7. LLORENTE vs. COURT OF APPEALS and ALICIA F. LLORENTE, respondents.

The Facts: Lorenzo and petitioner Paula Llorente were married in the Philippines. Lorenzo was an
enlisted serviceman of the United States Navy. Lorenzo departed for the United States and Paula
stayed in the conjugal home in Camarines Sur. Lorenzo was admitted to United States citizenship
and a Certificate of Naturalization was issued in his favor. Upon his visit to his wife in the
Philippines, he discovered that Paula was pregnant and was "living in" and having an adulterous
relationship with his brother. Paula gave birth to a boy registered in the Office of the Registrar of
Nabua as "Crisologo Llorente". Lorenzo returned to the United States and filed for divorce. An
interlocutory judgment of divorce was issued and the divorce decree then became final.

Lorenzo married Alicia F. Llorente in Manila. Apparently, Alicia had no knowledge of the first
marriage even if they resided in the same town as Paula, who did not oppose the marriage or
cohabitation. Lorenzo and Alicia lived together as husband and wife. On March 13, 1981, Lorenzo
executed a notarized Last Will and Testament disposing all his property in favor of Alicia and her
children.

However, in the petition of Alicia for the issuance of letters testamentary, the RTC found that the
divorce decree granted to the late Lorenzo Llorente is void and inapplicable in the Philippines,
therefore the marriage he contracted with Alicia Fortunato on January 16, 1958 at Manila is
likewise void. This being so the petition of Alicia F. Llorente for the issuance of letters
testamentary is denied. Likewise, she is not entitled to receive any share from the estate

The Issue: Whether

RULING:
The Civil Code clearly provides:
"Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity
of persons are binding upon citizens of the Philippines, even though living abroad.
"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 succession, both with respect to the order of succession and
to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall
be regulated by the national law of the person whose succession is under consideration, whatever
may be the nature of the property and regardless of the country wherein said property may be
found."

True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to
take judicial notice of them. Like any other fact, they must be alleged and proved. While the
substance of the foreign law was pleaded, the Court of Appeals did not admit the foreign law. The
Court of Appeals and the trial court called to the fore the renvoi doctrine, where the case was
"referred back" to the law of the decedent’s domicile, in this case, Philippine law.

We note that while the trial court stated that the law of New York was not sufficiently proven, in
the same breath it made the categorical, albeit equally unproven statement that "American law
follows the ‘domiciliary theory’ hence, Philippine law applies when determining the validity of
Lorenzo’s will. However, there is no showing that the application of the renvoi doctrine is called
for or required by New York State law.

The trial court held that the will was intrinsically invalid since it contained dispositions in favor of
Alice, who in the trial court’s opinion was a mere paramour. The trial court threw the will out,
leaving Alice, and her two children, Raul and Luz, with nothing. The Court of Appeals also
disregarded the will. It declared Alice entitled to one half (1/2) of whatever property she and
Lorenzo acquired during their cohabitation.
We hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula was valid and
recognized in this jurisdiction as a matter of comity. Now, the effects of this divorce are matters
best left to the determination of the trial court.

Validity of the Will

The Civil Code provides:

"Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be
governed by the laws of the country in which they are executed.
When the acts referred to are executed before the diplomatic or consular officials of the Republic
of the Philippines in a foreign country, the solemnities established by Philippine laws shall be
observed in their execution."

The clear intent of Lorenzo to bequeath his property to his second wife and children by her is
glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was a
foreigner, not covered by our laws on "family rights and duties, status, condition and legal
capacity."

Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best proved
by foreign law which must be pleaded and proved. Whether the will was executed in accordance
with the formalities required is answered by referring to Philippine law. In fact, the will was duly
probated.

As a guide however, the trial court should note that whatever public policy or good customs may
be involved in our system of legitimes, Congress did not intend to extend the same to the
succession of foreign nationals. Congress specifically left the amount of successional rights to the
decedent's national law.

The Court REVERSES the decision of the Regional Trial Court and RECOGNIZES as VALID
the decree of divorce granted in favor of the deceased Lorenzo N. Llorente by the Superior Court
of the State of California. Further, the Court REMANDS the cases to the court of origin for
determination of the intrinsic validity of Lorenzo N. Llorente’s will and determination of the
parties’ successional rights allowing proof of foreign law with instructions that the trial court shall
proceed with all deliberate dispatch to settle the estate of the deceased within the framework of the
Rules of Court.

8. GARCIA-RECIO vs. RECIO

A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such decree
is valid according to the national law of the foreigner. However, the divorce decree and the
governing personal law of the alien spouse who obtained the divorce must be proven. Our courts
do not take judicial notice of foreign laws and judgment; hence, like any other facts, both the
divorce decree and the national law of the alien must be alleged and proven according to our law
on evidence.

The Facts: Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian citizen, in
Malabon, Rizal. They lived together as husband and wife in Australia. On May 18, 1989, a decree
of divorce, purportedly dissolving the marriage, was issued by an Australian family court.

On June 26, 1992, respondent became an Australian citizen, as shown by a "Certificate of

Australian Citizenship" issued by the Australian government. Petitioner, a Filipina, and respondent
were married on January 12, 1994 in Cabanatuan City. Starting October 22, 1995, petitioner and
respondent lived separately without prior judicial dissolution of their marriage. On March 3, 1998,
petitioner filed a Complaint for Declaration of Nullity of Marriage in the court a quo, on the ground
of bigamy – respondent allegedly had a prior subsisting marriage at the time he married her on
January 12, 1994. She claimed that she learned of respondent's marriage to Editha Samson only in
November, 1997. In his Answer, respondent contended that his first marriage to an Australian
citizen had been validly dissolved by a divorce decree obtained in Australian thus, he was legally
capacitated to marry petitioner in 1994.

On July 7, 1998, respondent was able to secure a divorce decree from a family court in Sydney,
Australia. Respondent prayed in his Answer that the Complaint be dismissed on the ground that it
stated no cause of action. The trial court declared the marriage dissolved on the ground that the
divorce issued in Australia was valid and recognized in the Philippines. The Australian divorce
had ended the marriage; thus, there was no more martial union to nullify or annual.

Issue: (1) whether the divorce between respondent and Editha Samson was proven, and (2) whether
respondent was proven to be legally capacitated to marry petitioner.

RULING:

Philippine law does not provide for absolute divorce; hence, our courts cannot grant it. A marriage
between two Filipinos cannot be dissolved even by a divorce obtained abroad, because of Articles
1522 and 1723 of the Civil Code. In mixed marriages involving a Filipino and a foreigner, Article
2625 of the Family Code allows the former to contract a subsequent marriage in case the divorce
is "validly obtained abroad by the alien spouse capacitating him or her to remarry." A divorce
obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided
it is consistent with their respective national laws. Therefore, before a foreign divorce decree
can be recognized by our courts, the party pleading it must prove the divorce as a fact and
demonstrate its conformity to the foreign law allowing it. Presentation solely of the divorce
decree is insufficient.

Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary;
respondent was no longer bound by Philippine personal laws after he acquired Australian
citizenship in 1992. Naturalization is the legal act of adopting an alien and clothing him with the
political and civil rights belonging to a citizen. Naturalized citizens, freed from the protective cloak
of their former states, don the attires of their adoptive countries. By becoming an Australian,
respondent severed his allegiance to the Philippines and the vinculum juris that had tied him to
Philippine personal laws.

Second Issue: Respondent's Legal Capacity to Remarry

In its strict legal sense, divorce means the legal dissolution of a lawful union for a cause arising
after marriage. But divorces are of different types. The two basic ones are (1) absolute divorce or
a vinculo matrimonii and (2) limited divorce or a mensa et thoro. The first kind terminates the
marriage, while the second suspends it and leaves the bond in full force. There is no showing in
the case at bar which type of divorce was procured by respondent.

On its face, the herein Australian divorce decree contains a restriction that reads:

"1. A party to a marriage who marries again before this decree becomes absolute (unless the other
party has died) commits the offence of bigamy."

This quotation bolsters our contention that the divorce obtained by respondent may have been
restricted. It did not absolutely establish his legal capacity to remarry according to his national
law. Hence, we find no basis for the ruling of the trial court, which erroneously assumed that the
Australian divorce ipso facto restored respondent's capacity to remarry despite the paucity of
evidence on this matter.

Petitioner argues that the certificate of legal capacity required by Article 21 of the Family Code
was not submitted together with the application for a marriage license. According to her, its
absence is proof that respondent did not have legal capacity to remarry.
We clarify. To repeat, the legal capacity to contract marriage is determined by the national law
of the party concerned. The certificate mentioned in Article 21 of the Family Code would have
been sufficient to establish the legal capacity of respondent, had he duly presented it in court. A
duly authenticated and admitted certificate is prima facie evidence of legal capacity to marry on
the part of the alien applicant for a marriage license.

As it is, however, there is absolutely no evidence that proves respondent's legal capacity to marry
petitioner. We cannot conclude that respondent, who was then a naturalized Australian citizen,
was legally capacitated to marry petitioner on January 12, 1994. We agree with petitioner's
contention that the court a quo erred in finding that the divorce decree ipso facto clothed respondent
with the legal capacity to remarry without requiring him to adduce sufficient evidence to show the
Australian personal law governing his status; or at the very least, to prove his legal capacity to
contract the second marriage.

Neither can we grant petitioner's prayer to declare her marriage to respondent null and void on the
ground of bigamy. After all, it may turn out that under Australian law, he was really capacitated
to marry petitioner as a direct result of the divorce decree. Hence, we believe that the most
judicious course is to remand this case to the trial court to receive evidence, if any, which show
petitioner's legal capacity to marry petitioner. Failing in that, then the court a quo may declare a
nullity of the parties' marriage on the ground of bigamy, there being already in evidence two
existing marriage certificates, which were both obtained in the Philippines, one in Malabon, Metro
Manila dated March 1, 1987 and the other, in Cabanatuan City dated January 12, 1994.

9. REPUBLIC OF THE PHILIPPINES vs. CIPRIANO ORBECIDO III

FACTS: On May 24, 1981, Cipriano Orbecido III married Lady Myros M. Villanueva in the
Philippines In 1986, Cipriano’s wife left for the United States. A few years later, Cipriano
discovered that his wife had been naturalized as an American citizen. Sometime in 2000, Cipriano
learned that his wife had obtained a divorce decree and then married a certain Innocent Stanley.
Cipriano thereafter filed with the trial court a petition for authority to remarry invoking Paragraph
2 of Article 26 of the Family Code. Finding merit in the petition, the court granted the same. The
Republic, through the OSG, sought reconsideration but it was denied.

The OSG contends that Paragraph 2 of Article 26 of the Family Code is not applicable to the instant
case because it only applies to a valid mixed marriage; that is, a marriage celebrated between a
Filipino citizen and an alien.

For his part, respondent admits that Article 26 is not directly applicable to his case but insists that
when his naturalized alien wife obtained a divorce decree which capacitated her to remarry, he is
likewise capacitated by operation of law pursuant to Section 12, Article II of the Constitution.

ISSUE: Given a valid marriage between two Filipino citizens, where one party is later naturalized
as a foreign citizen and obtains a valid divorce decree capacitating him or her to remarry, can the
Filipino spouse likewise remarry under Philippine law?

RULING: ART. 26. All marriages solemnized outside the Philippines in accordance with the laws
in force in the country where they were solemnized, and valid there as such, shall also be valid in
this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the
Filipino spouse shall have capacity to remarry under Philippine law.

The intent of Paragraph 2 of Article 26 is to avoid the absurd situation where the Filipino spouse
remains married to the alien spouse who, after obtaining a divorce, is no longer married to the
Filipino spouse. Thus, it should be interpreted to include cases involving parties who, at the time
of the celebration of the marriage were Filipino citizens, but later on, one of them becomes
naturalized as a foreign citizen and obtains a divorce decree. The Filipino spouse should likewise
be allowed to remarry as if the other party were a foreigner at the time of the solemnization of the
marriage.

If we are to give meaning to the legislative intent to avoid the absurd situation where the Filipino
spouse remains married to the alien spouse who, after obtaining a divorce is no longer married to
the Filipino spouse, then the instant case must be deemed as coming within the contemplation of
Paragraph 2 of Article 26.

The twin elements for the application of Paragraph 2 of Article 26 as follows:

1. There is a valid marriage that has been celebrated between a Filipino citizen and a foreigner;
and
2. A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the time of the celebration of the
marriage, but their citizenship at the time a valid divorce is obtained abroad by the alien spouse
capacitating the latter to remarry.

In this case, when Cipriano’s wife was naturalized as an American citizen, there was still a valid
marriage that has been celebrated between her and Cipriano. As fate would have it, the naturalized
alien wife subsequently obtained a valid divorce capacitating her to remarry. Clearly, the twin
requisites for the application of Paragraph 2 of Article 26 are both present in this case. Thus
Cipriano, the "divorced" Filipino spouse, should be allowed to remarry.

However, we note that the records are bereft of competent evidence duly submitted by respondent
concerning the divorce decree and the naturalization of respondent’s wife. It is settled rule that one
who alleges a fact has the burden of proving it and mere allegation is not evidence. Accordingly,
for his plea to prosper, respondent herein must prove his allegation that his wife was naturalized
as an American citizen. Likewise, before a foreign divorce decree can be recognized by our own
courts, the party pleading it must prove the divorce as a fact and demonstrate its conformity to the
foreign law allowing it.Such foreign law must also be proved as our courts cannot take judicial
notice of foreign laws. Like any other fact, such laws must be alleged and proved. Furthermore,
respondent must also show that the divorce decree allows his former wife to remarry as specifically
required in Article 26. Otherwise, there would be no evidence sufficient to declare that he is
capacitated to enter into another marriage.

10. IDONAH SLADE PERKINS, petitioner, vs. ARSENIO P. DIZON, Judge of First
Instance of Manila, EUGENE ARTHUR PERKINS, and BENGUET
CONSOLIDATED MINING COMPANY, respondents.

Accion in rem – action instituted against a thing/ property

Accion in personam – instituted against a person
Accion quasi in rem - property is within the court's jurisdiction, even if the court does not have the
power to exercise in personam jurisdiction over the defendant. However, a court acting quasi in
rem may only affect the interests of a single, named defendant, as is the case in an in personam
action.

Eugene Arthur Perkins instituted an action in the CFI of Manila against the Benguet Consolidated
Mining Company for dividends amounting to P71,379.90 on 52,874 shares of stock registered in
his name, payment of which was being withheld by the company; and, for the recognition of his
right to the control and disposal of said shares, to the exclusion of all others. To the complaint, the
company filed its answer alleging, by way of defense, that the withholding of such dividends and
the non-recognition of plaintiff's right to the disposal and control of the shares were due to certain
demands made with respect to said shares by Idonah Slade Perkins, and by one George H.
Engelhard. The trial court ordered respondent Eugene Arthur Perkins to include in his complaint
as parties defendant petitioner, Idonah Slade Perkins, and George H. Engelhard. The complaint
was accordingly amended. Thereafter, summons by publication were served upon the non-resident
defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the order of the trial court.
On December 9, 1938, Engelhard filed his answer to the amended complaint, and on December
10, 1938, petitioner Idonah Slade Perkins filed her pleading wherein she challenged the jurisdiction
of the lower court over her person.

ISSUE: whether or not the Court of First Instance of Manila has acquired jurisdiction over the
person of the present petitioner as a non-resident defendant

RULING: When the defendant is a non-resident and refuses to appear voluntarily, the court
cannot acquire jurisdiction over his person even if the summons be served by publication,
for he is beyond the reach of judicial process ( applies only in action in personam)

Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued
in the Philippine courts and it appears, by the complaint or by affidavits, that the action relates to
real or personal property within the Philippines in which said defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in
excluding such person from any interest therein, service of summons maybe made by publication.

We have fully explained the meaning of this provision in El Banco Español Filipino vs. Palanca,
37 Phil., 921, wherein we laid down the following rules:

(1) In order that the court may validly try a case, it must have jurisdiction over the subject-matter
and over the persons of the parties. Jurisdiction over the subject-matter is acquired by concession
of the sovereign authority which organizes a court and determines the nature and extent of its
powers in general and thus fixes its jurisdiction with reference to actions which it may entertain
and the relief it may grant. Jurisdiction over the persons of the parties is acquired by their voluntary
appearance in court and their submission to its authority, or by the coercive power of legal process
exerted over their persons.

(2) When the defendant is a non-resident and refuses to appear voluntary, the court cannot acquire
jurisdiction over his person even if the summons be served by publication, for he is beyond the
reach of judicial process. No tribunal established by one State can extend its process beyond its
territory so as to subject to its decisions either persons or property located in another State. T only
exception seems to be found in the case where the non-resident defendant has expressly or
impliedly consented to the mode of service.

(3) The general rule, therefore, is that a suit against a non-resident cannot be entertained by a
Philippine court. Where, however, the action is in rem or quasi in rem in connection with
property located in the Philippines, the court acquires jurisdiction over the res, and its
jurisdiction over the person of the non-resident is non-essential.

(4) As before stated, in an action in rem or quasi in rem against a non-resident defendant,
jurisdiction over his person is non-essential, and if the law requires in such case that the summons
upon the defendant be served by publication, it is merely to satisfy the constitutional requirement
of due process. If any be said, in this connection, that "may reported cases can be cited in which it
is assumed that the question of the sufficiency of publication or notice in the case of this kind is a
question affecting the jurisdiction of the court, and the court is sometimes said to acquire
jurisdiction by virtue of the publication.

The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a non-
resident, as laid down by the Supreme Court of the United States in Pennoyer v. Neff, supra, may
be found in a recognized principle of public law to the effect that "no State can exercise direct
jurisdiction and authority over persons or property without its territory. And so it is laid down by
jurists, as an elementary principle, that the laws of one State have no operation outside of its
territory, except so far as is allowed by comity; and that no tribunal established by it can extend its
process beyond that territory so as to subject either persons or property to its decisions. "Any
exertion of authority of this sort beyond this limit," says Story, "is a mere nullity, and incapable of
binding such persons or property in any other tribunals."

When, however, the action relates to property located in the Philippines, the Philippine courts may
validly try the case, upon the principle that a "State, through its tribunals, may subject property
situated within its limits owned by non-residents to the payment of the demand of its own citizens
against them; and the exercise of this jurisdiction in no respect infringes upon the sovereignty of
the State where the owners are domiciled. Every State owes protection to its citizens; and, when
non-residents deal with them, it is a legitimate and just exercise of authority to hold and appropriate
any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the
State's jurisdiction over the property of the non-resident situated within its limits that its tribunals
can inquire into the non-resident's obligations to its own citizens, and the inquiry can then be
carried only to the extent necessary to control the disposition of the property. If the non-resident
has no property in the State, there is nothing upon which the tribunals can adjudicate." (

In the instant case, there can be no question that the action brought by Eugene Arthur Perkins in
his amended complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her from any
interest in a property located in the Philippines. That property consists in certain shares of stocks
of the Benguet Consolidated Mining Company organized in the Philippines. The situs of the shares
is in the jurisdiction where the corporation is created, whether the certificated evidencing the
ownership of those shares are within or without that jurisdiction. Under these circumstances, we
hold that the action thus brought is quasi in rem, for while the judgement that may be rendered
therein is not strictly a judgment in rem, "it fixes and settles the title to the property in controversy
and to that extent partakes of the nature of the judgment in rem."

The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over the
person of the non-resident. In order to satisfy the constitutional requirement of due process,
summons has been served upon her by publication. There is no question as to the adequacy of
publication made nor as to the mailing of the order of publication to the petitioner's last known
place of residence in the United States. But, of course, the action being quasi in rem and notice
having be made by publication, the relief that may be granted by the Philippine court must
be confined to the res, it having no jurisdiction to render a personal judgment against the
non-resident. In the amended complaint filed by Eugene Arthur Perkins, the only relief sought
therein is that she be declared to be without any interest in the shares in controversy and that she
be excluded from any claim thereto.

The publication of the summons was ordered not in virtue of an interpleading, but upon the filing
of the amended complaint wherein an action quasi in rem is alleged. Had not the complaint been
amended, including the herein petitioner as an additional defendant, and had the court, upon the
filing of the answer of the Benguet Consolidated Mining Company, issued an order under section
120 of the Code of Civil Procedure, calling the conflicting claimants into court and compelling
them to interplead with one another, such order could not perhaps have validly been served by
publication or otherwise, upon the non-resident Idonah Slade Perkins, for then the proceeding
would be purely one of interpleading.

11. PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE

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

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

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount
covered by the note became due and demandable. Accordingly, on October 17, 1985, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for
payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud
allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock
delivered to 1488, Inc. under the Agreement. Originally instituted in the United States District
Court of Texas. ATHONA sought the recovery of damages and excess payment allegedly made to
1488, Inc. and, in the alternative, the rescission of sale of the property. For their part, PHILSEC
and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but,
as their motion was denied, they later filed a joint answer with counterclaim against private
respondents and Edgardo V. Guevarra, PHILSEC's own former president, for the rescission of the
sale on the ground that the property had been overvalued. On March 13, 1990, the United States
District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V.
Guevarra on the ground that it was "frivolous and [was] brought against him simply to humiliate
and embarrass him." For this reason, the U.S. court imposed so-called Rule 11 sanctions on
PHILSEC and AYALA and ordered them to pay damages to Guevarra.

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

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

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

A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9,
1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of
litis pendentia considering that
the "main factual element" of the cause of action in this case which is the validity of the sale of
real property in the United States between defendant 1488 and plaintiff ATHONA is the subject
matter of the pending case in the United States District Court which, under the doctrine of forum
non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the
assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas,
U.S.A. from the date of the transaction in 1983 up to the present and verily, . . . (emphasis by trial
court)

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

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

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

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

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

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

In their present appeal, petitioners contend that:

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

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

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

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

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

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

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

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

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

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to
foreign judgments in several cases, 7 it was after the parties opposed to the judgment had been
given ample opportunity to repel them on grounds allowed under the law. 8 It is not necessary for
this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment.
What is essential is that there is opportunity to challenge the foreign judgment, in order for the
court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions
in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima
facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a foreign
country, having jurisdiction to pronounce the judgment is as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

12. G.R. No. 162894 February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner,

vs.
STOCKTON W. ROUZIE, JR., respondent.

DECISION

TINGA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals in
CA-G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against petitioner
with the trial court.

As culled from the records of the case, the following antecedents appear:

Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing
under the laws of the State of Connecticut, United States of America, and respondent Stockton W.
Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its
representative to negotiate the sale of services in several government projects in the Philippines
for an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured
a service contract with the Republic of the Philippines on behalf of BMSI for the dredging of rivers
affected by the Mt. Pinatubo eruption and mudflows.3

On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert
and Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach
of employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered
judgment ordering BMSI and RUST to pay respondent’s money claims.5 Upon appeal by BMSI,
the NLRC reversed the decision of the Labor Arbiter and dismissed respondent’s complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a
Resolution dated 26 November 1997. The Resolution became final and executory on 09 November
1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages
before the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil
Case No. 1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as
BMSI and RUST, the two corporations impleaded in the earlier labor case. The complaint
essentially reiterated the allegations in the labor case that BMSI verbally employed respondent to
negotiate the sale of services in government projects and that respondent was not paid the
commissions due him from the Pinatubo dredging project which he secured on behalf of BMSI.
The complaint also averred that BMSI and RUST as well as petitioner itself had combined and
functioned as one company.

In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a foreign corporation
duly licensed to do business in the Philippines and denied entering into any arrangement with
respondent or paying the latter any sum of money. Petitioner also denied combining with BMSI
and RUST for the purpose of assuming the alleged obligation of the said companies.9 Petitioner
also referred to the NLRC decision which disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the
rights and obligations of the parties shall be governed by the laws of the State of Connecticut.10
Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action and
forum non conveniens and prayed for damages by way of compulsory counterclaim.11

On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on
Affirmative Defenses and for Summary Judgment12 seeking the dismissal of the complaint on
grounds of forum non conveniens and failure to state a cause of action. Respondent opposed the
same. Pending the resolution of the omnibus motion, the deposition of Walter Browning was taken
before the Philippine Consulate General in Chicago.13

In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial
court held that the factual allegations in the complaint, assuming the same to be admitted, were
sufficient for the trial court to render a valid judgment thereon. It also ruled that the principle of
forum non conveniens was inapplicable because the trial court could enforce judgment on
petitioner, it being a foreign corporation licensed to do business in the Philippines.15

Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioner’s motion. Thus,
it filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari
and a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and
31 July 2001 and to enjoin the trial court from conducting further proceedings.20

On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition
for certiorari for lack of merit. It also denied petitioner’s motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22

The appellate court held that although the trial court should not have confined itself to the
allegations in the complaint and should have also considered evidence aliunde in resolving
petitioner’s omnibus motion, it found the evidence presented by petitioner, that is, the deposition
of Walter Browning, insufficient for purposes of determining whether the complaint failed to state
a cause of action. The appellate court also stated that it could not rule one way or the other on the
issue of whether the corporations, including petitioner, named as defendants in the case had indeed
merged together based solely on the evidence presented by respondent. Thus, it held that the issue
should be threshed out during trial.23 Moreover, the appellate court deferred to the discretion of
the trial court when the latter decided not to desist from assuming jurisdiction on the ground of the
inapplicability of the principle of forum non conveniens.

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE

COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua
Law Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty.
Rogelio Karagdag, had severed relations with the law firm even before the filing of the instant
petition and that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite
diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with
the filing of a comment.

The instant petition lacks merit.

Petitioner mainly asserts that the written contract between respondent and BMSI included a valid
choice of law clause, that is, that the contract shall be governed by the laws of the State of
Connecticut. It also mentions the presence of foreign elements in the dispute – namely, the parties
and witnesses involved are American corporations and citizens and the evidence to be presented
is located outside the Philippines – that renders our local courts inconvenient forums. Petitioner
theorizes that the foreign elements of the dispute necessitate the immediate application of the
doctrine of forum non conveniens.

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in
judicial resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and
recognition and enforcement of judgments. Thus, in the instances27 where the Court held that the
local judicial machinery was adequate to resolve controversies with a foreign element, the
following requisites had to be proved: (1) that the Philippine Court is one to which the parties may
conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine Court has or is likely to have the power to
enforce its decision.28

On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine
court and where the court has jurisdiction over the subject matter, the parties and the res, it may or
can proceed to try the case even if the rules of conflict-of-laws or the convenience of the parties
point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case
is filed.29

Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and
the law30 and by the material allegations in the complaint, irrespective of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No.
1192-BG is an action for damages arising from an alleged breach of contract. Undoubtedly, the
nature of the action and the amount of damages prayed are within the jurisdiction of the RTC.

As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent
(as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person
of petitioner (as party defendant) was acquired by its voluntary appearance in court.32

That the subject contract included a stipulation that the same shall be governed by the laws of the
State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for
that matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two
distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state;
choice of law asks the further question whether the application of a substantive law which will
determine the merits of the case is fair to both parties.33 The choice of law stipulation will become
relevant only when the substantive issues of the instant case develop, that is, after hearing on the
merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.34 Petitioner’s averments of the foreign
elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil
Case No. No. 1192-BG and the parties involved.

Moreover, the propriety of dismissing a case based on the principle of forum non conveniens
requires a factual determination; hence, it is more properly considered as a matter of defense.
While it is within the discretion of the trial court to abstain from assuming jurisdiction on this
ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance.35

Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its
conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In
the same manner, the Court defers to the sound discretion of the lower courts because their findings
are binding on this Court.

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of
action against petitioner. Failure to state a cause of action refers to the insufficiency of allegation
in the pleading.36 As a general rule, the elementary test for failure to state a cause of action is
whether the complaint alleges facts which if true would justify the relief demanded.37

The complaint alleged that petitioner had combined with BMSI and RUST to function as one
company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On
this score, the resolution of the Court of Appeals is instructive, thus:

x x x Our examination of the deposition of Mr. Walter Browning as well as other documents
produced in the hearing shows that these evidence aliunde are not quite sufficient for us to mete a
ruling that the complaint fails to state a cause of action.

Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that
Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of defendant
Rust International in the Makar Port Project in General Santos City, after Rust International ceased
to exist after being absorbed by REC. Other documents already submitted in evidence are likewise
meager to preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc. and
Brand Marine Service, Inc. have combined into one company, so much so that Raytheon
International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI
to respondent Rouzie for unpaid commissions. Neither these documents clearly speak otherwise.38

As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and
RUST merged together requires the presentation of further evidence, which only a full-blown trial
on the merits can afford.

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs
against petitioner.

SO ORDERED.

13. G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA
AND MARCELO G. SANTOS, respondents.
PARDO, J.:

The case before the Court is a petition for certiorari1 to annul the following orders of the National
Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without
or with excess jurisdiction and with grave abuse of discretion:2

(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4
The questioned order declared that the NLRC, not the Philippine Overseas Employment
Administration (hereinafter referred to as "POEA"), had jurisdiction over private respondent's
complaint;

(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private
respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the
unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four
months salary for the two (2) year period of his contract, three thousand six hundred dollars
(US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight hundred dollars
(US$19,800.00) or its peso equivalent and attorney's fees amounting to ten percent (10%) of the
total award; and

(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an
overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic
of China and later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila
Hotel International Company, Limited (hereinafter referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and controlled corporation
duly organized and existing under the laws of the Philippines.

MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an
"incorporator" of MHICL, owning 50% of its capital stock.8

By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited),
MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent
Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace
Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly
salary and increased benefits. The position was slated to open on October 1, 1988.11

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment
contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was
acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional
pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30,
1988, under the pretext that he was needed at home to help with the family's piggery and poultry
business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter.
Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4,
1988) and notified them that he was going to arrive in Manila during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would commence September
1, 1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars
(US$900.00) net of taxes, payable fourteen (14) times a year.13

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace
Hotel.14

Subsequently, respondent Santos signed an amended "employment agreement" with the Palace
Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The
Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed
the employment agreement under the word "noted".

From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned
to China and reassumed his post on July 17, 1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten
note that respondent Santos be given one (1) month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt
that his employment at the Palace Hotel print shop would be terminated due to business reverses
brought about by the political upheaval in China.15 We quote the letter:16

"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square
incidents), our business has been severely affected. To reduce expenses, we will not open/operate
printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest assured this does in no way
reflect your past performance which we found up to our expectations."

"Should a turnaround in the business happen, we will contact you directly and give you priority on
future assignment."

On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid
all benefits due him, including his plane fare back to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt,
demanding full compensation pursuant to the employment agreement.

On November 11, 1989, Mr. Shmidt replied, to wit:17

His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-
month notice clause and Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still not operational and with a low
business outlook, retrenchment in various departments of the hotel is going on which is a normal
management practice to control costs.

"When going through the latest performance ratings, please also be advised that his performance
was below average and a Chinese National who is doing his job now shows a better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still
enjoyed free accommodation/laundry/meals up to the day of his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the
Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC). He
prayed for an award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00)
as actual damages, forty thousand pesos (P40,000.00) as exemplary damages and attorney's fees
equivalent to 20% of the damages prayed for. The complaint named MHC, MHICL, the Palace
Hotel and Mr. Shmidt as respondents.

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the
proceedings before the Labor Arbiter.18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

"d) Ten (10) percent of the total award as attorney's fees.

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had
jurisdiction over the case.

On August 28, 1992, the NLRC promulgated a resolution, stating:20

"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of
jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted
resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas
contract worker."21

On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor
Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was
retrenched or dismissed.22

On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial
and documentary evidence presented to and heard by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital
Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24

On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent
Santos was illegally dismissed from employment and recommended that he be paid actual damages
equivalent to his salaries for the unexpired portion of his contract.26

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27

"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by
substantial evidence, judgment is hereby rendered, directing the respondents to jointly and
severally pay complainant the following computed contractual benefits: (1) US$12,600.00 as
salaries for the unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months
salary for the two (2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month
pay" for the aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00
or its peso equivalent, plus (4) attorney's fees of 10% of complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de
Vera's recommendation had no basis in law and in fact.28

On March 30, 1995, the NLRC denied the motion for reconsideration.29

Hence, this petition.30

On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a
temporary restraining order and/or writ of preliminary injunction and a motion for the annulment
of the entry of judgment of the NLRC dated July 31, 1995.31

On November 20, 1995, the Court denied petitioner's urgent motion. The Court required
respondents to file their respective comments, without giving due course to the petition.32

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the
petition and its annexes, they can not defend and sustain the position taken by the NLRC in its
assailed decision and orders. The Solicitor General prayed that he be excused from filing a
comment on behalf of the NLRC33

On April 30,1996, private respondent Santos filed his comment.34

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the
NLRC to file its own comment to the petition.35

On January 7, 1997, the NLRC filed its comment.

The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case
involves purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations.
Not all cases involving our citizens can be tried here.
The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign
employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was
then employed. He was hired without the intervention of the POEA or any authorized recruitment
agency of the government.36

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction
over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties
may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent
decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power
to enforce its decision.37 The conditions are unavailing in the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents
of the case — from the time of recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the
Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the
law governing the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract was
made).38

The employment contract was not perfected in the Philippines. Respondent Santos signified his
acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the
Palace Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the
alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of
China. The NLRC was not in a position to determine whether the Tiannamen Square incident truly
adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision
could be reached by the NLRC, such would not have any binding effect against the employer, the
Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not
even served with summons. Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve controversies
involving foreign employers. Neither are we saying that we do not have power over an employment
contract executed in a foreign country. If Santos were an "overseas contract worker", a Philippine
forum, specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract
worker" a fact which he admits with conviction.40

Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision
cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that
MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity
cannot be held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock.
However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC.

Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It
is done only when a corporation is a mere alter ego or business conduit of a person or another
corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not
of itself a sufficient reason for disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First, the defendant must
have control or complete domination of the other corporation's finances, policy and business
practices with regard to the transaction attacked. There must be proof that the other corporation
had no separate mind, will or existence with respect the act complained of. Second, control must
be used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty
must be the proximate cause of the injury or loss complained of. The absence of any of the elements
prevents the piercing of the corporate veil.43

It is basic that a corporation has a personality separate and distinct from those composing it as well
as from that of any other legal entity to which it may be related.44 Clear and convincing evidence
is needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that
MHICL and MHC are one and the same entity.

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment
contract with the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Miguel D.
Cergueda signed the employment contract as a mere witness. He merely signed under the word
"noted".

When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46
In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term
"noted" means that the person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a decision on the matter.

Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the
document is that which, "in a deed or other formal instrument is that part which comes after the
recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party
to a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a
beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written
statement"50 a memorandum or observation.

Second, and more importantly, there was no existing employer-employee relationship between
Santos and MHICL. In determining the existence of an employer-employee relationship, the
following elements are considered:51

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers. It did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his
friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of
employment were negotiated and finalized through correspondence between respondent Santos,
Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not
MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control
his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated
respondent Santos' services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no
proof that MHICL "supplied" respondent Santos or even referred him for employment to the Palace
Hotel.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same
entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to
pierce the corporate veil between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

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

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

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;

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

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

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

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

requirement.

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

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

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint.
His failure to dismiss the case amounts to grave abuse of discretion.56

V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders
and resolutions of the National Labor Relations Commission dated May 31, 1993, December 15,
1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-
90).

No costs.

SO ORDERED.

14. G.R. No. 133876 December 29, 1999

BANK OF AMERICA, NT and SA, petitioner,

vs.
AMERICAN REALTY CORPORATION and COURT OF APPEALS, respondents.

BUENA, J.:

Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over
a third party mortgagor's property situated in the Philippines by filing an action for the collection
of the principal loan before foreign courts?

Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of
Court are the decision 1 of public respondent Court of Appeals in CA G.R. CV No. 51094,
promulgated on 30 September 1997 and its resolution, 2 dated 22 May 1998, denying petitioner's
motion for reconsideration.

Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing

institution duly licensed to do business in the Philippines, organized and existing under and by
virtue of the laws of the State of California, United States of America while private respondent
American Realty Corporation (ARC) is a domestic corporation.

Bank of America International Limited (BAIL), on the other hand, is a limited liability company
organized and existing under the laws of England.

As borne by the records, BANTSA and BAIL on several occasions granted three major multi-
million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian
Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as "borrowers"), all of which are existing under and by virtue
of the laws of the Republic of Panama and are foreign affiliates of private
respondent. 3

Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers
signed and entered into restructuring agreements. As additional security for the restructured loans,
private respondent ARC as third party mortgagor executed two real estate mortgages, 4 dated 17
February 1983 and 20 July 1984, over its parcels of land including improvements thereon, located
at Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate
of Title Nos. T-78759, T-78760, T-78761, T-78762 and T-78763.

Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting
petitioner BANTSA to file civil actions 5 before foreign courts for the collection of the principal
loan, to wit:

a) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-
Folio No 2098) against Liberian Transport Navigation S.A., Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation Corp., S.A., Eduardo
Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992.

b) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-
Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A., Eduardo Katipuan
Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;

c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A.
Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on
November 19, 1992; and

d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company, S.A.,
Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992.

In the civil suits instituted before the foreign courts, private respondent ARC, being a third party
mortgagor, was private not impleaded as party-defendant.

On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of
Bulacan, Philippines an application for extrajudicial foreclosure 6 of real estate mortgage.

On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at
public auction in an extrajudicial foreclosure sale, with Integrated Credit and Corporation Services
Co (ICCS) as the highest bidder for the sum of Twenty four Million Pesos (P24,000.000.00). 7

On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159,
an action for damages 8 against the petitioner, for the latter's act of foreclosing extrajudicially the
real estate mortgages despite the pendency of civil suits before foreign courts for the collection of
the principal loan.

In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the
mortgage after an ordinary suit for collection has been filed, is not applicable in the present case,
claiming that:

a) The plaintiff, being a mere third party mortgagor and not a party to the principal
restructuring agreements, was never made a party defendant in the civil cases filed in Hongkong
and England;

b) There is actually no civil suit for sum of money filed in the Philippines since the civil
actions were filed in Hongkong and England. As such, any decisions (sic) which may be rendered
in the abovementioned courts are not (sic) enforceable in the Philippines unless a separate action
to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of
the Revised Rules of Court.

c) Under English Law, which is the governing law under the principal agreements, the
mortgagee does not lose its security interest by filing civil actions for sums of money.

On 14 December 1993, private respondent filed a motion for

suspension 10 of the redemption period on the ground that "it cannot exercise said right of
redemption without at the same time waiving or contradicting its contentions in the case that the
foreclosure of the mortgage on its properties is legally improper and therefore invalid."
In an order 11 dated 28 January 1994, the trial court granted the private respondent's motion for
suspension after which a copy of said order was duly received by the Register of Deeds of
Meycauayan, Bulacan.

On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale,
consolidated its ownership over the real properties, resulting to the issuance of Transfer Certificate
of Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.

On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties
to Stateland Investment Corporation for the amount of Thirty Nine Million Pesos
(P39,000,000.00). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m),
T-187783(m), T-16653P(m) and T-16652P(m) were issued in the latter's name.

After trial, the lower court rendered a decision 13 in favor of private respondent ARC dated 12
May 1993, the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the
defendant of collection suits against the principal debtors operated as a waiver of the security of
the mortgages. Consequently, the plaintiff's rights as owner and possessor of the properties then
covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761,
all of the Register of Deeds of Meycauayan, Bulacan, Philippines, were violated when the
defendant caused the extrajudicial foreclosure of the mortgages constituted thereon.

Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal
interest thereon from the date of the filing of the complaint up to the date of actual payment:

1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos

(P99,000,000.00);

2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and

3) Costs of suit.

SO ORDERED.

On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting
petitioner to file a motion for reconsideration which the appellate court denied.

Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA ascribes
to the Court of Appeals the following assignment of errors:

1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme
Court in the cases of Caltex Philippines, Inc. vs. Intermediate Appellate Court docketed as G.R.
No. 74730 promulgated on August 25, 1989 and Philippine Commercial International Bank vs.
IAC, 196 SCRA 29 (1991 case), although said cases were duly cited, extensively discussed and
specifically mentioned, as one of the issues in the assignment of errors found on page 5 of the
decision dated September 30, 1997.

2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the private
respondent actual and exemplary damages totalling P171,600,000.00, as of July 12, 1998 although
such huge amount was not asked nor prayed for in private respondent's complaint, is contrary to
law and is totally unsupported by evidence (sic).

In fine, this Court is called upon to resolve two main issues:

1. Whether or not the petitioner's act of filing a collection suit against the principal debtors
for the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of
private respondent ARC, as third-party mortgagor, is proper.

The petition is bereft of merit.

First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of
foreclosure requires the concurrence of two requisites: an ordinary civil action for collection
should be filed and subsequently a final judgment be correspondingly rendered therein.

According to petitioner, the mere filing of a personal action to collect the principal loan does not
suffice; a final judgment must be secured and obtained in the personal action so that waiver of the
remedy of foreclosure may be appreciated. To put it differently, absent any of the two requisites,
the mortgagee-creditor is deemed not to have waived the remedy of foreclosure.

We do not agree.

Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence laid
down in Bachrach 15 and similar cases adjudicated thereafter, thus:

In the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action or debt or a real action to foreclose the mortgage. In other
words, he may he may pursue either of the two remedies, but not both. By such election, his cause
of action can by no means be impaired, for each of the two remedies is complete in itself. Thus,
an election to bring a personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself. And, if he waives such
personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for a deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to him for the
satisfaction of the deficiency. In either case, his remedy is complete, his cause of action
undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely
accidental and are all under his right of election. On the other hand, a rule that would authorize the
plaintiff to bring a personal action against the debtor and simultaneously or successively another
action against the mortgaged property, would result not only in multiplicity of suits so offensive
to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs. San
Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in the
place of his residence or of the residence of the plaintiff, and then again in the place where the
property lies.

In Danao vs. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in Manila
Trading and Supply Co vs. Co Kim 17 and Movido vs.
RFC, 18 invariably held:

. . . The rule is now settled that a mortgage creditor may elect to waive his security and bring,
instead, an ordinary action to recover the indebtedness with the right to execute a judgment thereon
on all the properties of the debtor, including the subject matter of the mortgage . . . , subject to the
qualification that if he fails in the remedy by him elected, he cannot pursue further the remedy he
has waived. (Emphasis Ours)

Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may
institute against the mortgage debtor either a personal action for debt or a real action to foreclose
the mortgage. 19

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose,
a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the
complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the of
the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected
by the mortgage creditor upon filing of the petition not with any court of justice but with the Office
of the Sheriff of the province where the sale is to be made, in accordance with the provisions of
Act No. 3135, as amended by Act No. 4118.

In the case at bench, private respondent ARC constituted real estate mortgages over its properties
as security for the debt of the principal debtors. By doing so, private respondent subjected itself to
the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan
may secure the latter by pledging or mortgaging their own property. 20

Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a
third person who secures the fulfillment of another's obligation by mortgaging his own property,
to be solidarily bound with the principal obligor. The signatory to the principal contract—loan—
remains to be primarily bound. It is only upon default of the latter that the creditor may have
recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the
recovery of the amount of the loan. 21

In the instant case, petitioner's contention that the requisites of filing the action for collection and
rendition of final judgment therein should concur, is untenable.

Thus, in Cerna vs. Court of Appeals, 22 we agreed with the petitioner in said case, that the filing
of a collection suit barred the foreclosure of the mortgage:

A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel
mortgage constituted over the personal property as security for the debt or value of the promissory
note when he seeks to recover in the said collection suit.

. . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the
chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go after
the mortgaged property as security for the promissory note . . . .

Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that
the mere act of filing of an ordinary action for collection operates as a waiver of the mortgage-
creditor's remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection
against the principal debtors, the petitioner in the present case is deemed to have elected a remedy,
as a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in
the collection suit is required for the rule on waiver to apply.

Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by
petitioner, supposedly to buttress its contention, this Court had occasion to rule that the mere act
of filing a collection suit for the recovery of a debt secured by a mortgage constitutes waiver of
the other remedy of foreclosure.

In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the
debt. Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner
then may opt to exercise only one of two remedies so as not to violate the rule against splitting a
cause of action.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal. 24

For non-payment of a note secured by mortgage, the creditor has a single cause of action against
the debtor. This single cause of action consists in the recovery of the credit with execution of the
security. In other words, the creditor in his action may make two demands, the payment of the debt
and the foreclosure of his mortgage. But both demands arise from the same cause, the non-payment
of the debt, and for that reason, they constitute a single cause of action. Though the debt and the
mortgage constitute separate agreements, the latter is subsidiary to the former, and both refer to
one and the same obligation. Consequently, there exists only one cause of action for a single breach
of that obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single
cause of action by filing a complaint for payment of the debt, and thereafter another complaint for
foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the subsequent
complaint. By allowing the creditor to file two separate complaints simultaneously or successively,
one to recover his credit and another to foreclose his mortgage, we will, in effect, be authorizing
him plural redress for a single breach of contract at so much cost to the courts and with so much
vexation and oppression to the debtor.

Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in
Caltex wherein this High Court relaxed the application of the general rules to wit:

In the present case, however, we shall not follow this rule to the letter but declare that it is the
collection suit which was waived and/or abandoned. This ruling is more in harmony with the
principles underlying our judicial system. It is of no moment that the collection suit was filed
ahead, what is determinative is the fact that the foreclosure proceedings ended even before the
decision in the collection suit was rendered. . . .

Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex
case was never intended to overrule the well-entrenched doctrine enunciated Bachrach, which to
our mind still finds applicability in cases of this sort. To reiterate, Bachrach is still good law.

We then quote the decision 25 of the trial court, in the present case, thus:

The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar
circumstances obtaining therein. In the said case, the Supreme Court chastised Caltex for making
". . . a mockery of our judicial system when it initially filed a collection suit then, during the
pendency thereof, foreclosed extrajudicially the mortgaged property which secured the
indebtedness, and still pursued the collection suit to the end." Thus, to prevent a mockery of our
judicial system", the collection suit had to be nullified because the foreclosure proceedings have
already been pursued to their end and can no longer be undone.

xxx xxx xxx

In the case at bar, it has not been shown whether the defendant pursued to the end or are still
pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for this court
to apply the exception laid down by the Supreme Court in Caltex by nullifying the collection suits.
Quite obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the
only way the court may prevent the spector of a creditor having "plural redress for a single breach
of contract" is by holding, as the Court hereby holds, that the defendant has waived the right to
foreclose the mortgages constituted by the plaintiff on its properties originally covered by Transfer
Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761. (RTC Decision pp., 10-11)

In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26

Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC. 27 Again,
petitioner tried to fit a square peg in a round hole. It must be stressed that far from overturning the
doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by
declaring:

While the law allows a mortgage creditor to either institute a personal action for the debt or a real
action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively
as was done by PCIB in this case.

xxx xxx xxx

Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory
note secured by real estate mortgages and subsequently filed a petition for extrajudicial
foreclosure, it violates the rule against splitting a cause of action.

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four
civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate
mortgages constituted over the properties of third-party mortgagor and herein private respondent
ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially the
mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-
enshrined in jurisprudence and our statute books.

In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection
suit was filed, considering that the creditor should not be afforded "plural redress for a single
breach of contract." For cause of action should not be confused with the remedy created for its
enforcement. 28

Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen
in addressing the creditor's cause. Hence, a suit brought before a foreign court having competence
and jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation
of the remedy available to the mortgagee-creditor. This pronouncement would best serve the
interest of justice and fair play and further discourage the noxious practice of splitting up a lone
cause of action.

Incidentally, BANTSA alleges that under English Law, which according to petitioner is the
governing law with regard to the principal agreements, the mortgagee does not lose its security
interest by simply filing civil actions for sums of money. 29

We rule in the negative.

This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case
at bench, Philippine law shall apply notwithstanding the evidence presented by petitioner to prove
the English law on the matter.

In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that
there is no judicial notice of any foreign law. A foreign law must be properly pleaded and proved
as a fact. 30 Thus, if the foreign law involved is not properly pleaded and proved, our courts will
presume that the foreign law is the same as our local or domestic or internal
law. 31 This is what we refer to as the doctrine of processual presumption.

In the instant case, assuming arguendo that the English Law on the matter were properly pleaded
and proved in accordance with Section 24, Rule 132 of the Rules of Court and the jurisprudence
laid down in Yao Kee, et al. vs.
Sy-Gonzales, 32 said foreign law would still not find applicability.

Thus, when the foreign law, judgment or contract is contrary to a sound and established public
policy of the forum, the said foreign law, judgment or order shall not be applied. 33

Additionally, prohibitive laws concerning persons, their acts or property, and those which have for
their object public order, public policy and good customs shall not be rendered ineffective by laws
or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.
34

The public policy sought to be protected in the instant case is the principle imbedded in our
jurisdiction proscribing the splitting up of a single cause of action.

Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —

If two or more suits are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of the others.

Moreover, foreign law should not be applied when its application would work undeniable injustice
to the citizens or residents of the forum. To give justice is the most important function of law;
hence, a law, or judgment or contract that is obviously unjust negates the fundamental principles
of Conflict of Laws. 35

Clearly then, English Law is not applicable.

As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual
or compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing
the real estate mortgages constituted a clear violation of the rights of herein private respondent
ARC, as third-party mortgagor.

Actual or compensatory damages are those recoverable because of pecuniary loss in business,
trade, property, profession, job or occupation and the same must be proved, otherwise if the proof
is flimsy and non-substantial, no damages will be given. 36 Indeed, the question of the value of
property is always a difficult one to settle as valuation of real property is an imprecise process
since real estate has no inherent value readily ascertainable by an appraiser or by the court. 37 The
opinions of men vary so much concerning the real value of property that the best the courts can do
is hear all of the witnesses which the respective parties desire to present, and then, by carefully
weighing that testimony, arrive at a conclusion which is just and equitable. 38

In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made
by Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate court in
giving due weight to the appraisal report composed of twenty three pages, signed by Mr. Lauro
Marquez and submitted as evidence by private respondent. The appraisal report, as the records
would readily show, was corroborated by the testimony of Mr. Reynaldo Flores, witness for private
respondent.

On this matter, the trial court observed:

The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report
dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages which set
out in detail the valuation of the property to determine its fair market value (TSN, April 22, 1994,
p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony
of one Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc.
(TSN, ibid., p. 3). The latter's testimony was subjected to extensive cross-examination by counsel
for defendant-appellant (TSN, April 22, 1994, pp. 6-22). 39

In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule
that the factual findings of the trial court should be respected. 40 The time-tested jurisprudence is
that the findings and conclusions of the trial court on the credibility of witnesses enjoy a badge of
respect for the reason that trial courts have the advantage of observing the demeanor of witnesses
as they testify. 41

This Court will not alter the findings of the trial court on the credibility of witnesses, principally
because they are in a better position to assess the same than the appellate court. 42 Besides, trial
courts are in a better position to examine real evidence as well as observe the demeanor of
witnesses. 43

Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest
primarily with the trial court. 44 In the case at bar, we see no reason that would justify this Court
to disturb the factual findings of the trial court, as affirmed by the Court of Appeals, with regard
to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified the award by presenting the
following ratiocination in its assailed decision 45, to wit:

Indeed, the Court has its own mind in the matter of valuation. The size of the subject real properties
are (sic) set forth in their individuals titles, and the Court itself has seen the character and nature
of said properties during the ocular inspection it conducted. Based principally on the foregoing,
the Court makes the following observations:

1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan,
which is (sic) not distant from Metro Manila — the biggest urban center in the Philippines — and
are easily accessible through well-paved roads;

2. The properties are suitable for development into a subdivision for low cost housing, as
admitted by defendant's own appraiser (TSN, May 30, 1994, p. 31);

3. The pigpens which used to exist in the property have already been demolished. Houses of
strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a
growing community. It has even been shown that the house of the Barangay Chairman is located
adjacent to the property in question (Exh. 27), and the only remaining piggery (named Cherry
Farm) in the vicinity is about 2 kilometers away from the western boundary of the property in
question (TSN, November 19, p. 3);

4. It will not be hard to find interested buyers of the property, as indubitably shown by the
fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated
real estate properties to Stateland Investment Corporation, in whose favor new titles were issued,
i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the
Register of Deeds of Meycauayan (sic), Bulacan;

5. The fact that ICCS was able to sell the subject properties to Stateland Investment
Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple defendant's
appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant's aforesaid estimate
(Decision, Records, p. 603).

It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of
witnesses command great respect and consideration especially when the conclusions are supported
by the evidence on record. 46 Applying the foregoing principle, we therefore hold that the trial
court committed no palpable error in giving credence to the testimony of Reynaldo Flores, who
according to the records, is a licensed real estate broker, appraiser and director of Philippine
Appraisal Company, Inc. since 1990. 47 As the records show, Flores had been with the company
for 26 years at the time of his testimony.

Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated
29 March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair market
value of the real property. Above all these, the record would likewise show that the trial judge in
order to appraise himself of the characteristics and condition of the property, conducted an ocular
inspection where the opposing parties appeared and were duly represented.

Based on these considerations and the evidence submitted, we affirm the ruling of the trial court
as regards the valuation of the property —

. . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties (sic)
translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter. This appears
to be, as the court so holds, a better approximation of the fair market value of the subject properties.
This is the amount which should be restituted by the defendant to the plaintiff by way of actual or
compensatory damages . . . . 48
Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked nor
prayed for in private respondent's complaint.

Notwithstanding the fact that the award of actual and compensatory damages by the lower court
exceeded that prayed for in the complaint, the same is nonetheless valid, subject to certain
qualifications.

On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:

Sec. 5. Amendment to conform to or authorize presentation of evidence. — When issues not raised
by the pleadings are tried with the express or implied consent of the parties, they shall be treated
in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may
be necessary to cause them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgement; but failure to amend does not affect the
result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not
within the issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of substantial
justice will be subserved thereby. The court may grant a continuance to enable the amendment to
be made.

The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de
Talisay-Silay, Inc. 49 citing Northern Cement Corporation vs. Intermediate Appellate Court 50 is
enlightening:

There have been instances where the Court has held that even without the necessary amendment,
the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106),
where we said that if the facts shown entitled plaintiff to relief other than that asked for, no
amendment to the complaint was necessary, especially where defendant had himself raised the
point on which recovery was based. The appellate court could treat the pleading as amended to
conform to the evidence although the pleadings were actually not amended. Amendment is also
unnecessary when only clerical error or non substantial matters are involved, as we held in Bank
of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed
that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice
is caused the objecting party. And in the recent case of National Power Corporation vs. Court of
Appeals (113 SCRA 556), we held that where there is a variance in the defendant's pleadings and
the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform
with the evidence.

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

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

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

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

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

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

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

SO ORDERED.

15. G.R. No. L-55960 November 24, 1988

YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN YEN, petitioners,
vs.
AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE, RODOLFO SY, and
HONORABLE COURT OF APPEALS, respondents.

Montesa, Albon, & Associates for petitioners.

De Lapa, Salonga, Fulgencio & De Lunas for respondents.

CORTES, J.:

Sy Kiat, a Chinese national. died on January 17, 1977 in Caloocan City where he was then residing,
leaving behind real and personal properties here in the Philippines worth P300,000.00 more or
less.

Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy filed a petition
for the grant of letters of administration docketed as Special Proceedings Case No. C-699 of the
then Court of First Instance of Rizal Branch XXXIII, Caloocan City. In said petition they alleged
among others that (a) they are the children of the deceased with Asuncion Gillego; (b) to their
knowledge Sy Mat died intestate; (c) they do not recognize Sy Kiat's marriage to Yao Kee nor the
filiation of her children to him; and, (d) they nominate Aida Sy-Gonzales for appointment as
administratrix of the intestate estate of the deceased [Record on Appeal, pp. 4-9; Rollo, p. 107.]

The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Yun Chen who alleged
that: (a) Yao Kee is the lawful wife of Sy Kiat whom he married on January 19, 1931 in China;
(b) the other oppositors are the legitimate children of the deceased with Yao Kee; and, (c) Sze
Sook Wah is the eldest among them and is competent, willing and desirous to become the
administratrix of the estate of Sy Kiat [Record on Appeal, pp. 12-13; Rollo, p. 107.] After hearing,
the probate court, finding among others that:

(1) Sy Kiat was legally married to Yao Kee [CFI decision, pp. 12-27; Rollo, pp. 49-64;]

(2) Sze Sook Wah, Sze Lai Cho and Sze Chun Yen are the legitimate children of Yao Kee with
Sy Mat [CFI decision, pp. 28-31; Rollo. pp. 65-68;] and,

(3) Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy are the acknowledged
illegitimate offsprings of Sy Kiat with Asuncion Gillego [CFI decision, pp. 27-28; Rollo, pp. 64-
65.]

held if favor of the oppositors (petitioners herein) and appointed Sze Sook Wah as the
administratrix of the intestate estate of the deceased [CFI decision, pp. 68-69; Rollo, pp. 105-106.]

On appeal the Court of Appeals rendered a decision modifying that of the probate court, the
dispositive portion of which reads:

IN VIEW OF THE FOREGOING, the decision of the lower Court is hereby MODIFIED and SET
ASIDE and a new judgment rendered as follows:

(1) Declaring petitioners Aida Sy-Gonzales, Manuel Sy, Teresita Sy- Bernabe and Rodolfo Sy
acknowledged natural children of the deceased Sy Kiat with Asuncion Gillego, an unmarried
woman with whom he lived as husband and wife without benefit of marriage for many years:

(2) Declaring oppositors Sze Sook Wah, Sze Lai Chu and Sze Chun Yen, the acknowledged
natural children of the deceased Sy Kiat with his Chinese wife Yao Kee, also known as Yui Yip,
since the legality of the alleged marriage of Sy Mat to Yao Kee in China had not been proven to
be valid to the laws of the Chinese People's Republic of China (sic);

(3) Declaring the deed of sale executed by Sy Kiat on December 7, 1976 in favor of Tomas Sy
(Exhibit "G-1", English translation of Exhibit "G") of the Avenue Tractor and Diesel Parts Supply
to be valid and accordingly, said property should be excluded from the estate of the deceased Sy
Kiat; and

(4) Affirming the appointment by the lower court of Sze Sook Wah as judicial administratrix
of the estate of the deceased. [CA decision, pp. 11-12; Rollo, pp. 36- 37.]

From said decision both parties moved for partial reconsideration, which was however denied by
respondent court. They thus interposed their respective appeals to this Court.

Private respondents filed a petition with this Court docketed as G.R. No. 56045 entitled "Aida Sy-
Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy v. Court of Appeals, Yao Kee, Sze
Sook Wah, Sze Lai Cho and Sy Chun Yen" questioning paragraphs (3) and (4) of the dispositive
portion of the Court of Appeals' decision. The Supreme Court however resolved to deny the
petition and the motion for reconsideration. Thus on March 8, 1982 entry of judgment was made
in G.R. No. 56045. **
The instant petition, on the other hand, questions paragraphs (1) and (2) of the dispositive portion
of the decision of the Court of Appeals. This petition was initially denied by the Supreme Court
on June 22, 1981. Upon motion of the petitioners the Court in a resolution dated September 16,
1981 reconsidered the denial and decided to give due course to this petition. Herein petitioners
assign the following as errors:

I. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THE

MARRIAGE OF SY KIAT TO YAO YEE AS NOT HAVE (sic) BEEN PROVEN VALID IN
ACCORDANCE WITH LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.

II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING AIDA

SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE AND RODOLFO SY AS
NATURAL CHILDREN OF SY KIAT WITH ASUNCION GILLEGO. [Petition, p. 2; Rollo, p.
6.]

I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in accordance with Chinese law
and custom was conclusively proven. To buttress this argument they rely on the following
testimonial and documentary evidence.

First, the testimony of Yao Kee summarized by the trial court as follows:

Yao Kee testified that she was married to Sy Kiat on January 19, 1931 in Fookien, China; that she
does not have a marriage certificate because the practice during that time was for elders to agree
upon the betrothal of their children, and in her case, her elder brother was the one who contracted
or entered into [an] agreement with the parents of her husband; that the agreement was that she
and Sy Mat would be married, the wedding date was set, and invitations were sent out; that the
said agreement was complied with; that she has five children with Sy Kiat, but two of them died;
that those who are alive are Sze Sook Wah, Sze Lai Cho, and Sze Chun Yen, the eldest being Sze
Sook Wah who is already 38 years old; that Sze Sook Wah was born on November 7, 1939; that
she and her husband, Sy Mat, have been living in FooKien, China before he went to the Philippines
on several occasions; that the practice during the time of her marriage was a written document [is
exchanged] just between the parents of the bride and the parents of the groom, or any elder for that
matter; that in China, the custom is that there is a go- between, a sort of marriage broker who is
known to both parties who would talk to the parents of the bride-to-be; that if the parents of the
bride-to-be agree to have the groom-to-be their son in-law, then they agree on a date as an
engagement day; that on engagement day, the parents of the groom would bring some pieces of
jewelry to the parents of the bride-to-be, and then one month after that, a date would be set for the
wedding, which in her case, the wedding date to Sy Kiat was set on January 19, 1931; that during
the wedding the bridegroom brings with him a couch (sic) where the bride would ride and on that
same day, the parents of the bride would give the dowry for her daughter and then the document
would be signed by the parties but there is no solemnizing officer as is known in the Philippines;
that during the wedding day, the document is signed only by the parents of the bridegroom as well
as by the parents of the bride; that the parties themselves do not sign the document; that the bride
would then be placed in a carriage where she would be brought to the town of the bridegroom and
before departure the bride would be covered with a sort of a veil; that upon reaching the town of
the bridegroom, the bridegroom takes away the veil; that during her wedding to Sy Kiat (according
to said Chinese custom), there were many persons present; that after Sy Kiat opened the door of
the carriage, two old ladies helped her go down the carriage and brought her inside the house of
Sy Mat; that during her wedding, Sy Chick, the eldest brother of Sy Kiat, signed the document
with her mother; that as to the whereabouts of that document, she and Sy Mat were married for 46
years already and the document was left in China and she doubt if that document can still be found
now; that it was left in the possession of Sy Kiat's family; that right now, she does not know the
whereabouts of that document because of the lapse of many years and because they left it in a
certain place and it was already eaten by the termites; that after her wedding with Sy Kiat, they
lived immediately together as husband and wife, and from then on, they lived together; that Sy
Kiat went to the Philippines sometime in March or April in the same year they were married; that
she went to the Philippines in 1970, and then came back to China; that again she went back to the
Philippines and lived with Sy Mat as husband and wife; that she begot her children with Sy Kiat
during the several trips by Sy Kiat made back to China. [CFI decision, pp. 13-15; Rollo, pp. 50-
52.]

Second, the testimony of Gan Ching, a younger brother of Yao Kee who stated that he was among
the many people who attended the wedding of his sister with Sy Kiat and that no marriage
certificate is issued by the Chinese government, a document signed by the parents or elders of the
parties being sufficient [CFI decision, pp. 15-16; Rollo, pp.
52-53.]

Third, the statements made by Asuncion Gillego when she testified before the trial court to the
effect that (a) Sy Mat was married to Yao Kee according to Chinese custom; and, (b) Sy Kiat's
admission to her that he has a Chinese wife whom he married according to Chinese custom [CFI
decision, p. 17; Rollo, p. 54.]

Fourth, Sy Kiat's Master Card of Registered Alien issued in Caloocan City on October 3, 1972
where the following entries are found: "Marital status—Married"; "If married give name of
spouses—Yao Kee"; "Address-China; "Date of marriage—1931"; and "Place of marriage—
China" [Exhibit "SS-1".]

Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on January 12, 1968 where the
following entries are likewise found: "Civil status—Married"; and, 'If married, state name and
address of spouse—Yao Kee Chingkang, China" [Exhibit "4".]

And lastly, the certification issued in Manila on October 28, 1977 by the Embassy of the People's
Republic of China to the effect that "according to the information available at the Embassy Mr. Sy
Kiat a Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were married on January 19,
1931 in Fukien, the People's Republic of China" [Exhibit "5".]

These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However,
the same do not suffice to establish the validity of said marriage in accordance with Chinese law
or custom.

Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed
(practiced) as a social rule, legally binding and obligatory" [In the Matter of the Petition for
Authority to Continue Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and Reyes",
July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth Ed.,
Vol. 1, p. 7.] The law requires that "a custom must be proved as a fact, according to the rules of
evidence" [Article 12, Civil Code.] On this score the Court had occasion to state that "a local
custom as a source of right can not be considered by a court of justice unless such custom is
properly established by competent evidence like any other fact" [Patriarca v. Orate, 7 Phil. 390,
395 (1907).] The same evidence, if not one of a higher degree, should be required of a foreign
custom.

The law on foreign marriages is provided by Article 71 of the Civil Code which states that:

Art. 71. All marriages performed outside the Philippines in accordance with the laws in
force in the country where they were performed and valid there as such, shall also be valid in this
country, except bigamous, Polygamous, or incestuous marriages, as determined by Philippine law.
(Emphasis supplied.) ***

Construing this provision of law the Court has held that to establish a valid foreign marriage two
things must be proven, namely: (1) the existence of the foreign law as a question of fact; and (2)
the alleged foreign marriage by convincing evidence [Adong v. Cheong Seng Gee, 43 Phil. 43, 49
(1922).]
In proving a foreign law the procedure is provided in the Rules of Court. With respect to an
unwritten foreign law, Rule 130 section 45 states that:

SEC. 45. Unwritten law.—The oral testimony of witnesses, skilled therein, is admissible as
evidence of the unwritten law of a foreign country, as are also printed and published books of
reports of decisions of the courts of the foreign country, if proved to be commonly admitted in
such courts.

Proof of a written foreign law, on the other hand, is provided for under Rule 132 section 25, thus:

SEC. 25. Proof of public or official record.—An official record or an entry therein, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy
attested by the officer having the legal custody of the record, or by his deputy, and accompanied,
if the record is not kept in the Philippines, with a certificate that such officer has the custody. If
the office in which the record is kept is in a foreign country, the certificate may be made by a
secretary of embassy or legation, consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the foreign country in which the record
is kept and authenticated by the seal of his office.

The Court has interpreted section 25 to include competent evidence like the testimony of a witness
to prove the existence of a written foreign law [Collector of Internal Revenue v. Fisher 110 Phil.
686, 700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471 (1935).]

In the case at bar petitioners did not present any competent evidence relative to the law and custom
of China on marriage. The testimonies of Yao and Gan Ching cannot be considered as proof of
China's law or custom on marriage not only because they are
self-serving evidence, but more importantly, there is no showing that they are competent to testify
on the subject matter. For failure to prove the foreign law or custom, and consequently, the validity
of the marriage in accordance with said law or custom, the marriage between Yao Kee and Sy Kiat
cannot be recognized in this jurisdiction.

Petitioners contend that contrary to the Court of Appeals' ruling they are not duty bound to prove
the Chinese law on marriage as judicial notice thereof had been taken by this Court in the case of
Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).]

This contention is erroneous. Well-established in this jurisdiction is the principle that Philippine
courts cannot take judicial notice of foreign laws. They must be alleged and proved as any other
fact [Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915); Fluemer v. Hix, 54 Phil. 610
(1930).]

Moreover a reading of said case would show that the party alleging the foreign marriage presented
a witness, one Li Ung Bieng, to prove that matrimonial letters mutually exchanged by the
contracting parties constitute the essential requisite for a marriage to be considered duly
solemnized in China. Based on his testimony, which as found by the Court is uniformly
corroborated by authors on the subject of Chinese marriage, what was left to be decided was the
issue of whether or not the fact of marriage in accordance with Chinese law was duly proven [Sy
Joc Lieng v. Sy Quia, supra., at p. 160.]

Further, even assuming for the sake of argument that the Court has indeed taken judicial notice of
the law of China on marriage in the aforecited case, petitioners however have not shown any proof
that the Chinese law or custom obtaining at the time the Sy Joc Lieng marriage was celebrated in
1847 was still the law when the alleged marriage of Sy Kiat to Yao Kee took place in 1931 or
eighty-four (84) years later.

Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil. 633 (1916)] as being applicable
to the instant case. They aver that the judicial pronouncement in the Memoracion case, that the
testimony of one of the contracting parties is competent evidence to show the fact of marriage,
holds true in this case.

The Memoracion case however is not applicable to the case at bar as said case did not concern a
foreign marriage and the issue posed was whether or not the oral testimony of a spouse is
competent evidence to prove the fact of marriage in a complaint for adultery.

Accordingly, in the absence of proof of the Chinese law on marriage, it should be presumed that
it is the same as ours *** [Wong Woo Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13 SCRA
552, 555.] Since Yao Kee admitted in her testimony that there was no solemnizing officer as is
known here in the Philippines [See Article 56, Civil Code] when her alleged marriage to Sy Mat
was celebrated [CFI decision, p. 14; Rollo, p. 51], it therefore follows that her marriage to Sy Kiat,
even if true, cannot be recognized in this jurisdiction [Wong Woo Yiu v. Vivo, supra., pp. 555-
556.]

II. The second issue raised by petitioners concerns the status of private respondents.

Respondent court found the following evidence of petitioners' filiation:

(1) Sy Kiat's Master Card of Registered Alien where the following are entered: "Children if
any: give number of children—Four"; and, "Name—All living in China" [Exhibit "SS-1";]

(2) the testimony of their mother Yao Kee who stated that she had five children with Sy Kiat,
only three of whom are alive namely, Sze Sook Wah, Sze Lai Chu and Sze Chin Yan [TSN,
December 12, 1977, pp. 9-11;] and,

(3) an affidavit executed on March 22,1961 by Sy Kiat for presentation to the Local Civil
Registrar of Manila to support Sze Sook Wah's application for a marriage license, wherein Sy Kiat
expressly stated that she is his daughter [Exhibit "3".]

Likewise on the record is the testimony of Asuncion Gillego that Sy Kiat told her he has three
daughters with his Chinese wife, two of whom—Sook Wah and Sze Kai Cho—she knows, and
one adopted son [TSN, December 6,1977, pp. 87-88.]

However, as petitioners failed to establish the marriage of Yao Kee with Sy Mat according to the
laws of China, they cannot be accorded the status of legitimate children but only that of
acknowledged natural children. Petitioners are natural children, it appearing that at the time of
their conception Yao Kee and Sy Kiat were not disqualified by any impediment to marry one
another [See Art. 269, Civil Code.] And they are acknowledged children of the deceased because
of Sy Kiat's recognition of Sze Sook Wah [Exhibit "3"] and its extension to Sze Lai Cho and Sy
Chun Yen who are her sisters of the full blood [See Art. 271, Civil Code.]

Private respondents on the other hand are also the deceased's acknowledged natural children with
Asuncion Gillego, a Filipina with whom he lived for twenty-five (25) years without the benefit of
marriage. They have in their favor their father's acknowledgment, evidenced by a compromise
agreement entered into by and between their parents and approved by the Court of First Instance
on February 12, 1974 wherein Sy Kiat not only acknowleged them as his children by Asuncion
Gillego but likewise made provisions for their support and future inheritance, thus:

xxx xxx xxx

2. The parties also acknowledge that they are common-law husband and wife and that out of
such relationship, which they have likewise decided to definitely and finally terminate effective
immediately, they begot five children, namely: Aida Sy, born on May 30, 1950; Manuel Sy, born
on July 1, 1953; Teresita Sy, born on January 28, 1955; Ricardo Sy now deceased, born on
December 14, 1956; and Rodolfo Sy, born on May 7, 1958.
3. With respect to the AVENUE TRACTOR AND DIESEL PARTS SUPPLY ... , the parties
mutually agree and covenant that—

(a) The stocks and merchandize and the furniture and equipments ..., shall be divided into two
equal shares between, and distributed to, Sy Kiat who shall own
one-half of the total and the other half to Asuncion Gillego who shall transfer the same to their
children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy.

(b) the business name and premises ... shall be retained by Sy Kiat. However, it shall be his
obligation to give to the aforenamed children an amount of One Thousand Pesos ( Pl,000.00 )
monthly out of the rental of the two doors of the same building now occupied by Everett
Construction.

xxx xxx xxx

(5) With respect to the acquisition, during the existence of the

common-law husband-and-wife relationship between the parties, of the real estates and properties
registered and/or appearing in the name of Asuncion Gillego ... , the parties mutually agree and
covenant that the said real estates and properties shall be transferred in equal shares to their
children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy, but to be administered by
Asuncion Gillego during her lifetime ... [Exhibit "D".] (Emphasis supplied.)

xxx xxx xxx

This compromise agreement constitutes a statement before a court of record by which a child may
be voluntarily acknowledged [See Art. 278, Civil Code.]

Petitioners further argue that the questions on the validity of Sy Mat's marriage to Yao Kee and
the paternity and filiation of the parties should have been ventilated in the Juvenile and Domestic
Relations Court.

Specifically, petitioners rely on the following provision of Republic Act No. 5502, entitled "An
Act Revising Rep. Act No. 3278, otherwise known as the Charter of the City of Caloocan', with
regard to the Juvenile and Domestic Relations Court:

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

xxx xxx xxx

The provisions of the Judiciary Act to the contrary notwithstanding, the court shall have exclusive
original jurisdiction to hear and decide the following cases:

xxx xxx xxx

(2) Cases involving custody, guardianship, adoption, revocation of adoption, paternity and
acknowledgment;

(3) Annulment of marriages, relief from marital obligations, legal separation of spouses, and
actions for support;

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

xxx xxx xxx

and the ruling in the case of Bartolome v. Bartolome [G.R. No. L-23661, 21 SCRA 1324] reiterated
in Divinagracia v. Rovira [G.R. No. L-42615, 72 SCRA 307.]
With the enactment of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization
Act of 1980, the Juvenile and Domestic Relations Courts were abolished. Their functions and
jurisdiction are now vested with the Regional Trial Courts [See Section 19 (7), B.P. Blg. 129 and
Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, 143 SCRA 356, 360] hence it is
no longer necessary to pass upon the issue of jurisdiction raised by petitioners.

Moreover, even without the exactment of Batas Pambansa Blg. 129 we find in Rep. Act No. 5502
sec. 91-A last paragraph that:

xxx xxx xxx

If any question involving any of the above matters should arise as an incident in any case pending
in the ordinary court, said incident shall be determined in the main case.

xxx xxx xxx

As held in the case of Divinagracia v. Rovira [G.R. No. L42615. August 10, 1976, 72 SCRA 307]:

xxx xxx xxx

It is true that under the aforequoted section 1 of Republic Act No. 4834 **** a case involving
paternity and acknowledgment may be ventilated as an incident in the intestate or testate
proceeding (See Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal provision
presupposes that such an administration proceeding is pending or existing and has not been
terminated. [at pp. 313-314.] (Emphasis supplied.)

xxx xxx xxx

The reason for ths rule is not only "to obviate the rendition of conflicting rulings on the same issue
by the Court of First Instance and the Juvenile and Domestic Relations Court" [Vda. de Baluyut v.
Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but more importantly to prevent
multiplicity of suits. Accordingly, this Court finds no reversible error committed by respondent
court.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

16. [G.R. No. L-6897. November 29, 1956.]

In the Matter of the Claim for Attorney’s Fees. CLARO M. RECTO, claimant-Appellee, vs.
ESPERANZA P. DE HARDEN and FRED M. HARDEN, Defendants-Appellants.

DECISION

CONCEPCION, J.:

This is an appeal taken by Esperanza P. de Harden and Fred M. Harden from a decision of the
Court of First Instance of Manila, the pertinent part of which is of the following
tenor:chanroblesvirtuallawlibrary.

“The contingent fee to which the claimant is entitled under paragraph 3 of the contract, Exhibit JJJ
or 20, is 20% of P1,920,554.85 or the sum of P384,110.97.
“WHEREFORE, this Court hereby approves the recommendation of the Commissioner with the
above-stated modification, and finds that Attorney Claro M. Recto is entitled to the sum of THREE
HUNDRED EIGHTY-FOUR THOUSAND ONE HUNDRED AND TEN PESOS AND
NINETY-SEVEN CENTAVOS (P384,110.97), representing 20% of Esperanza P. de Harden’s
share in the conjugal properties owned by her and her husband, Fred M. Harden, as contingent fee
stipulated in paragraph 3 of the Contract of Professional Services, Exhibit JJJ or 20, and the said
Esperanza P. de Harden is hereby ordered to pay the said amount above-stated.” It appears that
sometime in July, 1941, Appellant, Mrs. Harden, and Appellee, Claro M. Recto, executed the
following:chanroblesvirtuallawlibrary

“CONTRACT OF PROFESSIONAL SERVICES

KNOW ALL MEN BY THESE PRESENTS:chanroblesvirtuallawlibrary

“That I, ESPERANZA PEREZ DE HARDEN, of age, married to Fred M. Harden, and temporarily
residing in the Philippines, with address at 534 Sales Street, Manila, have engaged the services of
Attorney Claro M. Recto to appear and act as my counsel in the action which I will file against my
husband, Fred M. Harden, for the purpose of securing an increase in the amount of support being
received by me from the conjugal partnership of myself and said Fred M. Harden, and for the
purpose likewise of protecting and preserving my rights in the properties of the said conjugal
partnership, in contemplation of the divorce suit which I intent to file against him in the competent
Court of California and of the liquidation of the conjugal partnership between us, this contract of
services to be under the following conditions:chanroblesvirtuallawlibrary

“1. That in lieu of retainer fee, which under the circumstances I am not in a position to pay, I
hereby agree to pay Attorney Claro M. Recto, such payment to be made monthly, during the
pendency of the litigation and until the termination of the same, twenty-five (25%) per cent of the
total increase in allowance or pension which may be awarded to me by the court over and above
the amount of P1,500.00 which I now receive monthly from Defendant Fred M. Harden out of the
funds of the conjugal partnership; chan roblesvirtualawlibraryProvided, that should the case be
terminated or an amicable settlement thereof be arrived at by the parties before the expiration of
two years from the date of the filing of the complaint, I shall continue to pay the said twenty-five
(25%) per cent up to the end of said period.

“2. That the aforesaid monthly payments shall be in addition to whatever amount may be adjudged
by the court against the Defendant Fred M. Harden or against the conjugal partnership by way of
litis expense, that is, attorney’s fees chargeable as expenses of litigation.

“3. That as full and complete satisfaction of the fees of Attorney Claro M. Recto in connection
with the case above referred to, and said case being for the purposes aforestated, that is, to secure
an increase in the amount of support I now receive as well as to protect and preserve my rights and
interest in the properties of the conjugal partnership, in contemplation of divorce and of the
liquidation of said partnership, I hereby agree to pay said Attorney Claro M. Recto twenty (20%)
per cent of the value of the share and participation which I may receive in the funds and properties
of the said conjugal partnership of myself and Defendant Fred M. Harden, as a result of the
liquidation thereof either by death, divorce, judicial separation, compromise or by any means or
method by virtue of which said partnership is or may be liquidated.

“4. All expenses in connection with the litigation are to be for my account, but the same may be
advanced by Attorney Claro M. Recto, to be reimbursed to him either from the money which I
receive by way of support or from the funds of the conjugal partnership.

“5. It is hereby understood that this contract includes the services of Attorney Claro M. Recto in
connection with the securing of the liquidation of the properties and assets of the conjugal
partnership of myself and Fred M. Harden, upon dissolution of said partnership or for any other
cause mentioned in Paragraph (3) hereof.
IN WITNESS WHEREOF, I have signed these presents in the City _____ of Manila, Philippines
this _______ day of July, 1941.

s/ Esperanza P. de Harden

t/ ESPERANZA P. DE HARDEN

ACCEPTED:chanroblesvirtuallawlibrary

s/ Claro M. Recto

t/ CLARO M. RECTO”

In compliance therewith, on July 12, 1941, the Appellee, as counsel for Mrs. Harden, commenced
Civil Case No. 59634 of the Court of First Instance of Manila, entitled “Esperanza P. de Harden
vs. Fred M. Harden and Jose Salumbides.” In the complaint therein filed, it was prayed, among
other things:chanroblesvirtuallawlibrary (a) that Mrs. Harden be given the exclusive
administration of the business and all properties of the conjugal partnership of Mr. and Mrs.
Harden; chan roblesvirtualawlibrary(b) that, in the event of denial of this prayer, the Defendants
be ordered to inform her “of everything pertaining to the administration of said business and
properties”, as well as to render accounts thereof and to permit her to examine the books and
records pertinent thereto; chan roblesvirtualawlibrary(c) that Mr. Harden be ordered to account to
Mrs. Harden, and to return to this jurisdiction, the sum of P449,015.44 allegedly withdrawn by
him from the Philippines or sent by him to Hongkong on April 1, 1941; chan
roblesvirtualawlibrary(d) that Defendant Salumbides be ordered to account for all moneys,
amounting to P285,000.00, belonging to the business and assets of said conjugal partnership and
deposited by him in a safety box, either in his name, or in that of Antonio Wilson, from January
23 to December 23, 1940; chan roblesvirtualawlibrary(e) that the transfer, in the name of
Salumbides, of certain shares of stock, allegedly belonging to the conjugal partnership, be
rescinded and said Defendant ordered to transfer said shares of stock in the name of Mrs. Harden
or in that of Mr. and Mrs. Harden, should Mr. Harden be allowed to continue as administrator of
said partnership; chan roblesvirtualawlibrary( f ) that the transfer, made by Mr. Harden and/or by
Defendant Salumbides, as his attorney-in-fact, of 36,000 shares of stock of the Angelo Mining
Company, to some residents of Hongkong, be rescinded and said shares returned to the assets of
the conjugal partnership and placed in the name of Mr. and Mrs. Harden; chan
roblesvirtualawlibrary(g) that the monthly allowance of Mrs. Harden be increased from P1,500 to
P15,000; chan roblesvirtualawlibrary(h) that, pending final decision, Mr. Harden be ordered to
increase the allowance or pension of Mrs. Harden and their daughter Sarah Elizabeth to P10,000 a
month; chan roblesvirtualawlibraryand (i) that a writ of preliminary injunction be issued
restraining the Defendants from disposing of the assets of the conjugal partnership in fraud of Mrs.
Harden.

By an order dated July 12, 1941, the court authorized the issuance of said writ, upon the filing of
the corresponding bond. It appears that, pursuant to an agreement submitted by both parties, and
with a view to avoiding unnecessary embarrassment, restraint or inconvenience in the financial
operations of the business enterprises affected by said writ of preliminary injunction, the same was
amended by an order dated July 19, 1941, in the sense that.

“ cralaw without prejudicing in any way the rights of the parties in this case, a separate bank
account be established in the Chartered Bank of India, Australia and China, of Manila, and all
transactions in connection with the aforesaid businesses passed through that account by Mr.
Harden or his duly authorized representative, who at present is Mr. Salumbides, without the
necessity of securing a particular order from this Court on each occasion; chan
roblesvirtualawlibrarythat the present funds in the Philippine National Bank in the name of Plaza
Lunch and Fred M. Harden be utilized for the purpose of starting said special bank account in the
Chartered Bank of India, Australia and China; chan roblesvirtualawlibrarythat all income from the
aforesaid businesses be deposited in this special bank account and no checks be drawn upon the
same, except to pay the necessary overhead and running expenses including purchases of tobacco,
merchandise, etc., required for the proper operation of said businesses; chan
roblesvirtualawlibrarythat a new set of books be opened by Mr. Harden or his duly authorized
representative covering all business transactions passed through said special bank account and the
same be opened for inspection by the Plaintiff’s duly authorized representative.

“The order of injunction of July 12, 1941, is modified only to the above extent, and in all other
respects is maintained.”

Subsequently, the Philippines was invaded by the Japanese and placed under military occupation.
Then came the liberation, in the course of which the records of this case were destroyed. On
October 23, 1946, said records were reconstituted at the instance of Appellee herein. Thereafter,
the proceedings were resumed and, in due course, the Court of First Instance of Manila rendered,
on or about October 31, 1949, a decision the dispositive part of which we
quote:chanroblesvirtuallawlibrary

“In view of the foregoing considerations, this court finds and so holds that —

“(a) Fred M. Harden abandoned his domicile of origin in New Jersey and established a domicile
of choice in Manila, Philippines, since 1901;

“(b) The matrimonial domicile of Fred M. Harden and Esperanza P. de Harden was established in
Manila, Philippines, from the date of their marriage on December 14, 1917;

“(c) Since they did not execute any antenuptial contract before their marriage, all the properties,
real or personal, acquired by either or both of them on and after December 14, 1917, up to the
present, over and above the sum of P20,000.00 representing Fred M. Harden’s capital, are hereby
declared conjugal properties;

“(d) The total amount of P1,944,794.37 representing deposits in safety deposit boxes in the name
of Jose Salumbides, the selling price of the house in Los Angeles, California, and the pre-war and
post-war remittances abroad of Fred M. Harden, from which has already been deducted the sum
of P160,000.00 covering payments for deficiency Federal income taxes and attorney’s fees, both
in the tax case and the present one, is hereby declared chargeable to the share of Defendant Harden
and deductible from whatever participation he may still have in the said conjugal partnership upon
the liquidation thereof, upon his failure to return and deposit them in the name of the Plaza Lunch
with the Manila branch of the Chartered Bank of India, Australia and China up to the time this
decision shall become final;

“(e) A conjugal lien be annotated in the original and owner’s duplicate of Transfer Certificates of
Title Nos. 24393, 52436 and 54911 of the Register of Deeds of Manila and in Original Certificate
of Title No. 2292 of Quezon Province, and on all the certificates of shares belonging to said
conjugal partnership, as well as in the corresponding books of the companies or corporations
issuing them, whereby it will be made to appear that any subsequent alienation or encumbrance of
said properties by Fred M. Harden alone or his representative without the consent of his wife will
be deemed fraudulent and subject to revocation or cancellation for being in fraud and prejudicial
to the right of Esperanza P. de Harden;

“( f ) Within a period of fifteen (15) days after this decision shall have become final, Fred M.
Harden and Esperanza P. de Harden are hereby ordered to execute a document to be approved by
this court creating and express active trust upon the remaining cash assets and income of the
conjugal partnership in the Philippines, whereby the Philippine Trust Company, with offices in
Manila, will act as trustee, subject to the right of Fred M. Harden to receive therefrom the sum of
P2,500,00 a month by way of allowance and an equal amount for the Plaintiff as separate support
and maintenance;
“(g) Within thirty (30) days after this decision shall have become final, Fred M. Harden shall
inform the Plaintiff of all the properties and businesses of the conjugal partnership, be they in the
Philippines or abroad, and render a true and complete accounting of the earnings and profits
thereof;

“(h) The Plaintiff is entitled to litis expensae in the amount of P175,000.00 for services rendered
by her counsel up to the rendition of this judgment, which Fred M. Harden or the herein receiver
is ordered to pay within a period of fifteen (15) days after this decision has become final; chan
roblesvirtualawlibraryand

“(i) The writ of preliminary injunction of July 12, 1941, is hereby declared permanent and the
order of receivership of November 20, 1946, is hereby maintained, but said auxiliary remedies will
be automatically lifted upon the conclusion of the annotation of the conjugal lien and the execution
of the deed of trust above mentioned. Without costs.

“IT IS SO ORDERED.”

The Defendants appealed from said decision to this Court, where the case was docketed as case
No. L-3687. While the appeal was thus pending before us, herein Appellee filed a manifestation
and a motion, both dated February 20, 1952. In said “manifestation”, Appellee stated that Mrs.
Harden had instructed him, by letter, to “discontinue all proceedings relative to” said case, “vacate
all orders and judgments rendered therein, and abandon and nullify all her claims to the conjugal
partnership existing between her and Mr. Harden”, in accordance with several instruments dated
January 29, 1952, and executed without the knowledge, advise and consent of said Appellee, as
counsel for Mrs. Harden, whereby:chanroblesvirtuallawlibrary (1) Mr. and Mrs. Harden had
purportedly agreed to settle their differences in consideration of the sum of $5,000 paid by Mr.
Harden to Mrs. Harden, and a monthly pension of P500 to be paid by him to her; chan
roblesvirtualawlibrary(2) Mr. Harden had created a trust fund of $20,000 from which said monthly
pension of $500 would be taken; chan roblesvirtualawlibraryand (3) Mr. and Mrs. Harden had
mutually released and forever discharged each other from all actions, debts, duties, accounts,
demands and claims to the conjugal partnership, in consideration of the sum of $1. It was further
asserted, in Appellee’s “manifestation”, that the purpose of the said instruments, executed by Mr.
and Mrs. Harden, was to defeat the claim of the former for attorney’s fees, for which reason, he
prayed, in his aforementioned motion, that

“a) Pending the resolution of this motion, the receiver appointed herein be authorized to continue
holding the properties above mentioned in his custody in order not to defeat the undersigned’s
inchoate lien on them;

“b) A day set aside to receive the evidence of the undersigned and those of the Plaintiff and the
Defendant Fred M. Harden, in order to determine the amount of fees due to the undersigned, by
the appointment of a referee or commissioner for the reception of such

“c) After due hearing, the undersigned be declared entitled to the sum of P400,000.00 as his fees
for services rendered in behalf of the Plaintiff in this case, under paragraph 3 of the contract, Annex
‘A’, and to that end a charging lien therefore be established upon the properties above-mentioned;

“d) And the receiver be ordered to pay to the undersigned the full amount of the fees to which the
latter is found to be entitled.”

Counsel for the Defendants-Appellants, in turn, moved for the dismissal of the case, to which
Appellee objected. Acting upon the issues raised in such motion for dismissal and in Appellee’s
motion to establish and enforce his charging lien, as counsel for Mrs. Harden, this Court issued on
July 22, 1952, a resolution the pertinent part of which reads:chanroblesvirtuallawlibrary

“It will be seen from the above that the Defendants-Appellants pray for the complete dismissal of
the above entitled case without prejudice to the annotation of the contingent claim of Attorney
Claro M. Recto on the property under receivership, other than the 368,553 shares of the Balatoc
Mining Company which belong to Fred M. Harden. On the other hand, Attorney Claro M. Recto
agrees to the lifting of the writ of preliminary injunction, the orders of contempt and commitment,
and all other interlocutory orders which were issued in the course of this case, with the exception
of the receivership, but objects to the dismissal of the case on the ground that, since receivership
is merely an auxiliary remedy, the present case should be allowed to remain pending for the
purpose of maintaining the receivership to safeguard his right to collect the fees that may be due
him.

“Attorney Claro M. Recto prays that a commissioner or referee be immediately appointed by this
Court to receive evidence in support of his allegations as to his attorney’s lien and its enforcement.
Counsel for the Defendants-Appellants does not object to this proceeding provided that the
restrictions set forth by him be observed. However, this Court does not have the proper facilities
for receiving evidence in order to determine the amount of the fees claimed by Attorney Claro M.
Recto, and it is deemed advisable that this matter be determined by the Court of First Instance.
This is specially so considering the opposition to the claim of Attorney Claro M. Recto filed by
Attorney J. W. Ferrier, Sr. in behalf of Esperanza P. de Harden.

“In view of the foregoing, the above entitled case is hereby remanded to the court of origin in order
to determine the amount of fees claimed by Attorney Claro M. Recto in his motion dated February
20, 1952.

“It is understood that, after said fees had been finally determined and paid, this case will be
completely dismissed as prayed for by the Defendants-Appellants, without prejudice to
considering the claim of the receiver for compensation as stated in his urgent motion dated July 2,
1952. “Pending the determination of the amount of fees claimed by Attorney Claro M. Recto, the
writ of preliminary injunction, the orders of contempt and commitment, and all interlocutory orders
which were issued in the course of this case, are hereby lifted and vacated, and with regard to the
receivership, the same is hereby dissolved, only with respect to the 368,553 shares of the Balatoc
Mining Company. As to the rest of the properties, the receivership shall be maintained.”

In compliance with said resolution, the records of this case were remanded to the lower court,
which, on September 2, 1952, designated a commissioner to receive evidence on the amount of
the fees collectible by herein Appellee and to report thereon. After due hearing, said commissioner
submitted, on February 6, 1953, a report of about one hundred (100) pages of the printed record
on appeal, setting forth, in detail, the evidence introduced by both parties, and his findings of fact,
with the following conclusion and recommendation:chanroblesvirtuallawlibrary

“Taking into consideration the value of the properties involved in this litigation, the length of time
in which claimant had handled the same for Esperanza Harden, the volume and quality of the work
performed, the complicated legal questions involved, the responsibility assumed by the claimant
as counsel, his reputation in the bar, the difficulties encountered by him while handling the same
in which he had to work hard every inch of the way because of the stiff oppositions filed by adverse
counsel, the diligence he employed not only in the preservation of the records in his possession
during the days of enemy occupation but also in the protection of the interests of Esperanza
Harden, his successful handling of said case and those cases growing out of it which reached the
Supreme Court, and the extra services he rendered in her behalf in the tax and other court cases,
the undersigned Commissioner concludes that claimant is entitled to the full amount of 20% of
Esperanza Harden’s share of the conjugal properties, as provided in paragraph 3 of the Contract of
Professional Services, Exhibit JJJ.

“WHEREFORE, the undersigned Commissioner respectfully recommends that Atty. Claro M.

Recto be paid the equivalent amount of 20% of Esperanza P. de Harden’s share of the conjugal
properties or the sum of P369,410.04 as his contingent fee for services rendered in her behalf.”

After appropriate proceedings, the lower court rendered a decision dated April 30, 1953, adopting
substantially said report of the commissioner, but increasing the contingent fee of Appellee herein
from P369,410.04, the sum recommended in the report, to P384,110.97. Hence, this appeal taken
by Mr. and Mrs. Harden.

The first question for determination therein is the validity of the above-quoted contract of services,
which the Appellants assail as void, mainly, upon the ground:chanroblesvirtuallawlibrary (1) that
Mrs. Harden cannot bind the conjugal partnership without her husband’s consent; chan
roblesvirtualawlibrary(2) that Article 1491 of the Civil Code of the Philippines in effect prohibits
contingent fees; chan roblesvirtualawlibrary(3) that the contract in question has for its purpose to
secure a decree of divorce, allegedly in violation of Articles 1305, 1352 and 1409 of the Civil Code
of the Philippines; chan roblesvirtualawlibraryand (4) that the terms of said contract are harsh,
inequitable and oppressive.

The first objection has no foundation in fact, for the contract in dispute does not seek to bind the
conjugal partnership. By virtue of said contract, Mrs. Harden merely bound herself — or assumed
the personal obligation — to pay, by way of contingent fees, 20% of her share in said partnership.
The contract neither gives, nor purports to give, to the Appellee any right whatsoever, personal or
real, in and to her aforesaid share. The amount thereof is simply a basis for the computation of said
fees.

For the same reason, the second objection is, likewise, untenable. Moreover, it has already been
held that contingent fees are not prohibited in the Philippines and are impliedly sanctioned by our
Cannons (No. 13) of Professional Ethics. (see, also, Ulanday vs. Manila Railroad Co., 45 Phil.,
540, 554.) Such is, likewise, the rule in the United States (Legal Ethics by Henry S. Drinker, p.
176).

“ cralaw in the United States, the great weight of authority recognizes the validity of contracts for
contingent fees, provided such contracts are not in contravention of public policy, and it is only
when the attorney has taken an unfair or unreasonable advantage of his client that such a claim is
condemned.” (See 5 Am. Jur. 359 et seq.; chan roblesvirtualawlibraryBallentine, Law Dictionary,
2nd ed., p. 276.)

Needless to say, there is absolutely nothing in the records before us to show that Appellee herein
had, in any manner, taken an unfair or unreasonable advantage of his client Mrs. Harden.

The third objection is not borne out, either by the language of the contract between them, or by the
intent of the parties thereto. Its purpose was not to secure a divorce, or to facilitate or promote the
procurement of a divorce. It merely sought to protect the interest of Mrs. Harden in the conjugal
partnership, during the pendency of a divorce suit she intended to file in the United States. What
is more, inasmuch as Mr. and Mrs. Harden are admittedly citizens of the United States, their status
and the dissolution thereof are governed — pursuant to Article 9 of the Civil Code of Spain (which
was in force in the Philippines at the time of the execution of the contract in question) and Article
15 of the Civil Code of the Philippines — by the laws of the United States, which sanction divorce.
In short, the contract of services, between Mrs. Harden and herein Appellee, is not contrary to law,
morals, good customs, public order or public policy.

The last objection is based upon principles of equity, but, pursuant thereto, one who seeks equity
must come with clean hands (Bastida, et al., vs. Dy Buncio & Co., 93 Phil., 195; chan
roblesvirtualawlibrary30 C.J. S. 475), and Appellants have not done so, for the circumstances
surrounding the case show, to our satisfaction, that their aforementioned agreements, ostensibly
for the settlement of the differences between husband and wife, were made for the purpose of
circumventing or defeating the rights of herein Appellee, under his above-quoted contract of
services with Mrs. Harden. Indeed, having secured a judgment in her favor, acknowledging her
rights to the assets of the conjugal partnership, which turned out to be worth almost P4,000,000 in
addition to litis expensae in the sum of P175,000, it is inconceivable that Mrs. Harden would have
waived such rights, as well as the benefits of all orders and judgments in her favor, in consideration
of the paltry sum of $5,000 allegedly paid to her by Mr. Harden and the additional sum of $20,000
to be paid by him in installments, at the rate of $500 a month. In fact, no explanation has been
given for this most unusual avowed settlement between Mr. and Mrs. Harden. One cannot even
consider the possibility of a reconciliation between the spouses, the same being inconsistent with
the monetary consideration for said alleged settlement. What is more, the records show that the
relations between said spouses — which were bad indeed, not only in July, 1941, when Mrs.
Harden engaged the services of the Appellee, but, even, before, for Mr. and Mrs. Harden were
separated since 1938 — had worsened considerably thereafter, as evidence by an action for divorce
filed by Mr. Harden in New Jersey, in July 1948, upon the ground of repeated acts of infidelity
allegedly committed by Mrs. Harden in 1940 and 1941.

Again, it appears that Appellee had rendered, under the contract in question, the following services,
for the benefit of Mrs. Harden:chanroblesvirtuallawlibrary

1. He succeeded in defeating Defendants’ motion for the dissolution of the writ of preliminary
injunction, issued by the Court on July 12, 1941, and amended on July 19, 1941.

2. On November 12, 1946, Appellee moved for the appointment of a receiver, upon the ground
that, despite said writ of preliminary injunction, the Defendants had been disposing of the
properties of the conjugal partnership for the purpose of defrauding Mrs. Harden. After due
hearing, the court, by an order dated November 20, 1946, directed the appointment of Abelardo
Perez as receiver of said properties, upon the filing of a P10,000 bond. Defendants asked, on
February 13, 1947, that the receivership be suspended, or else, that they be allowed to file a bond
for the discharge of the receivership. Appellee replied objecting thereto, unless the Defendants
posted a P4,000,000 bond. Subsequently or on March 5, 1947, the Defendants sought a
reconsideration of the order of November 20, 1946, and the discharge of the receiver. By an order
dated March 21, 1947, the Court authorized said discharged upon the filing, by the Defendants, of
a bond in the sum of P500,000, provided that Mr. Harden “should bring back all the 368,553 shares
of the Balatoc Mining Co., in his name to the Philippines for deposit with the Clerk of Court, or
with the Chartered Bank of India, Australia and China, at Manila cralaw

“3. On motion of the Appellee dated March 4, 1947, the Court, by an order dated April 5, 1947,
directed Mr. Harden to remit to Mrs. Harden the sum of $2,500, to be charged against her litis
expensae. Upon similar motion, filed by Appellee on or about April 26, 1947, the Court ordered
Mr. Harden, on May 13, 1947, to furnish Mrs. Harden the sum of $5,000, under the same
conditions.

4. On June 21, 1947, the Defendants instituted Civil Case No. G. R. No. L-1499 of this Court,
entitled “Fred M. Harden and Jose Salumbides vs. Emilio Peña, Abelardo Perez and Esperanza P.
Harden” for the purpose of annulling and setting aside, by writ of certiorari, the aforementioned
orders of the lower court dated July 12, 1941, November 20, 1946, and April 5 and May 13, 1947,
and to restrain, in the meantime, the enforcement thereof. After appropriate proceedings, in the
course of which Appellee appeared as counsel for Mrs. Harden, and like counsel for the Petitioners
therein, filed several lengthy, detailed pleadings and memoranda, decision was rendered on
November 21, 1950, denying the writ of certiorari prayed for.

5. On or about September 9, 1947, Appellee filed a motion alleging that despite the writ of
preliminary injunction above mentioned, the Defendants had, fraudulently and without judicial
consent, remitted abroad several sums of money aggregating P1,000,608.66, and praying that Mr.
Harden be ordered to return this sum to the Philippines, within a stated period, said sum to be
deposited with the account of the Plaza Lunch at the Manila Branch of the Chartered Bank of India,
Australia and China. Mr. Harden objected to said motion. Appellee filed a rejoinder, to which Mr.
Harden replied. Appellee filed a rejoinder to the rejoinder. On October 7, 1947, the Court granted
Appellee’s motion. Mr. Harden sought a reconsideration, which was opposed by the Appellee on
October 27, 1947, and denied by an order dated November 13, 1947. Mr. Harden moved, on
November 18, 1947, for the suspension of this order, which was immediately objected to by the
Appellee and then denied by the Court.
6. Inasmuch as said order of November 13, 1947 had not been complied with, Appellee filed on
November 27, 1947, a motion praying that Mr. Harden be declared in contempt of court and
punished accordingly. Meanwhile, or on November 24, 1947, Mr. Harden had instituted case G.
R. No. L-1816 of this Court against Hon. Emilio Peña, as Judge of the Court of First Instance of
Manila, and Mrs. Harden. In the petition therein filed, Mr. Harden applied for a writ of certiorari
annulling said orders of Judge Peña of October 7 and November 13, 1947, and prayed that, pending
disposition of the case, a writ of preliminary injunction be issued restraining the Respondents
therein from enforcing said orders, particularly through contempt proceedings. Hence, the lower
court deferred action on the aforementioned motion of November 27, 1947. After due hearing, this
Court, in a resolution dated February 12, 1948, refused to issue the writ of preliminary injunction
prayed for. Subsequently, or on November 21, 1950, decision was rendered denying the petition
for a writ of certiorari.

7. Soon after the issuance of our resolution in said case G. R. No. 1816, dated February 12, 1948,
or to be exact on March 27, 1948, the lower court issued an order directing Mr. Harden to comply,
within five (5) days from notice, with the order of October 7, 1947. On April 6, 1948, Appellee
filed with the lower court the corresponding formal charges against Mr. Harden for contempt of
court. After due hearing, Mr. Harden was, by an order of April 28, 1948, found guilty as charged
and ordered confined “until he complies with the aforementioned orders” of October 7, 1947 and
March 27, 1948. On motion of Mr. Harden, said order of April 28, 1948 was suspended until May
4, 1948, on which date he was arrested and placed in confinement at the New Bilibid Prison, in
Muntinglupa, Rizal. On July 10, 1948, he filed with this Court a petition for a writ of habeas corpus
against the Director of Prisons, (G. R. No. L-2349, entitled “Fred M. Harden vs. The Director of
Prisons”), which, in due course was denied in a decision promulgated on October 22, 1948.

8. During the military occupation of the Philippines by the Japanese, the Appellee made
representations with the Japanese Government to prevent the commandeering of a business
establishment belonging to Mr. and Mrs. Harden. Moreover, he succeeded in persuading the
Japanese to refrain from interning Mrs. Harden and her daughter and to allow her to withdraw,
from the former’s deposit in a local bank, from P200 to P250 a month, for their subsistence. He,
likewise, lent her money to meet her needs and spent the sum of P55,000 in the preservation of the
records and papers pertaining to the business and other properties of the conjugal partnership of
Mr. and Mrs. Harden.

9. Appellee assisted, also, the receiver, as his counsel and, in such capacity, took all steps essential
for the proper discharge of the duties of the former. Among other things, Appellee sought and
obtained judicial authority for some important acts of administration of, and disposition by, the
receiver. He (Appellee) secured judicial intervention for the protection and preservation of the
assets of the conjugal partnership, including orders for the delivery of certificates of stock, the
return thereof and/or its deposit with the clerk of court. He, likewise, represented the receiver in
seeking war damage payments.

10. In civil case No. 6222 of the Court of First Instance of Manila, entitled “Francisco Dalupan
vs. Fred M. Harden” for the recovery of P113,837.17, it was decided, through Appellee’s
intervention, that the conjugal assets would bear the payment of P22,767.43 only, the balance to
be chargeable exclusively against Mr. Harden’s share of the conjugal partnership.

11. Appellee instituted civil case No. 6940 of the Court of First Instance of Manila, entitled
“Abelardo Perez vs. Chartered Bank of India, Australia and China and Fred M. Harden”, for the
recovery of P1,000,608.66 and the return of stock certificates of the Balatoc Mining Co., which
had been sent abroad.

12. He (Appellee) represented Mrs. Harden in connection with a million-peso federal tax case
against Mr. and Mrs. Harden.

13. Appellee successfully blocked Mr. Harden’s attempts to

withdraw:chanroblesvirtuallawlibrary (1) $53,000 and forward the same to the Collector of
Internal Revenue of Los Angeles, California; chan roblesvirtualawlibrary(2) $50,000.00, allegedly
to defray expenses in resisting a new tax assessment against him in the United States; chan
roblesvirtualawlibraryand (3) P65,000 for his expenses.

Then too, the conjugal partnership had varried and extensive business interests and its assets were
worth almost P4,000,000. The pleadings, motions, oppositions, rejoinders, and memoranda filed,
and the evidence introduced, in the aforementioned cases — in which Appellee was pitted against
one of the most experienced and able members of the Philippine Bar — were numerous, extensive
and exhaustive. For instance, the record on appeal in one of those cases, namely, G. R. No. L-
3687, consisted of 966 pages.

In short, considering the character of the services rendered by the Appellee, the nature and
importance of the issues in said litigations, the amount of labor, time (1941 to 1952) and trouble
involved therein, the skill displayed in connection with said cases, the value of the property
affected by the controversy, the professional character and standing of the Appellee, the risks
assumed and the results obtained, we are of the opinion, and so hold, that the contract of services
in question is neither harsh nor oppressive or inequitable.

Under their second assignment of error, Appellants maintain that:chanroblesvirtuallawlibrary

“The lower court erred in failing to find as a fact borne out by the evidence that the legal services
of Attorney Claro M. Recto to Mrs. Esperanza P. de Harden, payment, for which is sought by him
in this case, have already been paid by his immediate execution pending appeal of the decision in
Civil Case No. CFI-R-59634 (SC-G.R. No. L- 3687), wherein he collected the sum of P176,000.00
for all such legal services.”

Said decision, however, states clearly that the aforementioned sum of P175,000 represents litis
expensae, and the contract between the Appellee and Mrs. Harden explicitly declares that said litis
expensae shall be “in addition to” Appellee’s share of 25% of the increase in the allowance of Mrs.
Harden and his attorney’s fees of 20% of her share in the conjugal partnership. The second
assignment of error is, therefore, devoid of merit.

Appellants, further contend, that:chanroblesvirtuallawlibrary

3. The lower court erred in holding that the inchoate share of the wife, Esperanza P. de Harden,
in the undissolved and unliquidated conjugal partnership properties of the Harden spouses, is
capable of certain valuation before such dissolution and liquidation, and summarily assessing the
value of Mrs. Harden’s share in such conjugal properties without proper evidence.

4. “The lower court erred in awarding 20% of such inchoate share to Attorney Claro M. Recto
from Mrs. Harden’s interests in the Harden conjugal properties, summarily assessing such 20%
inchoate share as of a value of P384,110.97, and ordering the payment of said sum to Attorney
Recto in pursuance of the provisions of paragraph 3 of the Contract of Professional Services.”

Appellants’ arguments in support thereof may be summarized as

follows:chanroblesvirtuallawlibrary The contract of services in question provides that Appellee’s
contingent fees shall be 20% of the share of Mrs. Harden in the conjugal partnership. Pursuant to
law, the share of Mrs. Harden shall be determined upon the liquidation of said partnership, which
has not taken place, as yet. What is more, it cannot be effected until the dissolution of the marriage
relation between Mr. and Mrs. Harden. Inasmuch as this relation subsists, it follows that the
amount of attorney’s fees due to Appellee herein should not have been determined in the decision
appealed from.

This line of argument overlooks the fact that said contract of services was made, principally, in
contemplation of a suit for divorce that, according to Mrs. Harden, she intended to file before a
competent court in California, “and of the liquidation of the conjugal partnership between” her and
Mr. Harden. Had she filed said action for divorce and secured a decree of divorce, said conjugal
partnership would have been dissolved and then liquidated, and the share of Mrs. Harden therein
would have been fixed. However, this cannot take place, either now, or in the foreseeable future,
owing to the aforementioned agreements between Mr. and Mrs. Harden, which were made for the
evident purpose of defeating Appellee’s claim for attorney’s fees. In other words, the occurrence,
within the time contemplated by the parties — bearing in mind the nature of, and the circumstances
under which they entered into, said contract of services — of the event upon which the amount of
said fees depended, was rendered impossible by Mrs. Harden. Hence, whether such event be
regarded as a condition or as a period, she may not insist upon its occurrence, prior to the
enforcement of the rights of the herein Appellee, for “the condition shall be deemed fulfilled when
the obligor voluntarily prevents its fulfillment” (Art. 1186, Civil Code) and “the debtor shall lose
every right to make use of the period” when he “violates any undertaking, in consideration of
which the creditor agreed to the period.” (Art. 1198, Civil Code.)

It should be noted, also, that the compensation agreed upon for Appellee’s services, consists of
three (3) parts, namely:chanroblesvirtuallawlibrary (a) 25% of the increase in the allowance of
Mrs. Harden; chan roblesvirtualawlibrary(b) litis expensae; chan roblesvirtualawlibraryand (c)
20% of her share in the conjugal partnership. The first part was dealt with in the first paragraph of
their contract of services. The second and third parts were the object of the second and third
paragraphs, respectively. The first paragraph limited the rights of Appellee thereunder to two (2)
years, in the event of termination of the case or amicable settlement thereof within two (2) years
from the filing of the complaint. No such limitation appears in the second and third paragraphs of
said contract. Hence, the same were intended by the parties to be fully operative under any and all
conditions.

It may not be amiss to add that the value of the properties involved has been assessed, not
summarily, but after due notice and full dress hearing, in the course of which both parties
introduced testimonial and documentary evidence. Appellants presented Exhibits 1 to 58, whereas
those of the Appellee were so numerous that, having begun with Exhibit A, his last piece of
documentary evidence was marked Exhibit 26 Y’s. The transcript of the hearing, which lasted ten
(10) days, covers over 220 pages.

The other assignments of error made by Appellants herein are mere corollaries of those already
disposed of, and, hence, no further discussion thereof is necessary.

In conclusion, it appears that the assets of the conjugal partnership between Mr. and Mrs. Harden
are reasonably valued at P3,841,109.70. One-half (1/2) thereof, representing the share of Mrs.
Harden, is therefore, worth P1,920,554.85. Twenty percentum (20%) of this sum is P384,110.97,
which is the contingent fee due to the Appellee, apart from the litis expensae already paid to him.
Inasmuch as the Appellee has collected, also, the sum of P80,000.00, on account of said contingent
fees, there results in his favor a balance of P304,110.97.

Subject to this qualification, the decision appealed from is hereby affirmed, therefore, with costs
against the Appellants. SO ORDERED.

17. G.R. No. 154830 June 8, 2007

PIONEER CONCRETE PHILIPPINES, INC., PIONEER PHILIPPINES HOLDINGS, and

PHILIP J. KLEPZIG, petitioners,
vs.
ANTONIO D. TODARO, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to annul and set aside the Decision1
of the Court of Appeals (CA) dated October 31, 2000 in CA-G.R. SP No. 54155 and its
Resolution2 of August 21, 2002 denying petitioners’ Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On January 16, 1998, herein respondent Antonio D. Todaro (Todaro) filed with the Regional Trial
Court (RTC) of Makati City, a complaint for Sum of Money and Damages with Preliminary
Attachment against Pioneer International Limited (PIL), Pioneer Concrete Philippines, Inc.
(PCPI), Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald) and Philip J.
Klepzig (Klepzig).3

In his complaint, Todaro alleged that PIL is a corporation duly organized and existing under the
laws of Australia and is principally engaged in the ready-mix concrete and concrete aggregates
business; PPHI is the company established by PIL to own and hold the stocks of its operating
company in the Philippines; PCPI is the company established by PIL to undertake its business of
ready-mix concrete, concrete aggregates and quarrying operations in the Philippines; McDonald
is the Chief Executive of the Hongkong office of PIL; and, Klepzig is the President and Managing
Director of PPHI and PCPI; Todaro has been the managing director of Betonval Readyconcrete,
Inc. (Betonval), a company engaged in pre-mixed concrete and concrete aggregate production; he
resigned from Betonval in February 1996; in May 1996, PIL contacted Todaro and asked him if
he was available to join them in connection with their intention to establish a ready-mix concrete
plant and other related operations in the Philippines; Todaro informed PIL of his availability and
interest to join them; subsequently, PIL and Todaro came to an agreement wherein the former
consented to engage the services of the latter as a consultant for two to three months, after which,
he would be employed as the manager of PIL's ready-mix concrete operations should the company
decide to invest in the Philippines; subsequently, PIL started its operations in the Philippines;
however, it refused to comply with its undertaking to employ Todaro on a permanent basis.4

Instead of filing an Answer, PPHI, PCPI and Klepzig separately moved to dismiss the complaint
on the grounds that the complaint states no cause of action, that the RTC has no jurisdiction over
the subject matter of the complaint, as the same is within the jurisdiction of the NLRC, and that
the complaint should be dismissed on the basis of the doctrine of forum non conveniens.5

In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein petitioners'
respective motions to dismiss.6 Herein petitioners, as defendants, filed an Urgent Omnibus
Motion7 for the reconsideration of the trial court's Order of January 4, 1999 but the trial court
denied it via its Order8 dated June 3, 1999.

On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA.9 On October 31,
2000, the CA rendered its presently assailed Decision denying herein petitioners' Petition for
Certiorari. Petitioners filed a Motion for Reconsideration but the CA denied it in its Resolution
dated August 21, 2002.

Hence, herein Petition for Review on Certiorari based on the following assignment of errors:

A.

THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A CAUSE

OF ACTION AGAINST PETITIONERS IS WITHOUT ANY LEGAL BASIS. THE ANNEXES
TO THE COMPLAINT CLEARLY BELIE THE ALLEGATION OF EXISTENCE OF AN
EMPLOYMENT CONTRACT BETWEEN PRIVATE RESPONDENT AND PETITIONERS.

B.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN

ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT UPHELD THE JURISDICTION OF THE TRIAL COURT DESPITE THE FACT
THAT THE COMPLAINT INDUBITABLY SHOWS THAT IT IS AN ACTION FOR AN
ALLEGED BREACH OF EMPLOYMENT CONTRACT, AND HENCE, FALLS WITHIN THE
EXLCUSIVE JURISDICTION OF THE NATIONAL LABOR RELATIONS COMMISSION.

THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE PRINCIPLE

OF "FORUM NON CONVENIENS" AS A VALID GROUND FOR DISMISSING A
COMPLAINT.10

In their first assigned error, petitioners contend that there was no perfected employment contract
between PIL and herein respondent. Petitioners assert that the annexes to respondent's complaint
show that PIL's offer was for respondent to be employed as the manager only of its pre-mixed
concrete operations and not as the company's managing director or CEO. Petitioners argue that
when respondent reiterated his intention to become the manager of PIL's overall business venture
in the Philippines, he, in effect did not accept PIL's offer of employment and instead made a
counter-offer, which, however, was not accepted by PIL. Petitioners also contend that under
Article 1318 of the Civil Code, one of the requisites for a contract to be perfected is the consent of
the contracting parties; that under Article 1319 of the same Code, consent is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract; that the offer must be certain and the acceptance absolute; that a qualified acceptance
constitutes a counter-offer. Petitioners assert that since PIL did not accept respondent's counter-
offer, there never was any employment contract that was perfected between them.

Petitioners further argue that respondent's claim for damages based on the provisions of Articles
19 and 21 of the Civil Code is baseless because it was shown that there was no perfected
employment contract.

Assuming, for the sake of argument, that PIL may be held liable for breach of employment
contract, petitioners contend that PCPI and PPHI, may not also be held liable because they are
juridical entities with personalities which are separate and distinct from PIL, even if they are
subsidiary corporations of the latter. Petitioners also aver that the annexes to respondent's
complaint show that the negotiations on the alleged employment contract took place between
respondent and PIL through its office in Hongkong. In other words, PCPI and PPHI were not privy
to the negotiations between PIL and respondent for the possible employment of the latter; and
under Article 1311 of the Civil Code, a contract is not binding upon and cannot be enforced against
one who was not a party to it even if he be aware of such contract and has acted with knowledge
thereof.

Petitioners further assert that petitioner Klepzig may not be held liable because he is simply acting
in his capacity as president of PCPI and PPHI and settled is the rule that an officer of a corporation
is not personally liable for acts done in the performance of his duties and within the bounds of the
authority conferred on him. Furthermore, petitioners argue that even if PCPI and PPHI are held
liable, respondent still has no cause of action against Klepzig because PCPI and PPHI have
personalities which are separate and distinct from those acting in their behalf, such as Klepzig.

As to their second assigned error, petitioners contend that since herein respondent's claims for
actual, moral and exemplary damages are solely premised on the alleged breach of employment
contract, the present case should be considered as falling within the exclusive jurisdiction of the
NLRC.

With respect to the third assigned error, petitioners assert that the principle of forum non
conveniens dictates that even where exercise of jurisidiction is authorized by law, courts may
refuse to entertain a case involving a foreign element where the matter can be better tried and
decided elsewhere, either because the main aspects of the case transpired in a foreign jurisdiction
or the material witnesses have their residence there and the plaintiff sought the forum merely to
secure procedural advantage or to annoy or harass the defendant. Petitioners also argue that one of
the factors in determining the most convenient forum for conflicts problem is the power of the
court to enforce its decision. Petitioners contend that since the majority of the defendants in the
present case are not residents of the Philippines, they are not subject to compulsory processes of
the Philippine court handling the case for purposes of requiring their attendance during trial. Even
assuming that they can be summoned, their appearance would entail excessive costs. Petitioners
further assert that there is no allegation in the complaint from which one can conclude that the
evidence to be presented during the trial can be better obtained in the Philippines. Moreover, the
events which led to the present controversy occurred outside the Philippines. Petitioners conclude
that based on the foregoing factual circumstances, the case should be dismissed under the principle
of forum non conveniens.

In his Comment, respondent extensively quoted the assailed CA Decision maintaining that the
factual allegations in the complaint determine whether or not the complaint states a cause of action.

As to the question of jurisdiction, respondent contends that the complaint he filed was not based
on a contract of employment. Rather, it was based on petitioners' unwarranted breach of their
contractual obligation to employ respondent. This breach, respondent argues, gave rise to an action
for damages which is cognizable by the regular courts.

Even assuming that there was an employment contract, respondent asserts that for the NLRC to
acquire jurisdiction, the claim for damages must have a reasonable causal connection with the
employer-employee relationship of petitioners and respondent.

Respondent further argues that there is a perfected contract between him and petitioners as they
both agreed that the latter shall employ him to manage and operate their ready-mix concrete
operations in the Philippines. Even assuming that there was no perfected contract, respondent
contends that his complaint alleges an alternative cause of action which is based on the provisions
of Articles 19 and 21 of the Civil Code.

As to the applicability of the doctrine of forum non conveniens, respondent avers that the question
of whether a suit should be entertained or dismissed on the basis of the principle of forum non
conveniens depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial judge, who is in the best position to determine whether special circumstances
require that the court desist from assuming jurisdiction over the suit.

The petition lacks merit.

Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or omission
by which a party violates a right of another. A cause of action exists if the following elements are
present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or
is created; (2) an obligation on the part of the named defendant to respect or not to violate such
right; and, (3) an act or omission on the part of such defendant violative of the right of the plaintiff
or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages.11

In Hongkong and Shanghai Banking Corporation Limited v. Catalan,12 this Court held:

The elementary test for failure to state a cause of action is whether the complaint alleges facts
which if true would justify the relief demanded. Stated otherwise, may the court render a valid
judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the
material allegations. If the allegations in the complaint furnish sufficient basis on which it can be
maintained, it should not be dismissed regardless of the defense that may be presented by the
defendants.13

Moreover, the complaint does not have to establish or allege facts proving the existence of a cause
of action at the outset; this will have to be done at the trial on the merits of the case.14 To sustain
a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief
does not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or
uncertain.15

Hence, in resolving whether or not the Complaint in the present case states a cause of action, the
trial court correctly limited itself to examining the sufficiency of the allegations in the Complaint
as well as the annexes thereto. It is proscribed from inquiring into the truth of the allegations in
the Complaint or the authenticity of any of the documents referred or attached to the Complaint,
since these are deemed hypothetically admitted by the respondent.

This Court has reviewed respondent’s allegations in its Complaint. In a nutshell, respondent
alleged that herein petitioners reneged on their contractual obligation to employ him on a
permanent basis. This allegation is sufficient to constitute a cause of action for damages.

The issue as to whether or not there was a perfected contract between petitioners and respondent
is a matter which is not ripe for determination in the present case; rather, this issue must be taken
up during trial, considering that its resolution would necessarily entail an examination of the
veracity of the allegations not only of herein respondent as plaintiff but also of petitioners as
defendants.

The Court does not agree with petitioners' contention that they were not privy to the negotiations
for respondent's possible employment. It is evident from paragraphs 24 to 28 of the Complaint16
that, on various occasions, Klepzig conducted negotiations with respondent regarding the latter's
possible employment. In fact, Annex "H"17 of the complaint shows that it was Klepzig who
informed respondent that his company was no longer interested in employing respondent. Hence,
based on the allegations in the Complaint and the annexes attached thereto, respondent has a cause
of action against herein petitioners.

As to the question of jurisdiction, this Court has consistently held that where no employer-
employee relationship exists between the parties and no issue is involved which may be resolved
by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is
the Regional Trial Court that has jurisdiction.18 In the present case, no employer-employee
relationship exists between petitioners and respondent. In fact, in his complaint, private respondent
is not seeking any relief under the Labor Code, but seeks payment of damages on account of
petitioners' alleged breach of their obligation under their agreement to employ him. It is settled
that an action for breach of contractual obligation is intrinsically a civil dispute.19 In the
alternative, respondent seeks redress on the basis of the provisions of Articles 19 and 21 of the
Civil Code. Hence, it is clear that the present action is within the realm of civil law, and jurisdiction
over it belongs to the regular courts.20

With respect to the applicability of the principle of forum non conveniens in the present case, this
Court's ruling in Bank of America NT & SA v. Court of Appeals21 is instructive, to wit:

The doctrine of forum non conveniens, literally meaning ‘the forum is inconvenient’, emerged in
private international law to deter the practice of global forum shopping, that is to prevent non-
resident litigants from choosing the forum or place wherein to bring their suit for malicious
reasons, such as to secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts
of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or
available forum and the parties are not precluded from seeking remedies elsewhere.

Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial court. In
the case of Communication Materials and Design, Inc. vs. Court of Appeals, this Court held that
"xxx [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided,
that the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to
enforce its decision."

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals, that the
doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because
Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further
ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance; and that the propriety of dismissing a case based on
this principle of forum non conveniens requires a factual determination, hence it is more properly
considered a matter of defense.22 (emphasis supplied)

In the present case, the factual circumstances cited by petitioners which would allegedly justify
the application of the doctrine of forum non conveniens are matters of defense, the merits of which
should properly be threshed out during trial.

WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the
Court of Appeals are AFFIRMED.

Costs against petitioners.

SO ORDERED.

18. G.R. No. 125078 May 30, 2011

NAVIDA ET AL vs DIZON ET AL

Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules
of Court, which arose out of two civil cases that were filed in different courts but whose factual
background and issues are closely intertwined.

The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3 dated May 20, 1996 of
the Regional Trial Court (RTC) of General Santos City, Branch 37, in Civil Case No. 5617. The
said Order decreed the dismissal of the case in view of the perceived lack of jurisdiction of the
RTC over the subject matter of the complaint. The petition in G.R. No. 125598 also challenges the
Orders dated June 4, 19964 and July 9, 1996,5 which held that the RTC of General Santos City no
longer had jurisdiction to proceed with Civil Case No. 5617.

On the other hand, the petitions in G.R. Nos. 126654,6 127856,7 and 1283988 seek the reversal of
the Order9 dated October 1, 1996 of the RTC of Davao City, Branch 16, in Civil Case No. 24,251-
96, which also dismissed the case on the ground of lack of jurisdiction.

G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the Resolutions
dated February 10, 1997,10 April 28, 199711 and March 10, 1999.12

The factual antecedents of the petitions are as follows:

Proceedings before the Texas Courts

Beginning 1993, a number of personal injury suits were filed in different Texas state courts by
citizens of twelve foreign countries, including the Philippines. The thousands of plaintiffs sought
damages for injuries they allegedly sustained from their exposure to dibromochloropropane
(DBCP), a chemical used to kill nematodes (worms), while working on farms in 23 foreign
countries. The cases were eventually transferred to, and consolidated in, the Federal District Court
for the Southern District of Texas, Houston Division. The cases therein that involved plaintiffs
from the Philippines were "Jorge Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was
docketed as Civil Action No. H-94-1359, and "Juan Ramon Valdez, et al. v. Shell Oil Co., et al.,"
which was docketed as Civil Action No. H-95-1356. The defendants in the consolidated cases
prayed for the dismissal of all the actions under the doctrine of forum non conveniens.

In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally granted
the defendants’ motion to dismiss. Pertinently, the court ordered that:

Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the entry of
this Memorandum and Order provided that defendants and third- and fourth-party defendants have:

(1) participated in expedited discovery in the United States xxx;

(2) either waived or accepted service of process and waived any other jurisdictional defense within
40 days after the entry of this Memorandum and Order in any action commenced by a plaintiff in
these actions in his home country or the country in which his injury occurred. Any plaintiff desiring
to bring such an action will do so within 30 days after the entry of this Memorandum and Order;

(3) waived within 40 days after the entry of this Memorandum and Order any limitations-based
defense that has matured since the commencement of these actions in the courts of Texas;

(4) stipulated within 40 days after the entry of this Memorandum and Order that any discovery
conducted during the pendency of these actions may be used in any foreign proceeding to the same
extent as if it had been conducted in proceedings initiated there; and

(5) submitted within 40 days after the entry of this Memorandum and Order an agreement binding
them to satisfy any final judgment rendered in favor of plaintiffs by a foreign court.

xxxx

Notwithstanding the dismissals that may result from this Memorandum and Order, in the event
that the highest court of any foreign country finally affirms the dismissal for lack of jurisdiction
of an action commenced by a plaintiff in these actions in his home country or the country in which
he was injured, that plaintiff may return to this court and, upon proper motion, the court will resume
jurisdiction over the action as if the case had never been dismissed for [forum non conveniens].13

Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and 125598

In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General
Santos City (the petitioners in G.R. No. 125078, hereinafter referred to as NAVIDA, et al.) filed a
Joint Complaint14 in the RTC of General Santos City on August 10, 1995. The case was docketed
as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co. (SHELL); Dow Chemical
Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit
Co., Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as
DOLE); Chiquita Brands, Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte
Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter collectively referred to as DEL
MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac
Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to as
defendant companies.)

Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the
reproductive systems which they allegedly suffered because of their exposure to DBCP. They
claimed, among others, that they were exposed to this chemical during the early 1970’s up to the
early 1980’s when they used the same in the banana plantations where they worked at; and/or when
they resided within the agricultural area where such chemical was used. Navida, et al., claimed
that their illnesses and injuries were due to the fault or negligence of each of the defendant
companies in that they produced, sold and/or otherwise put into the stream of commerce DBCP-
containing products. According to NAVIDA, et al., they were allowed to be exposed to the said
products, which the defendant companies knew, or ought to have known, were highly injurious to
the former’s health and well-being.

Instead of answering the complaint, most of the defendant companies respectively filed their
Motions for Bill of Particulars.15 During the pendency of the motions, on March 13, 1996,
NAVIDA, et al., filed an Amended Joint Complaint,16 excluding Dead Sea Bromine Co., Ltd.,
Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as party defendants.

Again, the remaining defendant companies filed their various Motions for Bill of Particulars.17
On May 15, 1996, DOW filed an Answer with Counterclaim.18

On May 20, 1996, without resolving the motions filed by the parties, the RTC of General Santos
City issued an Order dismissing the complaint. First, the trial court determined that it did not have
jurisdiction to hear the case, to wit:

THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT
SHOULD BE DISMISSED FOR LACK OF JURISDICTION

xxxx

The substance of the cause of action as stated in the complaint against the defendant foreign
companies cites activity on their part which took place abroad and had occurred outside and
beyond the territorial domain of the Philippines. These acts of defendants cited in the complaint
included the manufacture of pesticides, their packaging in containers, their distribution through
sale or other disposition, resulting in their becoming part of the stream of commerce.

Accordingly, the subject matter stated in the complaint and which is uniquely particular to the
present case, consisted of activity or course of conduct engaged in by foreign defendants outside
Philippine territory, hence, outside and beyond the jurisdiction of Philippine Courts, including the
present Regional Trial Court.19

Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their
complaint is a tort category that is not recognized in Philippine laws. Said the trial court:

THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT

FOREIGN COMPANIES IS NOT WITHIN THE SUBJECT MATTER JURISDICTION OF THE
REGIONAL TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY WITHIN THE
PURVIEW OF THE PHILIPPINE LAW

The specific tort asserted against defendant foreign companies in the present complaint is product
liability tort. When the averments in the present complaint are examined in terms of the particular
categories of tort recognized in the Philippine Civil Code, it becomes stark clear that such
averments describe and identify the category of specific tort known as product liability tort. This
is necessarily so, because it is the product manufactured by defendant foreign companies, which
is asserted to be the proximate cause of the damages sustained by the plaintiff workers, and the
liability of the defendant foreign companies, is premised on being the manufacturer of the
pesticides.

It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and
only if the Civil Code of the Philippines, or a suppletory special law prescribes a product liability
tort, inclusive of and comprehending the specific tort described in the complaint of the plaintiff
workers.20

Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting
their case to the Philippine courts, viz:

FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS

The Court views that the plaintiffs did not freely choose to file the instant action, but rather were
coerced to do so, merely to comply with the U.S. District Court’s Order dated July 11, 1995, and
in order to keep open to the plaintiffs the opportunity to return to the U.S. District Court.21

Fourth, the trial court ascribed little significance to the voluntary appearance of the defendant
companies therein, thus:

THE DEFENDANTS’ SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS

ILLUSORY

Defendants have appointed their agents authorized to accept service of summons/processes in the
Philippines pursuant to the agreement in the U.S. court that defendants will voluntarily submit to
the jurisdiction of this court. While it is true that this court acquires jurisdiction over persons of
the defendants through their voluntary appearance, it appears that such voluntary appearance of
the defendants in this case is conditional. Thus in the "Defendants’ Amended Agreement
Regarding Conditions of Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed
with the U.S. District Court, defendants declared that "(t)he authority of each designated
representative to accept service of process will become effective upon final dismissal of these
actions by the Court". The decision of the U.S. District Court dismissing the case is not yet final
and executory since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i),
Amended Complaint). Consequently, since the authority of the agent of the defendants in the
Philippines is conditioned on the final adjudication of the case pending with the U.S. courts, the
acquisition of jurisdiction by this court over the persons of the defendants is also conditional. x x
x.

The appointment of agents by the defendants, being subject to a suspensive condition, thus
produces no legal effect and is ineffective at the moment.22

Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case in
the Philippine courts violated the rules on forum shopping and litis pendencia. The trial court
expounded:

THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING

This court frowns upon the fact that the parties herein are both vigorously pursuing their appeal of
the decision of the U.S. District court dismissing the case filed thereat. To allow the parties to
litigate in this court when they are actively pursuing the same cases in another forum, violates the
rule on ‘forum shopping’ so abhorred in this jurisdiction. x x x.

xxxx

THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION

Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction. This
court takes note that the U.S. District Court did not decline jurisdiction over the cause of action.
The case was dismissed on the ground of forum non conveniens, which is really a matter of venue.
By taking cognizance of the case, the U.S. District Court has, in essence, concurrent jurisdiction
with this court over the subject matter of this case. It is settled that initial acquisition of jurisdiction
divests another of its own jurisdiction. x x x.

xxxx

THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"

Furthermore, the case filed in the U.S. court involves the same parties, same rights and interests,
as in this case. There exists litis pendencia since there are two cases involving the same parties and
interests. The court would like to emphasize that in accordance with the rule on litis pendencia x
x x; the subsequent case must be dismissed. Applying the foregoing [precept] to the case-at-bar,
this court concludes that since the case between the parties in the U.S. is still pending, then this
case is barred by the rule on "litis pendencia."23

In fine, the trial court held that:

It behooves this Court, then to dismiss this case. For to continue with these proceedings, would be
violative of the constitutional provision on the Bill of Rights guaranteeing speedy disposition of
cases (Ref. Sec. 16, Article III, Constitution). The court has no other choice. To insist on further
proceedings with this case, as it is now presented, might accord this court a charming appearance.
But the same insistence would actually thwart the very ends of justice which it seeks to achieve.

This evaluation and action is made not on account of but rather with due consideration to the fact
that the dismissal of this case does not necessarily deprive the parties – especially the plaintiffs –
of their possible remedies. The court is cognizant that the Federal Court may resume proceedings
of that earlier case between the herein parties involving the same acts or omissions as in this case.

WHEREFORE, in view of the foregoing considerations, this case is now considered

DISMISSED.24

On June 4, 1996, the RTC of General Santos City likewise issued an Order,25 dismissing DOW’s
Answer with Counterclaim.

CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration26 of the RTC
Order dated May 20, 1996, while DOW filed a motion for reconsideration27 of the RTC Order
dated June 4, 1996. Subsequently, DOW and OCCIDENTAL also filed a Joint Motion for
Reconsideration28 of the RTC Order dated May 20, 1996.

In an Order29 dated July 9, 1996, the RTC of General Santos City declared that it had already lost
its jurisdiction over the case as it took into consideration the Manifestation of the counsel of
NAVIDA, et al., which stated that the latter had already filed a petition for review on certiorari
before this Court.

CHIQUITA and SHELL filed their motions for reconsideration30 of the above order.

On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail the
RTC Order dated May 20, 1996, which was docketed as G.R. No. 125078.

The RTC of General Santos City then issued an Order31 dated August 14, 1996, which merely
noted the incidents still pending in Civil Case No. 5617 and reiterated that it no longer had any
jurisdiction over the case.

On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on Certiorari,32
challenging the orders of the RTC of General Santos City dated May 20, 1996, June 4, 1996 and
July 9, 1996. Their petition was docketed as G.R. No. 125598.

In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in
ruling that it has no jurisdiction over the subject matter of the case as well as the persons of the
defendant companies.

In a Resolution33 dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598 with
G.R. No. 125078.

CHIQUITA filed a Petition for Review on Certiorari,34 which sought the reversal of the RTC
Orders dated May 20, 1996, July 9, 1996 and August 14, 1996. The petition was docketed as G.R.
No. 126018. In a Resolution35 dated November 13, 1996, the Court dismissed the aforesaid
petition for failure of CHIQUITA to show that the RTC committed grave abuse of discretion.
CHIQUITA filed a Motion for Reconsideration,36 but the same was denied through a
Resolution37 dated January 27, 1997.

Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856, and
128398

Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL
MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155 plaintiffs
from Davao City. This case was docketed as Civil Case No. 24,251-96. These plaintiffs (the
petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.) amended their Joint-
Complaint on May 21, 1996.38

Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana
plantation and/or as residents near the said plantation, they were made to use and/or were exposed
to nematocides, which contained the chemical DBCP. According to ABELLA, et al., such
exposure resulted in "serious and permanent injuries to their health, including, but not limited to,
sterility and severe injuries to their reproductive capacities."39 ABELLA, et al., claimed that the
defendant companies manufactured, produced, sold, distributed, used, and/or made available in
commerce, DBCP without warning the users of its hazardous effects on health, and without
providing instructions on its proper use and application, which the defendant companies knew or
ought to have known, had they exercised ordinary care and prudence.

Except for DOW, the other defendant companies filed their respective motions for bill of
particulars to which ABELLA, et al., filed their opposition. DOW and DEL MONTE filed their
respective Answers dated May 17, 1996 and June 24, 1996.

The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated October 1,
1996, which, in its entirety, reads:

Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the
plaintiffs against the defendants Shell Oil Company, DOW Chemicals Company, Occidental
Chemical Corporation, Standard Fruit Company, Standard Fruit and Steamship, DOLE Food
Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands International, Del
Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign corporations with
Philippine Representatives, the Court, as correctly pointed out by one of the defendants, is
convinced that plaintiffs "would have this Honorable Court dismiss the case to pave the way for
their getting an affirmance by the Supreme Court" (#10 of Defendants’ Del Monte Fresh Produce,
N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated July 22, 1996). Consider these:

1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the
Philippines; they have no agents as well (par. 18); plaintiffs are suing the defendants for tortuous
acts committed by these foreign corporations on their respective countries, as plaintiffs, after
having elected to sue in the place of defendants’ residence, are now compelled by a decision of a
Texas District Court to file cases under torts in this jurisdiction for causes of actions which
occurred abroad (par. 19); a petition was filed by same plaintiffs against same defendants in the
Courts of Texas, USA, plaintiffs seeking for payment of damages based on negligence, strict
liability, conspiracy and international tort theories (par. 27); upon defendants’ Motion to Dismiss
on Forum non [conveniens], said petition was provisionally dismissed on condition that these cases
be filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine Courts
refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.)

11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District
Court issued a Memorandum and Order conditionally dismissing several of the consolidated
actions including those filed by the Filipino complainants. One of the conditions imposed was for
the plaintiffs to file actions in their home countries or the countries in which they were injured x x
x. Notwithstanding, the Memorandum and [O]rder further provided that should the highest court
of any foreign country affirm the dismissal for lack of jurisdictions over these actions filed by the
plaintiffs in their home countries [or] the countries where they were injured, the said plaintiffs may
return to that court and, upon proper motion, the Court will resume jurisdiction as if the case had
never been dismissed for forum non conveniens.

The Court however is constrained to dismiss the case at bar not solely on the basis of the above
but because it shares the opinion of legal experts given in the interview made by the Inquirer in its
Special report "Pesticide Cause Mass Sterility," to wit:

1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines
should be an inconvenient forum to file this kind of damage suit against foreign companies since
the causes of action alleged in the petition do not exist under Philippine laws. There has been no
decided case in Philippine Jurisprudence awarding to those adversely affected by DBCP. This
means there is no available evidence which will prove and disprove the relation between sterility
and DBCP.

2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in
the Philippines the device has been employed strictly. Mass sterility will not qualify as a class suit
injury within the contemplation of Philippine statute.

3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine
here that permits these causes to be heard. No product liability ever filed or tried here.

Case ordered dismissed.40

Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by ABELLA,
et al., assails before this Court the above-quoted order of the RTC of Davao City.

ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-96
on the ground of lack of jurisdiction.

According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of
the case since Articles 2176 and 2187 of the Civil Code are broad enough to cover the acts
complained of and to support their claims for damages.

ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal
luminaries reported in a newspaper, by the RTC of Davao City is bereft of basis. According to
them, their cause of action is based on quasi-delict under Article 2176 of the Civil Code. They also
maintain that the absence of jurisprudence regarding the award of damages in favor of those
adversely affected by the DBCP does not preclude them from presenting evidence to prove their
allegations that their exposure to DBCP caused their sterility and/or infertility.

SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the
Order dated October 1, 1996 of the RTC of Davao City. DEL MONTE also filed its motion for
reconsideration, which contained an additional motion for the inhibition of the presiding judge.

The presiding judge of Branch 16 then issued an Order41 dated December 2, 1996, voluntarily
inhibiting himself from trying the case. Thus, the case was re-raffled to Branch 13 of the RTC of
Davao City.

In an Order42 dated December 16, 1996, the RTC of Davao City affirmed the Order dated October
1, 1996, and denied the respective motions for reconsideration filed by defendant companies.

Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the Orders
dated October 1, 1996 and December 16, 1996 of the RTC of Davao City. This case was docketed
as G.R. No. 128398.
In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case motu
proprio as it acquired jurisdiction over the subject matter of the case as well as over the persons of
the defendant companies which voluntarily appeared before it. CHIQUITA also claims that the
RTC of Davao City cannot dismiss the case simply on the basis of opinions of alleged legal experts
appearing in a newspaper article.

Initially, this Court in its Resolution43 dated July 28, 1997, dismissed the petition filed by
CHIQUITA for submitting a defective certificate against forum shopping. CHIQUITA, however,
filed a motion for reconsideration, which was granted by this Court in the Resolution44 dated
October 8, 1997.

On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court
assailing the above-mentioned orders of the RTC of Davao City. Its petition was docketed as G.R.
No. 127856.

DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-96,
as defined under the law and that the said court already obtained jurisdiction over its person by its
voluntary appearance and the filing of a motion for bill of particulars and, later, an answer to the
complaint. According to DEL MONTE, the RTC of Davao City, therefore, acted beyond its
authority when it dismissed the case motu proprio or without any motion to dismiss from any of
the parties to the case.

In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court
consolidated G.R. Nos. 125078, 125598, 126654, 127856, and 128398.

The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents filed
by NAVIDA, et al. and ABELLA, et al.

On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a
Consolidated Motion (to Drop Party-Respondents).45 The plaintiff claimants alleged that they had
amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in July 1997. This
settlement agreement was evidenced by facsimiles of the "Compromise Settlement, Indemnity,
and Hold Harmless Agreement," which were attached to the said motion. Pursuant to said
agreement, the plaintiff claimants sought to withdraw their petitions as against DOW,
OCCIDENTAL, and SHELL.

DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the settlement
entered into between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL.

The Memoranda of the Parties

Considering the allegations, issues, and arguments adduced by the parties, this Court, in a
Resolution dated June 22, 1998,46 required all the parties to submit their respective memoranda.

CHIQUITA filed its Memorandum on August 28, 1998;47 SHELL asked to be excused from the
filing of a memorandum alleging that it had already executed a compromise agreement with the
plaintiff claimants.48 DOLE filed its Memorandum on October 12, 199849 while DEL MONTE
filed on October 13, 1998.50 NAVIDA, et al., and ABELLA, et al., filed their Consolidated
Memorandum on February 3, 1999;51 and DOW and OCCIDENTAL jointly filed a Memorandum
on December 23, 1999.52

The Motion to Withdraw Petition for Review in G.R. No. 125598

On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in
G.R. No. 125598, 53 explaining that the said petition "is already moot and academic and no longer
presents a justiciable controversy" since they have already entered into an amicable settlement
with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied with their
obligations set forth in the 1997 Compromise Agreements.

DOLE filed its Manifestation dated September 6, 2004,54 interposing no objection to the
withdrawal of the petition, and further stating that they maintain their position that DOW and
OCCIDENTAL, as well as other settling defendant companies, should be retained as defendants
for purposes of prosecuting the cross-claims of DOLE, in the event that the complaint below is
reinstated.

NAVIDA, et al., also filed their Comment dated September 14, 2004,55 stating that they agree
with the view of DOW and OCCIDENTAL that the petition in G.R. No. 125598 has become moot
and academic because Civil Case No. 5617 had already been amicably settled by the parties in
1997.

On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for
Review Filed by Petitioners in G.R. No. 125598,56 stating that it has no objections to the
withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No. 125598.

In a Resolution57 dated October 11, 2004, this Court granted, among others, the motion to
withdraw petition for review filed by DOW and OCCIDENTAL.

THE ISSUES

In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the following
issues for our consideration:

IN REFUTATION

I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION.

a) The court did not simply dismiss the case because it was filed in bad faith with petitioners
intending to have the same dismissed and returned to the Texas court.

b) The court dismissed the case because it was convinced that it did not have jurisdiction.

IN SUPPORT OF THE PETITION

II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE
CASE.

a. The acts complained of occurred within Philippine territory.

b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts complained of.

c. Assumption of jurisdiction by the U.S. District Court over petitioner[s’] claims did not divest
Philippine [c]ourts of jurisdiction over the same.

d. The Compromise Agreement and the subsequent Consolidated Motion to Drop Party
Respondents Dow, Occidental and Shell does not unjustifiably prejudice remaining respondents
Dole, Del Monte and Chiquita.58

DISCUSSION

On the issue of jurisdiction

Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos
City and the RTC of Davao City erred in dismissing Civil Case Nos. 5617 and 24,251-96,
respectively, for lack of jurisdiction.

Remarkably, none of the parties to this case claims that the courts a quo are bereft of jurisdiction
to determine and resolve the above-stated cases. All parties contend that the RTC of General Santos
City and the RTC of Davao City have jurisdiction over the action for damages, specifically for
approximately ₱2.7 million for each of the plaintiff claimants.

NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of
defendant companies occurred within Philippine territory. Specifically, the use of and exposure to
DBCP that was manufactured, distributed or otherwise put into the stream of commerce by
defendant companies happened in the Philippines. Said fact allegedly constitutes reasonable basis
for our courts to assume jurisdiction over the case. Furthermore, NAVIDA, et al., and ABELLA,
et al., assert that the provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as
Article 2176 thereof, are broad enough to cover their claim for damages. Thus, NAVIDA, et al.,
and ABELLA, et al., pray that the respective rulings of the RTC of General Santos City and the
RTC of Davao City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said cases be
remanded to the courts a quo for further proceedings.

DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-delict,
which falls under Article 2176 of the Civil Code. In addition, DOLE states that if there were no
actionable wrongs committed under Philippine law, the courts a quo should have dismissed the
civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et al., and ABELLA,
et al., stated no cause of action against the defendant companies. DOLE also argues that if indeed
there is no positive law defining the alleged acts of defendant companies as actionable wrong,
Article 9 of the Civil Code dictates that a judge may not refuse to render a decision on the ground
of insufficiency of the law. The court may still resolve the case, applying the customs of the place
and, in the absence thereof, the general principles of law. DOLE posits that the Philippines is the
situs of the tortious acts allegedly committed by defendant companies as NAVIDA, et al., and
ABELLA, et al., point to their alleged exposure to DBCP which occurred in the Philippines, as the
cause of the sterility and other reproductive system problems that they allegedly suffered. Finally,
DOLE adds that the RTC of Davao City gravely erred in relying upon newspaper reports in
dismissing Civil Case No. 24,251-96 given that newspaper articles are hearsay and without any
evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were taken
judicial notice of, without any notice to the parties. DOLE, however, opines that the dismissal of
Civil Case Nos. 5617 and 24,251-96 was proper, given that plaintiff claimants merely prosecuted
the cases with the sole intent of securing a dismissal of the actions for the purpose of convincing
the U.S. Federal District Court to re-assume jurisdiction over the cases.

In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter
of the cases filed before them. The Amended Joint-Complaints sought approximately ₱2.7 million
in damages for each plaintiff claimant, which amount falls within the jurisdiction of the RTC.
CHIQUITA avers that the pertinent matter is the place of the alleged exposure to DBCP, not the
place of manufacture, packaging, distribution, sale, etc., of the said chemical. This is in consonance
with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law
of the place where the alleged wrong was committed will govern the action. CHIQUITA and the
other defendant companies also submitted themselves to the jurisdiction of the RTC by making
voluntary appearances and seeking for affirmative reliefs during the course of the proceedings.
None of the defendant companies ever objected to the exercise of jurisdiction by the courts a quo
over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-
96 to the RTC of General Santos City and the RTC of Davao City, respectively.

The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil Case
Nos. 5617 and 24,251-96, respectively
The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is
determined by the allegations in the complaint and the character of the relief sought, irrespective
of whether the plaintiffs are entitled to all or some of the claims asserted therein.59 Once vested
by law, on a particular court or body, the jurisdiction over the subject matter or nature of the action
cannot be dislodged by anybody other than by the legislature through the enactment of a law.

At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas
Pambansa Blg. 129, as amended by Republic Act No. 7691, was:

SEC. 19. Jurisdiction in civil cases. – Regional Trial Courts shall exercise exclusive original
jurisdiction:

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind,
attorney’s fees, litigation expenses, and costs or the value of the property in controversy exceeds
One hundred thousand pesos (₱100,000.00) or, in such other cases in Metro Manila, where the
demand, exclusive of the abovementioned items exceeds Two hundred thousand pesos
(₱200,000.00).60

Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:

2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount
under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies
to cases where the damages are merely incidental to or a consequence of the main cause of action.
However, in cases where the claim for damages is the main cause of action, or one of the causes
of action, the amount of such claim shall be considered in determining the jurisdiction of the court.

Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended Joint-
Complaints filed before the courts a quo, the following prayer:

PRAYER

WHEREFORE, premises considered, it is most respectfully prayed that after hearing, judgment be
rendered in favor of the plaintiffs ordering the defendants:

a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred
Thousand Pesos (₱1,500,00.00);

b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand Pesos
(₱400,000.00) each;

c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand
Pesos (₱600,000.00);

d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos (₱200,000.00);
and

e) TO PAY THE COSTS of the suit.61

From the foregoing, it is clear that the claim for damages is the main cause of action and that the
total amount sought in the complaints is approximately ₱2.7 million for each of the plaintiff
claimants. The RTCs unmistakably have jurisdiction over the cases filed in General Santos City
and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall within the purview
of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.

Moreover, the allegations in both Amended Joint-Complaints narrate that:

THE CAUSES OF ACTION

4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN

COMMERCE nematocides containing the chemical dibromochloropropane, commonly known as
DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as the nematode, which
plagued banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED OUT,
DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE HEALTH OF
PERSONS EXPOSED TO IT AFFECTING the human reproductive system as well.

5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used
this product in the banana plantations WHERE they were employed, and/or (b) they resided within
the agricultural area WHERE IT WAS USED. As a result of such exposure, the plaintiffs suffered
serious and permanent injuries TO THEIR HEALTH, including, but not limited to, STERILITY
and severe injuries to their reproductive capacities.

6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY

MANUFACTURED, produced, sold, and/or USED DBCP and/or otherwise, PUT THE SAME
into the stream of commerce, WITHOUT INFORMING THE USERS OF ITS HAZARDOUS
EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND
APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which
THEY knew, or in the exercise of ordinary care and prudence ought to have known, were highly
harmful and injurious to the Plaintiffs’ health and well-being.

7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE

AVAILABLE OR PUT DBCP INTO THE STREAM OF COMMERCE were negligent OR AT
FAULT in that they, AMONG OTHERS:

a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their
subsidiaries or affiliates to so warn plaintiffs;

b. Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient
clothing and proper protective equipment and appliances, if any, to protect plaintiffs from the
harmful effects of exposure to DBCP, or to cause their subsidiaries or affiliates to do so;

c. Failed to place adequate warnings, in a language understandable to the worker, on containers of

DBCP-containing materials to warn of the dangers to health of coming into contact with DBCP,
or to cause their subsidiaries or affiliates to do so;

d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce
a safety plan and a safe method of handling and applying DBCP, or to cause their subsidiaries or
affiliates to do so;

e. Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or
affiliates to do so; and

f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies
and the public, or to cause their subsidiaries or affiliate to do so.

8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of
defendants Standard Fruit Company, Dole Fresh Fruit Company, Dole Food Company, Inc.,
Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that they failed to exercise
reasonable care to prevent each plaintiff’s harmful exposure to DBCP-containing products which
defendants knew or should have known were hazardous to each plaintiff in that they, AMONG
OTHERS:
a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCP-
containing products;

b. Failed to implement proper methods and techniques of application of said products, or to cause
such to be implemented;

c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so
warned;

d. Failed to test said products for adverse health effects, or to cause said products to be tested;

e. Concealed from Plaintiffs information concerning the observed effects of said products on
Plaintiffs;

f. Failed to monitor the health of plaintiffs exposed to said products;

g. Failed to place adequate labels on containers of said products to warn them of the damages of
said products; and

h. Failed to use substitute nematocides for said products or to cause such substitutes to [be] used.62
(Emphasis supplied and words in brackets ours.)

Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and
ABELLA, et al., attribute to defendant companies certain acts and/or omissions which led to their
exposure to nematocides containing the chemical DBCP. According to NAVIDA, et al., and
ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and illnesses,
specifically to their reproductive system.

Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants – a
quasi-delict, which under the Civil Code is defined as an act, or omission which causes damage to
another, there being fault or negligence. To be precise, Article 2176 of the Civil Code provides:

Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al.,
point to the acts and/or omissions of the defendant companies in manufacturing, producing, selling,
using, and/or otherwise putting into the stream of commerce, nematocides which contain DBCP,
"without informing the users of its hazardous effects on health and/or without instructions on its
proper use and application." 63

Verily, in Citibank, N.A. v. Court of Appeals,64 this Court has always reminded that jurisdiction
of the court over the subject matter of the action is determined by the allegations of the complaint,
irrespective of whether or not the plaintiffs are entitled to recover upon all or some of the claims
asserted therein. The jurisdiction of the court cannot be made to depend upon the defenses set up
in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would
almost entirely depend upon the defendants. What determines the jurisdiction of the court is the
nature of the action pleaded as appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be consulted.

Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-
delict which is the basis for the claim for damages filed by NAVIDA, et al., and ABELLA, et al.,
with individual claims of approximately ₱2.7 million for each plaintiff claimant, which obviously
falls within the purview of the civil action jurisdiction of the RTCs.
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly
suffered resulted from their exposure to DBCP while they were employed in the banana plantations
located in the Philippines or while they were residing within the agricultural areas also located in
the Philippines. The factual allegations in the Amended Joint-Complaints all point to their cause
of action, which undeniably occurred in the Philippines. The RTC of General Santos City and the
RTC of Davao City obviously have reasonable basis to assume jurisdiction over the cases.

It is, therefore, error on the part of the courts a quo when they dismissed the cases on the ground
of lack of jurisdiction on the mistaken assumption that the cause of action narrated by NAVIDA,
et al., and ABELLA, et al., took place abroad and had occurred outside and beyond the territorial
boundaries of the Philippines, i.e., "the manufacture of the pesticides, their packaging in
containers, their distribution through sale or other disposition, resulting in their becoming part of
the stream of commerce,"65 and, hence, outside the jurisdiction of the RTCs.

Certainly, the cases below are not criminal cases where territoriality, or the situs of the act
complained of, would be determinative of jurisdiction and venue for trial of cases. In personal civil
actions, such as claims for payment of damages, the Rules of Court allow the action to be
commenced and tried in the appropriate court, where any of the plaintiffs or defendants resides, or
in the case of a non-resident defendant, where he may be found, at the election of the plaintiff.66

In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and
ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all residents of
the Philippines, either in General Santos City or in Davao City. Second, the specific areas where
they were allegedly exposed to the chemical DBCP are within the territorial jurisdiction of the
courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages.
Third, the testimonial and documentary evidence from important witnesses, such as doctors, co-
workers, family members and other members of the community, would be easier to gather in the
Philippines. Considering the great number of plaintiff claimants involved in this case, it is not far-
fetched to assume that voluminous records are involved in the presentation of evidence to support
the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact that the alleged
cause of action of NAVIDA, et al., and ABELLA, et al., against the defendant companies for
damages occurred in the Philippines, demonstrate that, apart from the RTC of General Santos City
and the RTC of Davao City having jurisdiction over the subject matter in the instant civil cases,
they are, indeed, the convenient fora for trying these cases.67

The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction over the
persons of all the defendant companies

It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction over
the cases filed before them. All parties are one in asserting that the RTC of General Santos City
and the RTC of Davao City have validly acquired jurisdiction over the persons of the defendant
companies in the action below. All parties voluntarily, unconditionally and knowingly appeared
and submitted themselves to the jurisdiction of the courts a quo.

Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendant’s voluntary
appearance in the action shall be equivalent to service of summons." In this connection, all the
defendant companies designated and authorized representatives to receive summons and to
represent them in the proceedings before the courts a quo. All the defendant companies submitted
themselves to the jurisdiction of the courts a quo by making several voluntary appearances, by
praying for various affirmative reliefs, and by actively participating during the course of the
proceedings below.

In line herewith, this Court, in Meat Packing Corporation of the Philippines v. Sandiganbayan,68
held that jurisdiction over the person of the defendant in civil cases is acquired either by his
voluntary appearance in court and his submission to its authority or by service of summons.
Furthermore, the active participation of a party in the proceedings is tantamount to an invocation
of the court’s jurisdiction and a willingness to abide by the resolution of the case, and will bar said
party from later on impugning the court or body’s jurisdiction.69

Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired
jurisdiction over the persons of the defendant companies, as well as over the subject matter of the
instant case. What is more, this jurisdiction, which has been acquired and has been vested on the
courts a quo, continues until the termination of the proceedings.

It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction."
Jurisdiction refers to the authority to decide a case, not the orders or the decision rendered therein.
Accordingly, where a court has jurisdiction over the persons of the defendants and the subject
matter, as in the case of the courts a quo, the decision on all questions arising therefrom is but an
exercise of such jurisdiction. Any error that the court may commit in the exercise of its jurisdiction
is merely an error of judgment, which does not affect its authority to decide the case, much less
divest the court of the jurisdiction over the case.70

Plaintiffs’ purported bad faith in filing the subject civil cases in Philippine courts

Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith merely to
procure a dismissal of the same and to allow them to return to the forum of their choice, this Court
finds such argument much too speculative to deserve any merit.

It must be remembered that this Court does not rule on allegations that are unsupported by evidence
on record. This Court does not rule on allegations which are manifestly conjectural, as these may
not exist at all. This Court deals with facts, not fancies; on realities, not appearances. When this
Court acts on appearances instead of realities, justice and law will be short-lived.71 This is
especially true with respect to allegations of bad faith, in line with the basic rule that good faith is
always presumed and bad faith must be proved.72

In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City have
jurisdiction over the subject matter of the amended complaints filed by NAVIDA, et al., and
ABELLA, et al., and that the courts a quo have also acquired jurisdiction over the persons of all
the defendant companies, it therefore, behooves this Court to order the remand of Civil Case Nos.
5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City, respectively.

On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of their
amicable settlement with NAVIDA, et al., and ABELLA, et al.

NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and SHELL
be dropped as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617
and 24,251-96. The non-settling defendants allegedly manifested that they intended to file their
cross-claims against their co-defendants who entered into compromise agreements. NAVIDA, et
al., and ABELLA, et al., argue that the non-settling defendants did not aver any cross-claim in
their answers to the complaint and that they subsequently sought to amend their answers to plead
their cross-claims only after the settlement between the plaintiff claimants and DOW,
OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and ABELLA, et al., therefore,
assert that the cross-claims are already barred.

In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et al.,
and ABELLA, et al., since the latter’s Amended Complaints cited several instances of tortious
conduct that were allegedly committed jointly and severally by the defendant companies. This
solidary obligation on the part of all the defendants allegedly gives any co-defendant the statutory
right to proceed against the other co-defendants for the payment of their respective shares. Should
the subject motion of NAVIDA, et al., and ABELLA, et al., be granted, and the Court subsequently
orders the remand of the action to the trial court for continuance, CHIQUITA and DOLE would
allegedly be deprived of their right to prosecute their cross-claims against their other co-
defendants. Moreover, a third party complaint or a separate trial, according to CHIQUITA, would
only unduly delay and complicate the proceedings. CHIQUITA and DOLE similarly insist that the
motion of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as
respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96,
be denied.

Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda, DEL
MONTE filed a Manifestation and Motion73 before the Court, stating that similar settlement
agreements were allegedly executed by the plaintiff claimants with DEL MONTE and CHIQUITA
sometime in 1999. Purportedly included in the agreements were Civil Case Nos. 5617 and 24,251-
96. Attached to the said manifestation were copies of the Compromise Settlement, Indemnity, and
Hold Harmless Agreement between DEL MONTE and the settling plaintiffs, as well as the Release
in Full executed by the latter.74 DEL MONTE specified therein that there were "only four (4)
plaintiffs in Civil Case No. 5617 who are claiming against the Del Monte parties"75 and that the
latter have executed amicable settlements which completely satisfied any claims against DEL
MONTE. In accordance with the alleged compromise agreements with the four plaintiffs in Civil
Case No. 5617, DEL MONTE sought the dismissal of the Amended Joint-Complaint in the said
civil case. Furthermore, in view of the above settlement agreements with ABELLA, et al., in Civil
Case No. 24,251-96, DEL MONTE stated that it no longer wished to pursue its petition in G.R.
No. 127856 and accordingly prayed that it be allowed to withdraw the same.

Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the RTC of
General Santos City and the RTC of Davao City, respectively, the Court deems that the
Consolidated Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and ABELLA, et al.,
should likewise be referred to the said trial courts for appropriate disposition.

Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already commenced." Like
any other contract, an extrajudicial compromise agreement is not excepted from rules and
principles of a contract. It is a consensual contract, perfected by mere consent, the latter being
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract.76 Judicial approval is not required for its perfection.77 A compromise
has upon the parties the effect and authority of res judicata78 and this holds true even if the
agreement has not been judicially approved.79 In addition, as a binding contract, a compromise
agreement determines the rights and obligations of only the parties to it.80

In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao
City should first receive in evidence and examine all of the alleged compromise settlements
involved in the cases at bar to determine the propriety of dropping any party as a defendant
therefrom.

The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed by
NAVIDA, et al., and ABELLA, et al., only pertained to DOW, OCCIDENTAL and SHELL in
view of the latter companies’ alleged compromise agreements with the plaintiff claimants.
However, in subsequent developments, DEL MONTE and CHIQUITA supposedly reached their
own amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it entered
into a settlement agreement with only four of the plaintiff claimants in Civil Case No. 5617. These
four plaintiff claimants were allegedly the only ones who were asserting claims against DEL
MONTE. However, the said allegation of DEL MONTE was simply stipulated in their
Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could not be
verified with certainty based on the records elevated to this Court. Significantly, the 336 plaintiff
claimants in Civil Case No. 5617 jointly filed a complaint without individually specifying their
claims against DEL MONTE or any of the other defendant companies. Furthermore, not one
plaintiff claimant filed a motion for the removal of either DEL MONTE or CHIQUITA as
defendants in Civil Case Nos. 5617 and 24,251-96.

There is, thus, a primary need to establish who the specific parties to the alleged compromise
agreements are, as well as their corresponding rights and obligations therein. For this purpose, the
courts a quo may require the presentation of additional evidence from the parties. Thereafter, on
the basis of the records of the cases at bar and the additional evidence submitted by the parties, if
any, the trial courts can then determine who among the defendants may be dropped from the said
cases.

It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who
are liable for the same quasi-delict is solidary. A solidary obligation is one in which each of the
debtors is liable for the entire obligation, and each of the creditors is entitled to demand the
satisfaction of the whole obligation from any or all of the debtors.81

In solidary obligations, the paying debtor’s right of reimbursement is provided for under Article
1217 of the Civil Code, to wit:

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more
solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to
each, with the interest for the payment already made. If the payment is made before the debt is
due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the
debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the
debt of each.1avvphil

The above right of reimbursement of a paying debtor, and the corresponding liability of the co-
debtors to reimburse, will only arise, however, if a solidary debtor who is made to answer for an
obligation actually delivers payment to the creditor. As succinctly held in Lapanday Agricultural
Development Corporation v. Court of Appeals,82 "[p]ayment, which means not only the delivery
of money but also the performance, in any other manner, of the obligation, is the operative fact
which will entitle either of the solidary debtors to seek reimbursement for the share which
corresponds to each of the [other] debtors."83

In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must
necessarily be conducted first in order to establish whether or not defendant companies are liable
for the claims for damages filed by the plaintiff claimants, which would necessarily give rise to an
obligation to pay on the part of the defendants.

At the point in time where the proceedings below were prematurely halted, no cross-claims have
been interposed by any defendant against another defendant. If and when such a cross-claim is
made by a non-settling defendant against a settling defendant, it is within the discretion of the trial
court to determine the propriety of allowing such a cross-claim and if the settling defendant must
remain a party to the case purely in relation to the cross claim.

In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals,84 the
Court had the occasion to state that "where there are, along with the parties to the compromise,
other persons involved in the litigation who have not taken part in concluding the compromise
agreement but are adversely affected or feel prejudiced thereby, should not be precluded from
invoking in the same proceedings an adequate relief therefor."85

Relevantly, in Philippine International Surety Co., Inc. v. Gonzales,86 the Court upheld the ruling
of the trial court that, in a joint and solidary obligation, the paying debtor may file a third-party
complaint and/or a cross-claim to enforce his right to seek contribution from his co-debtors.

Hence, the right of the remaining defendant(s) to seek reimbursement in the above situation, if
proper, is not affected by the compromise agreements allegedly entered into by NAVIDA, et al.,
and ABELLA, et al., with some of the defendant companies.
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos.
125078, 126654, and 128398. We REVERSE and SET ASIDE the Order dated May 20, 1996 of
the Regional Trial Court of General Santos City, Branch 37, in Civil Case No. 5617, and the Order
dated October 1, 1996 of the Regional Trial Court of Davao City, Branch 16, and its subsequent
Order dated December 16, 1996 denying reconsideration in Civil Case No. 24,251-96, and
REMAND the records of this case to the respective Regional Trial Courts of origin for further and
appropriate proceedings in line with the ruling herein that said courts have jurisdiction over the
subject matter of the amended complaints in Civil Case Nos. 5617 and 24,251-96.

The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R. No.
127856. In view of the previous grant of the motion to withdraw the petition in G.R. No. 125598,
both G.R. Nos. 127856 and 125598 are considered CLOSED AND TERMINATED.

No pronouncement as to costs.

SO ORDERED.

19. G.R. No. 149177 November 23, 2007

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD.,

Petitioners,
vs.
MINORU KITAMURA, Respondent.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the
July 25, 2001 Resolution2 denying the motion for reconsideration thereof.

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese
consultancy firm providing technical and management support in the infrastructure projects of
foreign governments,3 entered into an Independent Contractor Agreement (ICA) with respondent
Minoru Kitamura, a Japanese national permanently residing in the Philippines.4 The agreement
provides that respondent was to extend professional services to Nippon for a year starting on April
1, 1999.5 Nippon then assigned respondent to work as the project manager of the Southern Tagalog
Access Road (STAR) Project in the Philippines, following the company's consultancy contract
with the Philippine Government.6

When the STAR Project was near completion, the Department of Public Works and Highways
(DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this time for the
detailed engineering and construction supervision of the Bongabon-Baler Road Improvement
(BBRI) Project.7 Respondent was named as the project manager in the contract's Appendix 3.1.8

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its
International Division, informed respondent that the company had no more intention of
automatically renewing his ICA. His services would be engaged by the company only up to the
substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's expiry.9

Threatened with impending unemployment, respondent, through his lawyer, requested a

negotiation conference and demanded that he be assigned to the BBRI project. Nippon insisted
that respondent’s contract was for a fixed term that had already expired, and refused to negotiate
for the renewal of the ICA.10
As he was not able to generate a positive response from the petitioners, respondent consequently
initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11

For their part, petitioners, contending that the ICA had been perfected in Japan and executed by
and between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They
asserted that the claim for improper pre-termination of respondent's ICA could only be heard and
ventilated in the proper courts of Japan following the principles of lex loci celebrationis and lex
contractus.12

In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of
Kitamura by a certain Y. Kotake as project manager of the BBRI Project.13

On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that matters
connected with the performance of contracts are regulated by the law prevailing at the place of
performance,15 denied the motion to dismiss.16 The trial court subsequently denied petitioners'
motion for reconsideration,17 prompting them to file with the appellate court, on August 14, 2000,
their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].18 On August
23, 2000, the CA resolved to dismiss the petition on procedural grounds—for lack of statement of
material dates and for insufficient verification and certification against forum shopping.19 An
Entry of Judgment was later issued by the appellate court on September 20, 2000.20

Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within
the reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the
material dates and attaching thereto the proper verification and certification. This second petition,
which substantially raised the same issues as those in the first, was docketed as CA-G.R. SP No.
60827.21

Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001
Decision22 finding no grave abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci celebrationis was not applicable to the
case, because nowhere in the pleadings was the validity of the written agreement put in issue. The
CA thus declared that the trial court was correct in applying instead the principle of lex loci
solutionis.23

Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25,
2001 Resolution.24

Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant
Petition for Review on Certiorari25 imputing the following errors to the appellate court:

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE

TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN
TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE

NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS
IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26

The pivotal question that this Court is called upon to resolve is whether the subject matter
jurisdiction of Philippine courts in civil cases for specific performance and damages involving
contracts executed outside the country by foreign nationals may be assailed on the principles of
lex loci celebrationis, lex contractus, the "state of the most significant relationship rule," or forum
non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the
respondent.

Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has
already barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally
raising the same issues as those in the first one) and the instant petition for review thereof.

We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's
defective certification of non-forum shopping, it was a dismissal without prejudice.27 The same
holds true in the CA's dismissal of the said case due to defects in the formal requirement of
verification28 and in the other requirement in Rule 46 of the Rules of Court on the statement of
the material dates.29 The dismissal being without prejudice, petitioners can re-file the petition, or
file a second petition attaching thereto the appropriate verification and certification—as they, in
fact did—and stating therein the material dates, within the prescribed period30 in Section 4, Rule
65 of the said Rules.31

The dismissal of a case without prejudice signifies the absence of a decision on the merits and
leaves the parties free to litigate the matter in a subsequent action as though the dismissed action
had not been commenced. In other words, the termination of a case not on the merits does not bar
another action involving the same parties, on the same subject matter and theory.32

Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and
even if petitioners still indicated in the verification and certification of the second certiorari petition
that the first had already been dismissed on procedural grounds,33 petitioners are no longer
required by the Rules to indicate in their certification of non-forum shopping in the instant petition
for review of the second certiorari petition, the status of the aforesaid first petition before the CA.
In any case, an omission in the certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is not a fatal defect. It will not
warrant the dismissal and nullification of the entire proceedings, considering that the evils sought
to be prevented by the said certificate are no longer present.34

The Court also finds no merit in respondent's contention that petitioner Hasegawa is only
authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA and
not the instant petition. True, the Authorization35 dated September 4, 2000, which is attached to
the second certiorari petition and which is also attached to the instant petition for review, is limited
in scope—its wordings indicate that Hasegawa is given the authority to sign for and act on behalf
of the company only in the petition filed with the appellate court, and that authority cannot extend
to the instant petition for review.36 In a plethora of cases, however, this Court has liberally applied
the Rules or even suspended its application whenever a satisfactory explanation and a subsequent
fulfillment of the requirements have been made.37 Given that petitioners herein sufficiently
explained their misgivings on this point and appended to their Reply38 an updated Authorization39
for Hasegawa to act on behalf of the company in the instant petition, the Court finds the same as
sufficient compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the verification and
certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized
to act on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even
the subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a few cases, we have ruled that
corporate powers are exercised by the board of directors; thus, no person, not even its officers, can
bind the corporation, in the absence of authority from the board.40 Considering that Hasegawa
verified and certified the petition only on his behalf and not on behalf of the other petitioner, the
petition has to be denied pursuant to Loquias v. Office of the Ombudsman.41 Substantial
compliance will not suffice in a matter that demands strict observance of the Rules.42 While
technical rules of procedure are designed not to frustrate the ends of justice, nonetheless, they are
intended to effect the proper and orderly disposition of cases and effectively prevent the clogging
of court dockets.43

Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the
trial court's denial of their motion to dismiss. It is a well-established rule that an order denying a
motion to dismiss is interlocutory, and cannot be the subject of the extraordinary petition for
certiorari or mandamus. The appropriate recourse is to file an answer and to interpose as defenses
the objections raised in the motion, to proceed to trial, and, in case of an adverse decision, to
elevate the entire case by appeal in due course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.

This brings us to the discussion of the substantive issue of the case.

Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction
to hear and resolve the civil case for specific performance and damages filed by the respondent.
The ICA subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese
nationals, and written wholly in the Japanese language. Thus, petitioners posit that local courts
have no substantial relationship to the parties46 following the [state of the] most significant
relationship rule in Private International Law.47

The Court notes that petitioners adopted an additional but different theory when they elevated the
case to the appellate court. In the Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely argued that the applicable law
which will determine the validity or invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.49 While not abandoning this stance in their
petition before the appellate court, petitioners on certiorari significantly invoked the defense of
forum non conveniens.50 On petition for review before this Court, petitioners dropped their other
arguments, maintained the forum non conveniens defense, and introduced their new argument that
the applicable principle is the [state of the] most significant relationship rule.51

Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change
in theory, as explained in Philippine Ports Authority v. City of Iloilo.52 We only pointed out
petitioners' inconstancy in their arguments to emphasize their incorrect assertion of conflict of laws
principles.

To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are
involved: jurisdiction, choice of law, and recognition and enforcement of judgments.
Corresponding to these phases are the following questions: (1) Where can or should litigation be
initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be
enforced?53

Analytically, jurisdiction and choice of law are two distinct concepts.54 Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the further question
whether the application of a substantive law which will determine the merits of the case is fair to
both parties. The power to exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide,
the "minimum contacts" for one do not always provide the necessary "significant contacts" for the
other.55 The question of whether the law of a state can be applied to a transaction is different from
the question of whether the courts of that state have jurisdiction to enter a judgment.56

In this case, only the first phase is at issue—jurisdiction.1âwphi1 Jurisdiction, however, has
various aspects. For a court to validly exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the
subject matter, over the issues of the case and, in cases involving property, over the res or the thing
which is the subject of the litigation.57 In assailing the trial court's jurisdiction herein, petitioners
are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which establishes and organizes the court. It is given only by law and in the manner prescribed by
law.58 It is further determined by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted therein.59 To succeed in its motion for the
dismissal of an action for lack of jurisdiction over the subject matter of the claim,60 the movant
must show that the court or tribunal cannot act on the matter submitted to it because no law grants
it the power to adjudicate the claims.61

In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not
properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No.
00-0264 for specific performance and damages is one not capable of pecuniary estimation and is
properly cognizable by the RTC of Lipa City.62 What they rather raise as grounds to question
subject matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and the
"state of the most significant relationship rule."

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the "law of the place of the ceremony"63 or the law of the place
where a contract is made.64 The doctrine of lex contractus or lex loci contractus means the "law
of the place where a contract is executed or to be performed."65 It controls the nature, construction,
and validity of the contract66 and it may pertain to the law voluntarily agreed upon by the parties
or the law intended by them either expressly or implicitly.67 Under the "state of the most
significant relationship rule," to ascertain what state law to apply to a dispute, the court should
determine which state has the most substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the contract was made, was negotiated,
was to be performed, and the domicile, place of business, or place of incorporation of the parties.68
This rule takes into account several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved.69

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

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

It should be noted that when a conflicts case, one involving a foreign element, is brought before a
court or administrative agency, there are three alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States.74
The court’s power to hear cases and controversies is derived from the Constitution and the laws.
While it may choose to recognize laws of foreign nations, the court is not limited by foreign
sovereign law short of treaties or other formal agreements, even in matters regarding rights
provided by foreign sovereigns.75

Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial court of
its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule
16 of the Rules of Court does not include it as a ground.77 Second, whether a suit should be
entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the
particular case and is addressed to the sound discretion of the trial court.78 In this case, the RTC
decided to assume jurisdiction. Third, the propriety of dismissing a case based on this principle
requires a factual determination; hence, this conflicts principle is more properly considered a
matter of defense.79

Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case
filed by respondent and the grounds raised by petitioners to assail that jurisdiction are
inappropriate, the trial and appellate courts correctly denied the petitioners’ motion to dismiss.

WHEREFORE, premises considered, the petition for review on certiorari is DENIED.

SO ORDERED.

20. G.R. No. 136804 February 19, 2003

MANUFACTURERS HANOVER TRUST CO. and/or CHEMICAL BANK, petitioners,

vs.
RAFAEL MA. GUERRERO, respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review under Rule 45 of the Rules of Court to set aside the Court of Appeals’1
Decision of August 24, 1998 and Resolution of December 14, 1998 in CA-G.R. SP No. 423102
affirming the trial court’s denial of petitioners’ motion for partial summary judgment.

The Antecedents

On May 17, 1994, respondent Rafael Ma. Guerrero ("Guerrero" for brevity) filed a complaint for
damages against petitioner Manufacturers Hanover Trust Co. and/or Chemical Bank ("the Bank"
for brevity) with the Regional Trial Court of Manila ("RTC" for brevity). Guerrero sought payment
of damages allegedly for (1) illegally withheld taxes charged against interests on his checking
account with the Bank; (2) a returned check worth US$18,000.00 due to signature verification
problems; and (3) unauthorized conversion of his account. Guerrero amended his complaint on
April 18, 1995.

On September 1, 1995, the Bank filed its Answer alleging, inter alia, that by stipulation Guerrero’s
account is governed by New York law and this law does not permit any of Guerrero’s claims
except actual damages. Subsequently, the Bank filed a Motion for Partial Summary Judgment
seeking the dismissal of Guerrero’s claims for consequential, nominal, temperate, moral and
exemplary damages as well as attorney’s fees on the same ground alleged in its Answer. The Bank
contended that the trial should be limited to the issue of actual damages. Guerrero opposed the
motion.

The affidavit of Alyssa Walden, a New York attorney, supported the Bank’s Motion for Partial
Summary Judgment. Alyssa Walden’s affidavit ("Walden affidavit" for brevity) stated that
Guerrero’s New York bank account stipulated that the governing law is New York law and that
this law bars all of Guerrero’s claims except actual damages. The Philippine Consular Office in
New York authenticated the Walden affidavit.

The RTC denied the Bank’s Motion for Partial Summary Judgment and its motion for
reconsideration on March 6, 1996 and July 17, 1996, respectively. The Bank filed a petition for
certiorari and prohibition with the Court of Appeals assailing the RTC Orders. In its Decision dated
August 24, 1998, the Court of Appeals dismissed the petition. On December 14, 1998, the Court
of Appeals denied the Bank’s motion for reconsideration.
Hence, the instant petition.

The Ruling of the Court of Appeals

The Court of Appeals sustained the RTC orders denying the motion for partial summary judgment.
The Court of Appeals ruled that the Walden affidavit does not serve as proof of the New York law
and jurisprudence relied on by the Bank to support its motion. The Court of Appeals considered
the New York law and jurisprudence as public documents defined in Section 19, Rule 132 of the
Rules on Evidence, as follows:

"SEC. 19. Classes of Documents. – For the purpose of their presentation in evidence, documents
are either public or private.

Public documents are:

(a) The written official acts, or records of the official acts of the sovereign authority, official bodies
and tribunals, and public officers, whether of the Philippines, or of a foreign country;

x x x."

The Court of Appeals opined that the following procedure outlined in Section 24, Rule 132 should
be followed in proving foreign law:

"SEC. 24. Proof of official record. – The record of public documents referred to in paragraph (a)
of Section 19, when admissible for any purpose, may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy,
and accompanied, if the record is not kept in the Philippines, with a certificate that such officer
has the custody. If the office in which the record is kept is in a foreign country, the certificate may
be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office."

The Court of Appeals likewise rejected the Bank’s argument that Section 2, Rule 34 of the old
Rules of Court allows the Bank to move with the supporting Walden affidavit for partial summary
judgment in its favor. The Court of Appeals clarified that the Walden affidavit is not the supporting
affidavit referred to in Section 2, Rule 34 that would prove the lack of genuine issue between the
parties. The Court of Appeals concluded that even if the Walden affidavit is used for purposes of
summary judgment, the Bank must still comply with the procedure prescribed by the Rules to
prove the foreign law.

The Issues

The Bank contends that the Court of Appeals committed reversible error in -

"x x x HOLDING THAT [THE BANK’S] PROOF OF FACTS TO SUPPORT ITS MOTION FOR
SUMMARY JUDGMENT MAY NOT BE GIVEN BY AFFIDAVIT;

x x x HOLDING THAT [THE BANK’S] AFFIDAVIT, WHICH PROVES FOREIGN LAW AS

A FACT, IS "HEARSAY" AND THEREBY ‘CANNOT SERVE AS PROOF OF THE NEW
YORK LAW RELIED UPON BY PETITIONERS IN THEIR MOTION FOR SUMMARY
JUDGMENT x x x’."3

First, the Bank argues that in moving for partial summary judgment, it was entitled to use the
Walden affidavit to prove that the stipulated foreign law bars the claims for consequential, moral,
temperate, nominal and exemplary damages and attorney’s fees. Consequently, outright dismissal
by summary judgment of these claims is warranted.
Second, the Bank claims that the Court of Appeals mixed up the requirements of Rule 35 on
summary judgments and those of a trial on the merits in considering the Walden affidavit as
"hearsay." The Bank points out that the Walden affidavit is not hearsay since Rule 35 expressly
permits the use of affidavits.

Lastly, the Bank argues that since Guerrero did not submit any opposing affidavit to refute the
facts contained in the Walden affidavit, he failed to show the need for a trial on his claims for
damages other than actual.

The Court’s Ruling

The petition is devoid of merit.

The Bank filed its motion for partial summary judgment pursuant to Section 2, Rule 34 of the old
Rules of Court which reads:

"Section 2. Summary judgment for defending party. – A party against whom a claim, counterclaim,
or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting
affidavits for a summary judgment in his favor as to all or any part thereof."

A court may grant a summary judgment to settle expeditiously a case if, on motion of either party,
there appears from the pleadings, depositions, admissions, and affidavits that no important issues
of fact are involved, except the amount of damages. In such event, the moving party is entitled to
a judgment as a matter of law.4

In a motion for summary judgment, the crucial question is: are the issues raised in the pleadings
genuine, sham or fictitious, as shown by affidavits, depositions or admissions accompanying the
motion?5

A genuine issue means an issue of fact which calls for the presentation of evidence as distinguished
from an issue which is fictitious or contrived so as not to constitute a genuine issue for trial.6

A perusal of the parties’ respective pleadings would show that there are genuine issues of fact that
necessitate formal trial. Guerrero’s complaint before the RTC contains a statement of the ultimate
facts on which he relies for his claim for damages. He is seeking damages for what he asserts as
"illegally withheld taxes charged against interests on his checking account with the Bank, a
returned check worth US$18,000.00 due to signature verification problems, and unauthorized
conversion of his account." In its Answer, the Bank set up its defense that the agreed foreign law
to govern their contractual relation bars the recovery of damages other than actual. Apparently,
facts are asserted in Guerrero’s complaint while specific denials and affirmative defenses are set
out in the Bank’s answer.

True, the court can determine whether there are genuine issues in a case based merely on the
affidavits or counter-affidavits submitted by the parties to the court. However, as correctly ruled
by the Court of Appeals, the Bank’s motion for partial summary judgment as supported by the
Walden affidavit does not demonstrate that Guerrero’s claims are sham, fictitious or contrived. On
the contrary, the Walden affidavit shows that the facts and material allegations as pleaded by the
parties are disputed and there are substantial triable issues necessitating a formal trial.

There can be no summary judgment where questions of fact are in issue or where material
allegations of the pleadings are in dispute.7 The resolution of whether a foreign law allows only
the recovery of actual damages is a question of fact as far as the trial court is concerned since
foreign laws do not prove themselves in our courts.8 Foreign laws are not a matter of judicial
notice.9 Like any other fact, they must be alleged and proven. Certainly, the conflicting allegations
as to whether New York law or Philippine law applies to Guerrero’s claims present a clear dispute
on material allegations which can be resolved only by a trial on the merits.
Under Section 24 of Rule 132, the record of public documents of a sovereign authority or tribunal
may be proved by (1) an official publication thereof or (2) a copy attested by the officer having
the legal custody thereof. Such official publication or copy must be accompanied, if the record is
not kept in the Philippines, with a certificate that the attesting officer has the legal custody thereof.
The certificate may be issued by any of the authorized Philippine embassy or consular officials
stationed in the foreign country in which the record is kept, and authenticated by the seal of his
office. The attestation must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be, and must be under the official seal of the attesting officer.

Certain exceptions to this rule were recognized in Asiavest Limited v. Court of Appeals10 which
held that:

"x x x:

Although it is desirable that foreign law be proved in accordance with the above rule, however,
the Supreme Court held in the case of Willamette Iron and Steel Works v. Muzzal, that Section
41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does not exclude the
presentation of other competent evidence to prove the existence of a foreign law. In that case, the
Supreme Court considered the testimony under oath of an attorney-at-law of San Francisco,
California, who quoted verbatim a section of California Civil Code and who stated that the same
was in force at the time the obligations were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the Supreme Court in the Collector of
Internal Revenue v. Fisher et al., upheld the Tax Court in considering the pertinent law of
California as proved by the respondents’ witness. In that case, the counsel for respondent "testified
that as an active member of the California Bar since 1951, he is familiar with the revenue and
taxation laws of the State of California. When asked by the lower court to state the pertinent
California law as regards exemption of intangible personal properties, the witness cited Article 4,
Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derring’s
California Code, a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full
quotation of the cited section was offered in evidence by respondents." Likewise, in several
naturalization cases, it was held by the Court that evidence of the law of a foreign country on
reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of
practice, may be allowed and used as basis for favorable action, if, in the light of all the
circumstances, the Court is "satisfied of the authenticity of the written proof offered." Thus, in a
number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that law." (Emphasis supplied)

The Bank, however, cannot rely on Willamette Iron and Steel Works v. Muzzal or Collector of
Internal Revenue v. Fisher to support its cause. These cases involved attorneys testifying in open
court during the trial in the Philippines and quoting the particular foreign laws sought to be
established. On the other hand, the Walden affidavit was taken abroad ex parte and the affiant
never testified in open court.1a\^/phi1.net The Walden affidavit cannot be considered as proof of
New York law on damages not only because it is self-serving but also because it does not state the
specific New York law on damages. We reproduce portions of the Walden affidavit as follows:

"3. In New York, "[n]ominal damages are damages in name only, trivial sums such as six cents or
$1. Such damages are awarded both in tort and contract cases when the plaintiff establishes a cause
of action against the defendant, but is unable to prove" actual damages. Dobbs, Law of Remedies,
§ 3.32 at 294 (1993). Since Guerrero is claiming for actual damages, he cannot ask for nominal
damages.

4. There is no concept of temperate damages in New York law. I have reviewed Dobbs, a well-
respected treatise, which does not use the phrase "temperate damages" in its index. I have also
done a computerized search for the phrase in all published New York cases, and have found no
cases that use it. I have never heard the phrase used in American law.
5. The Uniform Commercial Code ("UCC") governs many aspects of a Bank’s relationship with
its depositors. In this case, it governs Guerrero’s claim arising out of the non-payment of the
$18,000 check. Guerrero claims that this was a wrongful dishonor. However, the UCC states that
"justifiable refusal to pay or accept" as opposed to dishonor, occurs when a bank refuses to pay a
check for reasons such as a missing indorsement, a missing or illegible signature or a forgery, § 3-
510, Official Comment 2. ….. to the Complaint, MHT returned the check because it had no
signature card on …. and could not verify Guerrero’s signature. In my opinion, consistent with the
UCC, that is a legitimate and justifiable reason not to pay.

6. Consequential damages are not available in the ordinary case of a justifiable refusal to pay. UCC
1-106 provides that "neither consequential or special or punitive damages may be had except as
specifically provided in the Act or by other rule of law". UCC 4-103 further provides that
consequential damages can be recovered only where there is bad faith. This is more restrictive than
the New York common law, which may allow consequential damages in a breach of contract case
(as does the UCC where there is a wrongful dishonor).

7. Under New York law, requests for lost profits, damage to reputation and mental distress are
considered consequential damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319, 540
N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif Construction Corp. v. Buffalo Savings Bank, 50
A.D.2d 718, 374 N.Y.S..2d 868, 869-70 (4th Dep’t 1975) damage to reputation); Dobbs, Law of
Remedies §12.4(1) at 63 (emotional distress).

8. As a matter of New York law, a claim for emotional distress cannot be recovered for a breach
of contract. Geler v. National Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y. 1991);
Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540 N.Y.S.2d 387, 390 (3d Dep’t 1989) Martin
v. Donald Park Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dep’t 1976). Damage to
reputation is also not recoverable for a contract. Motif Construction Corp. v. Buffalo Savings
Bank, 374 N.Y.S.2d at 869-70.1a\^/phi1.net

9. In cases where the issue is the breach of a contract to purchase stock, New York courts will not
take into consideration the performance of the stock after the breach. Rather, damages will be
based on the value of the stock at the time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456
N.Y.S.2d 558, 559 (4th Dep’t 1982), app. den. 59 N.Y.2d 601, 449 N.E.2d 1276, 463 N.Y.S.2d
1023 (1983).

10. Under New York law, a party can only get consequential damages if they were the type that
would naturally arise from the breach and if they were "brought within the contemplation of parties
as the probable result of the breach at the time of or prior to contracting." Kenford Co., Inc. v.
Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman v. Fargo, 223
N.Y. 32, 36 (1918).

11. Under New York law, a plaintiff is not entitled to attorneys’ fees unless they are provided by
contract or statute. E.g., Geler v. National Westminster Bank, 770 F. Supp. 210, 213 (S.D.N.Y.
1991); Camatron Sewing Mach, Inc. v. F.M. Ring Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d
396 (1st Dep’t 1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577 N.Y.S.2d 280, 281
(1st Dep’t 1991). There is no statute that permits attorney’s fees in a case of this type.

12. Exemplary, or punitive damages are not allowed for a breach of contract, even where the
plaintiff claims the defendant acted with malice. Geler v. National Westminster Bank, 770 F.Supp.
210, 215 (S.D.N.Y. 1991); Catalogue Service of …chester11 _v. Insurance Co. of North America,
74 A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dep’t 1980); Senior v. Manufacturers Hanover
Trust Co., 110 A.D.2d 833, 488 N.Y.S.2d 241, 242 (2d Dep’t 1985).

13. Exemplary or punitive damages may be recovered only where it is alleged and proven that the
wrong supposedly committed by defendant amounts to a fraud aimed at the public generally and
involves a high moral culpability. Walker v. Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223
N.Y.S.2d 488 (1961).
14. Furthermore, it has been consistently held under New York law that exemplary damages are
not available for a mere breach of contract for in such a case, as a matter of law, only a private
wrong and not a public right is involved. Thaler v. The North Insurance Company, 63 A.D.2d 921,
406 N.Y.S.2d 66 (1st Dep’t 1978)."12

The Walden affidavit states conclusions from the affiant’s personal interpretation and opinion of
the facts of the case vis a vis the alleged laws and jurisprudence without citing any law in particular.
The citations in the Walden affidavit of various U.S. court decisions do not constitute proof of the
official records or decisions of the U.S. courts. While the Bank attached copies of some of the U.S.
court decisions cited in the Walden affidavit, these copies do not comply with Section 24 of Rule
132 on proof of official records or decisions of foreign courts.

The Bank’s intention in presenting the Walden affidavit is to prove New York law and
jurisprudence. However, because of the failure to comply with Section 24 of Rule 132 on how to
prove a foreign law and decisions of foreign courts, the Walden affidavit did not prove the current
state of New York law and jurisprudence. Thus, the Bank has only alleged, but has not proved,
what New York law and jurisprudence are on the matters at issue.

Next, the Bank makes much of Guerrero’s failure to submit an opposing affidavit to the Walden
affidavit. However, the pertinent provision of Section 3, Rule 35 of the old Rules of Court did not
make the submission of an opposing affidavit mandatory, thus:

"SEC. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days
before the time specified for the hearing. The adverse party prior to the day of hearing may serve
opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if the
pleadings, depositions and admissions on file, together with the affidavits, show that, except as to
the amount of damages, there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." (Emphasis supplied)

It is axiomatic that the term "may" as used in remedial law, is only permissive and not
mandatory.13

Guerrero cannot be said to have admitted the averments in the Bank’s motion for partial summary
judgment and the Walden affidavit just because he failed to file an opposing affidavit. Guerrero
opposed the motion for partial summary judgment, although he did not present an opposing
affidavit. Guerrero may not have presented an opposing affidavit, as there was no need for one,
because the Walden affidavit did not establish what the Bank intended to prove. Certainly,
Guerrero did not admit, expressly or impliedly, the veracity of the statements in the Walden
affidavit. The Bank still had the burden of proving New York law and jurisprudence even if
Guerrero did not present an opposing affidavit. As the party moving for summary judgment, the
Bank has the burden of clearly demonstrating the absence of any genuine issue of fact and that any
doubt as to the existence of such issue is resolved against the movant.14

Moreover, it would have been redundant and pointless for Guerrero to submit an opposing affidavit
considering that what the Bank seeks to be opposed is the very subject matter of the complaint.
Guerrero need not file an opposing affidavit to the Walden affidavit because his complaint itself
controverts the matters set forth in the Bank’s motion and the Walden affidavit. A party should not
be made to deny matters already averred in his complaint.

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

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

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 24, 1998
and the Resolution dated December 14, 1998 of the Court of Appeals in CA-G.R. SP No. 42310
is AFFIRMED.

SO ORDERED.

G. R. No. 183622 February 8, 2012

MEROPE ENRIQUEZ VDA. DE CATALAN, Petitioner,

vs.
LOUELLA A. CATALAN-LEE, Respondent.

RESOLUTION

SERENO, J.:

Before us is a Petition for Review assailing the Court of Appeals (CA) Decision1 and Resolution2
regarding the issuance of letters of administration of the intestate estate of Orlando B. Catalan.

The facts are as follows:

Orlando B. Catalan was a naturalized American citizen. After allegedly obtaining a divorce in the
United States from his first wife, Felicitas Amor, he contracted a second marriage with petitioner
herein.

On 18 November 2004, Orlando died intestate in the Philippines.

Thereafter, on 28 February 2005, petitioner filed with the Regional Trial Court (RTC) of Dagupan
City a Petition for the issuance of letters of administration for her appointment as administratrix
of the intestate estate of Orlando. The case was docketed as Special Proceedings (Spec. Proc.) No.
228.

On 3 March 2005, while Spec. Proc. No. 228 was pending, respondent Louella A. Catalan-Lee,
one of the children of Orlando from his first marriage, filed a similar petition with the RTC
docketed as Spec. Proc. No. 232.

The two cases were subsequently consolidated.

Petitioner prayed for the dismissal of Spec. Proc. No. 232 on the ground of litis pendentia,
considering that Spec. Proc. No. 228 covering the same estate was already pending.

On the other hand, respondent alleged that petitioner was not considered an interested person
qualified to file a petition for the issuance of letters of administration of the estate of Orlando. In
support of her contention, respondent alleged that a criminal case for bigamy was filed against
petitioner before Branch 54 of the RTC of Alaminos, Pangasinan, and docketed as Crim. Case No.
2699-A.

Apparently, Felicitas Amor filed a Complaint for bigamy, alleging that petitioner contracted a
second marriage to Orlando despite having been married to one Eusebio Bristol on 12 December
1959.

On 6 August 1998, the RTC had acquitted petitioner of bigamy.3 The trial court ruled that since
the deceased was a divorced American citizen, and since that divorce was not recognized under
Philippine jurisdiction, the marriage between him and petitioner was not valid.
Furthermore, it took note of the action for declaration of nullity then pending action with the trial
court in Dagupan City filed by Felicitas Amor against the deceased and petitioner. It considered
the pending action to be a prejudicial question in determining the guilt of petitioner for the crime
of bigamy.

Finally, the trial court found that, in the first place, petitioner had never been married to Eusebio
Bristol.

On 26 June 2006, Branch 70 of the RTC of Burgos, Pangasinan dismissed the Petition for the
issuance of letters of administration filed by petitioner and granted that of private respondent.
Contrary to its findings in Crim. Case No. 2699-A, the RTC held that the marriage between
petitioner and Eusebio Bristol was valid and subsisting when she married Orlando. Without
expounding, it reasoned further that her acquittal in the previous bigamy case was fatal to her
cause. Thus, the trial court held that petitioner was not an interested party who may file a petition
for the issuance of letters of administration.4

After the subsequent denial of her Motion for Reconsideration, petitioner elevated the matter to
the Court of Appeals (CA) via her Petition for Certiorari, alleging grave abuse of discretion on the
part of the RTC in dismissing her Petition for the issuance of letters of administration.

Petitioner reiterated before the CA that the Petition filed by respondent should have been dismissed
on the ground of litis pendentia. She also insisted that, while a petition for letters of administration
may have been filed by an "uninterested person," the defect was cured by the appearance of a real
party-in-interest. Thus, she insisted that, to determine who has a better right to administer the
decedent’s properties, the RTC should have first required the parties to present their evidence
before it ruled on the matter.

On 18 October 2007, the CA promulgated the assailed Decision. First, it held that petitioner
undertook the wrong remedy. She should have instead filed a petition for review rather than a
petition for certiorari. Nevertheless, since the Petition for Certiorari was filed within the fifteen-
day reglementary period for filing a petition for review under Sec. 4 of Rule 43, the CA allowed
the Petition and continued to decide on the merits of the case. Thus, it ruled in this wise:

As to the issue of litis pendentia, we find it not applicable in the case. For litis pendentia to be a
ground for the dismissal of an action, there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same acts, and (c) the identity in the two cases should be such that the
judgment which may be rendered in one would, regardless of which party is successful, amount to
res judicata in the other. A petition for letters of administration is a special proceeding. A special
proceeding is an application or proceeding to establish the status or right of a party, or a particular
fact. And, in contrast to an ordinary civil action, a special proceeding involves no defendant or
respondent. The only party in this kind of proceeding is the petitioner of the applicant. Considering
its nature, a subsequent petition for letters of administration can hardly be barred by a similar
pending petition involving the estate of the same decedent unless both petitions are filed by the
same person. In the case at bar, the petitioner was not a party to the petition filed by the private
respondent, in the same manner that the latter was not made a party to the petition filed by the
former. The first element of litis pendentia is wanting. The contention of the petitioner must
perforce fail.

Moreover, to yield to the contention of the petitioner would render nugatory the provision of the
Rules requiring a petitioner for letters of administration to be an "interested party," inasmuch as
any person, for that matter, regardless of whether he has valid interest in the estate sought to be
administered, could be appointed as administrator for as long as he files his petition ahead of any
other person, in derogation of the rights of those specifically mentioned in the order of preference
in the appointment of administrator under Rule 78, Section 6 of the Revised Rules of Court, which
provides:
xxx xxx xxx

The petitioner, armed with a marriage certificate, filed her petition for letters of administration. As
a spouse, the petitioner would have been preferred to administer the estate of Orlando B. Catalan.
However, a marriage certificate, like any other public document, is only prima facie evidence of
the facts stated therein. The fact that the petitioner had been charged with bigamy and was
acquitted has not been disputed by the petitioner. Bigamy is an illegal marriage committed by
contracting a second or subsequent marriage before the first marriage has been dissolved or before
the absent spouse has been declared presumptively dead by a judgment rendered in a proper
proceedings. The deduction of the trial court that the acquittal of the petitioner in the said case
negates the validity of her subsequent marriage with Orlando B. Catalan has not been disproved
by her. There was not even an attempt from the petitioner to deny the findings of the trial court.
There is therefore no basis for us to make a contrary finding. Thus, not being an interested party
and a stranger to the estate of Orlando B. Catalan, the dismissal of her petition for letters of
administration by the trial court is in place.

xxx xxx xxx

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. No

pronouncement as to costs.

SO ORDERED.5 (Emphasis supplied)

Petitioner moved for a reconsideration of this Decision.6 She alleged that the reasoning of the CA
was illogical in stating, on the one hand, that she was acquitted of bigamy, while, on the other
hand, still holding that her marriage with Orlando was invalid. She insists that with her acquittal
of the crime of bigamy, the marriage enjoys the presumption of validity.

On 20 June 2008, the CA denied her motion.

Hence, this Petition.

At the outset, it seems that the RTC in the special proceedings failed to appreciate the finding of
the RTC in Crim. Case No. 2699-A that petitioner was never married to Eusebio Bristol. Thus, the
trial court concluded that, because petitioner was acquitted of bigamy, it follows that the first
marriage with Bristol still existed and was valid. By failing to take note of the findings of fact on
the nonexistence of the marriage between petitioner and Bristol, both the RTC and CA held that
petitioner was not an interested party in the estate of Orlando.

Second, it is imperative to note that at the time the bigamy case in Crim. Case No. 2699-A was
dismissed, we had already ruled that under the principles of comity, our jurisdiction recognizes a
valid divorce obtained by a spouse of foreign nationality. This doctrine was established as early as
1985 in Van Dorn v. Romillo, Jr.7 wherein we said:

It is true that owing to the nationality principle embodied in Article 15 of the Civil Code, only
Philippine nationals are covered by the policy against absolute divorces[,] the same being
considered contrary to our concept of public policy and morality. However, aliens may obtain
divorces abroad, which may be recognized in the Philippines, provided they are valid according to
their national law. In this case, the divorce in Nevada released private respondent from the
marriage from the standards of American law, under which divorce dissolves the marriage. xxx

We reiterated this principle in Llorente v. Court of Appeals,8 to wit:

In Van Dorn v. Romillo, Jr. we held that owing to the nationality principle embodied in Article 15
of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces,
the same being considered contrary to our concept of public policy and morality. In the same case,
the Court ruled that aliens may obtain divorces abroad, provided they are valid according to their
national law.

Citing this landmark case, the Court held in Quita v. Court of Appeals, that once proven that
respondent was no longer a Filipino citizen when he obtained the divorce from petitioner, the
ruling in Van Dorn would become applicable and petitioner could "very well lose her right to
inherit" from him.

In Pilapil v. Ibay-Somera, we recognized the divorce obtained by the respondent in his country,
the Federal Republic of Germany. There, we stated that divorce and its legal effects may be
recognized in the Philippines insofar as respondent is concerned in view of the nationality principle
in our civil law on the status of persons.

For failing to apply these doctrines, the decision of the Court of Appeals must be reversed. We
hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula was valid and
recognized in this jurisdiction as a matter of comity. xxx

Nonetheless, the fact of divorce must still first be proven as we have enunciated in Garcia v.
Recio,9 to wit:

Respondent is getting ahead of himself. Before a foreign judgment is given presumptive

evidentiary value, the document must first be presented and admitted in evidence. A divorce
obtained abroad is proven by the divorce decree itself. Indeed the best evidence of a judgment is
the judgment itself. The decree purports to be a written act or record of an act of an official body
or tribunal of a foreign country.

Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be proven
as a public or official record of a foreign country by either (1) an official publication or (2) a copy
thereof attested by the officer having legal custody of the document. If the record is not kept in the
Philippines, such copy must be (a) accompanied by a certificate issued by the proper diplomatic
or consular officer in the Philippine foreign service stationed in the foreign country in which the
record is kept and (b) authenticated by the seal of his office.

The divorce decree between respondent and Editha Samson appears to be an authentic one issued
by an Australian family court. However, appearance is not sufficient; compliance with the
aforementioned rules on evidence must be demonstrated.

Fortunately for respondent's cause, when the divorce decree of May 18, 1989 was submitted in
evidence, counsel for petitioner objected, not to its admissibility, but only to the fact that it had not
been registered in the Local Civil Registry of Cabanatuan City. The trial court ruled that it was
admissible, subject to petitioner's qualification. Hence, it was admitted in evidence and accorded
weight by the judge. Indeed, petitioner's failure to object properly rendered the divorce decree
admissible as a written act of the Family Court of Sydney, Australia.

Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary;
respondent was no longer bound by Philippine personal laws after he acquired Australian
citizenship in 1992. Naturalization is the legal act of adopting an alien and clothing him with the
political and civil rights belonging to a citizen. Naturalized citizens, freed from the protective cloak
of their former states, don the attires of their adoptive countries. By becoming an Australian,
respondent severed his allegiance to the Philippines and the vinculum juris that had tied him to
Philippine personal laws.

Burden of Proving Australian Law

Respondent contends that the burden to prove Australian divorce law falls upon petitioner, because
she is the party challenging the validity of a foreign judgment. He contends that petitioner was
satisfied with the original of the divorce decree and was cognizant of the marital laws of Australia,
because she had lived and worked in that country for quite a long time. Besides, the Australian
divorce law is allegedly known by Philippine courts; thus, judges may take judicial notice of
foreign laws in the exercise of sound discretion.

We are not persuaded. The burden of proof lies with the "party who alleges the existence of a fact
or thing necessary in the prosecution or defense of an action." In civil cases, plaintiffs have the
burden of proving the material allegations of the complaint when those are denied by the answer;
and defendants have the burden of proving the material allegations in their answer when they
introduce new matters. Since the divorce was a defense raised by respondent, the burden of proving
the pertinent Australian law validating it falls squarely upon him.

It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign
laws.1âwphi1 Like any other facts, they must be alleged and proved. Australian marital laws are
not among those matters that judges are supposed to know by reason of their judicial function. The
power of judicial notice must be exercised with caution, and every reasonable doubt upon the
subject should be resolved in the negative. (Emphasis supplied)

It appears that the trial court no longer required petitioner to prove the validity of Orlando’s divorce
under the laws of the United States and the marriage between petitioner and the deceased. Thus,
there is a need to remand the proceedings to the trial court for further reception of evidence to
establish the fact of divorce.

Should petitioner prove the validity of the divorce and the subsequent marriage, she has the
preferential right to be issued the letters of administration over the estate. Otherwise, letters of
administration may be issued to respondent, who is undisputedly the daughter or next of kin of the
deceased, in accordance with Sec. 6 of Rule 78 of the Revised Rules of Court.

This is consistent with our ruling in San Luis v. San Luis,10 in which we said:

Applying the above doctrine in the instant case, the divorce decree allegedly obtained by Merry
Lee which absolutely allowed Felicisimo to remarry, would have vested Felicidad with the legal
personality to file the present petition as Felicisimo's surviving spouse. However, the records show
that there is insufficient evidence to prove the validity of the divorce obtained by Merry Lee as
well as the marriage of respondent and Felicisimo under the laws of the U.S.A. In Garcia v. Recio,
the Court laid down the specific guidelines for pleading and proving foreign law and divorce
judgments. It held that presentation solely of the divorce decree is insufficient and that proof of its
authenticity and due execution must be presented. Under Sections 24 and 25 of Rule 132, a writing
or document may be proven as a public or official record of a foreign country by either (1) an
official publication or (2) a copy thereof attested by the officer having legal custody of the
document. If the record is not kept in the Philippines, such copy must be (a) accompanied by a
certificate issued by the proper diplomatic or consular officer in the Philippine foreign service
stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his
office.

With regard to respondent's marriage to Felicisimo allegedly solemnized in California, U.S.A., she
submitted photocopies of the Marriage Certificate and the annotated text of the Family Law Act
of California which purportedly show that their marriage was done in accordance with the said
law. As stated in Garcia, however, the Court cannot take judicial notice of foreign laws as they
must be alleged and proved.

Therefore, this case should be remanded to the trial court for further reception of evidence on the
divorce decree obtained by Merry Lee and the marriage of respondent and Felicisimo. (Emphasis
supplied)

Thus, it is imperative for the trial court to first determine the validity of the divorce to ascertain
the rightful party to be issued the letters of administration over the estate of Orlando B. Catalan.
WHEREFORE, premises considered, the Petition is hereby PARTIALLY GRANTED. The
Decision dated 18 October 2007 and the Resolution dated 20 June 2008 of the Court of Appeals
are hereby REVERSED and SET ASIDE. Let this case be REMANDED to Branch 70 of the
Regional Trial Court of Burgos, Pangasinan for further proceedings in accordance with this
Decision.

SO ORDERED.

21. G.R. No. 133743 February 6, 2007

EDGAR SAN LUIS, Petitioner,

vs.
FELICIDAD SAN LUIS, Respondent.

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

G.R. No. 134029 February 6, 2007

RODOLFO SAN LUIS, Petitioner,

vs.
FELICIDAD SAGALONGOS alias FELICIDAD SAN LUIS, Respondent.

DECISION

YNARES-SANTIAGO, J.:

Before us are consolidated petitions for review assailing the February 4, 1998 Decision 1 of the
Court of Appeals in CA-G.R. CV No. 52647, which reversed and set aside the September 12, 1995
2 and January 31, 1996 3 Resolutions of the Regional Trial Court of Makati City, Branch 134 in
SP. Proc. No. M-3708; and its May 15, 1998 Resolution 4 denying petitioners’ motion for
reconsideration.

The instant case involves the settlement of the estate of Felicisimo T. San Luis (Felicisimo), who
was the former governor of the Province of Laguna. During his lifetime, Felicisimo contracted
three marriages. His first marriage was with Virginia Sulit on March 17, 1942 out of which were
born six children, namely: Rodolfo, Mila, Edgar, Linda, Emilita and Manuel. On August 11, 1963,
Virginia predeceased Felicisimo.

Five years later, on May 1, 1968, Felicisimo married Merry Lee Corwin, with whom he had a son,
Tobias. However, on October 15, 1971, Merry Lee, an American citizen, filed a Complaint for
Divorce 5 before the Family Court of the First Circuit, State of Hawaii, United States of America
(U.S.A.), which issued a Decree Granting Absolute Divorce and Awarding Child Custody on
December 14, 1973. 6

On June 20, 1974, Felicisimo married respondent Felicidad San Luis, then surnamed Sagalongos,
before Rev. Fr. William Meyer, Minister of the United Presbyterian at Wilshire Boulevard, Los
Angeles, California, U.S.A. 7 He had no children with respondent but lived with her for 18 years
from the time of their marriage up to his death on December 18, 1992.

Thereafter, respondent sought the dissolution of their conjugal partnership assets and the
settlement of Felicisimo’s estate. On December 17, 1993, she filed a petition for letters of
administration 8 before the Regional Trial Court of Makati City, docketed as SP. Proc. No. M-
3708 which was raffled to Branch 146 thereof.

Respondent alleged that she is the widow of Felicisimo; that, at the time of his death, the decedent
was residing at 100 San Juanico Street, New Alabang Village, Alabang, Metro Manila; that the
decedent’s surviving heirs are respondent as legal spouse, his six children by his first marriage,
and son by his second marriage; that the decedent left real properties, both conjugal and exclusive,
valued at ₱30,304,178.00 more or less; that the decedent does not have any unpaid debts.
Respondent prayed that the conjugal partnership assets be liquidated and that letters of
administration be issued to her.

On February 4, 1994, petitioner Rodolfo San Luis, one of the children of Felicisimo by his first
marriage, filed a motion to dismiss 9 on the grounds of improper venue and failure to state a cause
of action. Rodolfo claimed that the petition for letters of administration should have been filed in
the Province of Laguna because this was Felicisimo’s place of residence prior to his death. He
further claimed that respondent has no legal personality to file the petition because she was only a
mistress of Felicisimo since the latter, at the time of his death, was still legally married to Merry
Lee.

On February 15, 1994, Linda invoked the same grounds and joined her brother Rodolfo in seeking
the dismissal 10 of the petition. On February 28, 1994, the trial court issued an Order 11 denying
the two motions to dismiss.

Unaware of the denial of the motions to dismiss, respondent filed on March 5, 1994 her opposition
12 thereto. She submitted documentary evidence showing that while Felicisimo exercised the
powers of his public office in Laguna, he regularly went home to their house in New Alabang
Village, Alabang, Metro Manila which they bought sometime in 1982. Further, she presented the
decree of absolute divorce issued by the Family Court of the First Circuit, State of Hawaii to prove
that the marriage of Felicisimo to Merry Lee had already been dissolved. Thus, she claimed that
Felicisimo had the legal capacity to marry her by virtue of paragraph 2, 13 Article 26 of the Family
Code and the doctrine laid down in Van Dorn v. Romillo, Jr. 14

Thereafter, Linda, Rodolfo and herein petitioner Edgar San Luis, separately filed motions for
reconsideration from the Order denying their motions to dismiss. 15 They asserted that paragraph
2, Article 26 of the Family Code cannot be given retroactive effect to validate respondent’s
bigamous marriage with Felicisimo because this would impair vested rights in derogation of
Article 256 16 of the Family Code.

On April 21, 1994, Mila, another daughter of Felicisimo from his first marriage, filed a motion to
disqualify Acting Presiding Judge Anthony E. Santos from hearing the case.

On October 24, 1994, the trial court issued an Order 17 denying the motions for reconsideration.
It ruled that respondent, as widow of the decedent, possessed the legal standing to file the petition
and that venue was properly laid. Meanwhile, the motion for disqualification was deemed moot
and academic 18 because then Acting Presiding Judge Santos was substituted by Judge Salvador
S. Tensuan pending the resolution of said motion.

Mila filed a motion for inhibition 19 against Judge Tensuan on November 16, 1994. On even date,
Edgar also filed a motion for reconsideration 20 from the Order denying their motion for
reconsideration arguing that it does not state the facts and law on which it was based.

On November 25, 1994, Judge Tensuan issued an Order 21 granting the motion for inhibition. The
case was re-raffled to Branch 134 presided by Judge Paul T. Arcangel.

On April 24, 1995, 22 the trial court required the parties to submit their respective position papers
on the twin issues of venue and legal capacity of respondent to file the petition. On May 5, 1995,
Edgar manifested 23 that he is adopting the arguments and evidence set forth in his previous
motion for reconsideration as his position paper. Respondent and Rodolfo filed their position
papers on June 14, 24 and June 20, 25 1995, respectively.

On September 12, 1995, the trial court dismissed the petition for letters of administration. It held
that, at the time of his death, Felicisimo was the duly elected governor and a resident of the
Province of Laguna. Hence, the petition should have been filed in Sta. Cruz, Laguna and not in
Makati City. It also ruled that respondent was without legal capacity to file the petition for letters
of administration because her marriage with Felicisimo was bigamous, thus, void ab initio. It found
that the decree of absolute divorce dissolving Felicisimo’s marriage to Merry Lee was not valid in
the Philippines and did not bind Felicisimo who was a Filipino citizen. It also ruled that paragraph
2, Article 26 of the Family Code cannot be retroactively applied because it would impair the vested
rights of Felicisimo’s legitimate children.

Respondent moved for reconsideration 26 and for the disqualification 27 of Judge Arcangel but
said motions were denied. 28

Respondent appealed to the Court of Appeals which reversed and set aside the orders of the trial
court in its assailed Decision dated February 4, 1998, the dispositive portion of which states:

WHEREFORE, the Orders dated September 12, 1995 and January 31, 1996 are hereby
REVERSED and SET ASIDE; the Orders dated February 28 and October 24, 1994 are
REINSTATED; and the records of the case is REMANDED to the trial court for further
proceedings. 29

The appellante court ruled that under Section 1, Rule 73 of the Rules of Court, the term "place of
residence" of the decedent, for purposes of fixing the venue of the settlement of his estate, refers
to the personal, actual or physical habitation, or actual residence or place of abode of a person as
distinguished from legal residence or domicile. It noted that although Felicisimo discharged his
functions as governor in Laguna, he actually resided in Alabang, Muntinlupa. Thus, the petition
for letters of administration was properly filed in Makati City.

The Court of Appeals also held that Felicisimo had legal capacity to marry respondent by virtue
of paragraph 2, Article 26 of the Family Code and the rulings in Van Dorn v. Romillo, Jr. 30 and
Pilapil v. Ibay-Somera. 31 It found that the marriage between Felicisimo and Merry Lee was
validly dissolved by virtue of the decree of absolute divorce issued by the Family Court of the First
Circuit, State of Hawaii. As a result, under paragraph 2, Article 26, Felicisimo was capacitated to
contract a subsequent marriage with respondent. Thus –

With the well-known rule – express mandate of paragraph 2, Article 26, of the Family Code of the
Philippines, the doctrines in Van Dorn, Pilapil, and the reason and philosophy behind the
enactment of E.O. No. 227, — there is no justiciable reason to sustain the individual view —
sweeping statement — of Judge Arc[h]angel, that "Article 26, par. 2 of the Family Code,
contravenes the basic policy of our state against divorce in any form whatsoever." Indeed, courts
cannot deny what the law grants. All that the courts should do is to give force and effect to the
express mandate of the law. The foreign divorce having been obtained by the Foreigner on
December 14, 1992, 32 the Filipino divorcee, "shall x x x have capacity to remarry under
Philippine laws". For this reason, the marriage between the deceased and petitioner should not be
denominated as "a bigamous marriage.

Therefore, under Article 130 of the Family Code, the petitioner as the surviving spouse can
institute the judicial proceeding for the settlement of the estate of the deceased. x x x 33

Edgar, Linda, and Rodolfo filed separate motions for reconsideration 34 which were denied by the
Court of Appeals.

On July 2, 1998, Edgar appealed to this Court via the instant petition for review on certiorari. 35
Rodolfo later filed a manifestation and motion to adopt the said petition which was granted. 36

In the instant consolidated petitions, Edgar and Rodolfo insist that the venue of the subject petition
for letters of administration was improperly laid because at the time of his death, Felicisimo was a
resident of Sta. Cruz, Laguna. They contend that pursuant to our rulings in Nuval v. Guray 37 and
Romualdez v. RTC, Br. 7, Tacloban City, 38 "residence" is synonymous with "domicile" which
denotes a fixed permanent residence to which when absent, one intends to return. They claim that
a person can only have one domicile at any given time. Since Felicisimo never changed his
domicile, the petition for letters of administration should have been filed in Sta. Cruz, Laguna.

Petitioners also contend that respondent’s marriage to Felicisimo was void and bigamous because
it was performed during the subsistence of the latter’s marriage to Merry Lee. They argue that
paragraph 2, Article 26 cannot be retroactively applied because it would impair vested rights and
ratify the void bigamous marriage. As such, respondent cannot be considered the surviving wife
of Felicisimo; hence, she has no legal capacity to file the petition for letters of administration.

The issues for resolution: (1) whether venue was properly laid, and (2) whether respondent has
legal capacity to file the subject petition for letters of administration.

The petition lacks merit.

Under Section 1, 39 Rule 73 of the Rules of Court, the petition for letters of administration of the
estate of Felicisimo should be filed in the Regional Trial Court of the province "in which he resides
at the time of his death." In the case of Garcia Fule v. Court of Appeals, 40 we laid down the
doctrinal rule for determining the residence – as contradistinguished from domicile – of the
decedent for purposes of fixing the venue of the settlement of his estate:

[T]he term "resides" connotes ex vi termini "actual residence" as distinguished from "legal
residence or domicile." This term "resides," like the terms "residing" and "residence," is elastic
and should be interpreted in the light of the object or purpose of the statute or rule in which it is
employed. In the application of venue statutes and rules – Section 1, Rule 73 of the Revised Rules
of Court is of such nature – residence rather than domicile is the significant factor. Even where the
statute uses the word "domicile" still it is construed as meaning residence and not domicile in the
technical sense. Some cases make a distinction between the terms "residence" and "domicile" but
as generally used in statutes fixing venue, the terms are synonymous, and convey the same
meaning as the term "inhabitant." In other words, "resides" should be viewed or understood in its
popular sense, meaning, the personal, actual or physical habitation of a person, actual residence or
place of abode. It signifies physical presence in a place and actual stay thereat. In this popular
sense, the term means merely residence, that is, personal residence, not legal residence or domicile.
Residence simply requires bodily presence as an inhabitant in a given place, while domicile
requires bodily presence in that place and also an intention to make it one’s domicile. No particular
length of time of residence is required though; however, the residence must be more than
temporary. 41 (Emphasis supplied)

It is incorrect for petitioners to argue that "residence," for purposes of fixing the venue of the
settlement of the estate of Felicisimo, is synonymous with "domicile." The rulings in Nuval and
Romualdez are inapplicable to the instant case because they involve election cases. Needless to
say, there is a distinction between "residence" for purposes of election laws and "residence" for
purposes of fixing the venue of actions. In election cases, "residence" and "domicile" are treated
as synonymous terms, that is, the fixed permanent residence to which when absent, one has the
intention of returning. 42 However, for purposes of fixing venue under the Rules of Court, the
"residence" of a person is his personal, actual or physical habitation, or actual residence or place
of abode, which may not necessarily be his legal residence or domicile provided he resides therein
with continuity and consistency. 43 Hence, it is possible that a person may have his residence in
one place and domicile in another.

In the instant case, while petitioners established that Felicisimo was domiciled in Sta. Cruz,
Laguna, respondent proved that he also maintained a residence in Alabang, Muntinlupa from 1982
up to the time of his death. Respondent submitted in evidence the Deed of Absolute Sale 44 dated
January 5, 1983 showing that the deceased purchased the aforesaid property. She also presented
billing statements 45 from the Philippine Heart Center and Chinese General Hospital for the period
August to December 1992 indicating the address of Felicisimo at "100 San Juanico, Ayala
Alabang, Muntinlupa." Respondent also presented proof of membership of the deceased in the
Ayala Alabang Village Association 46 and Ayala Country Club, Inc., 47 letter-envelopes 48 from
1988 to 1990 sent by the deceased’s children to him at his Alabang address, and the deceased’s
calling cards 49 stating that his home/city address is at "100 San Juanico, Ayala Alabang Village,
Muntinlupa" while his office/provincial address is in "Provincial Capitol, Sta. Cruz, Laguna."

From the foregoing, we find that Felicisimo was a resident of Alabang, Muntinlupa for purposes
of fixing the venue of the settlement of his estate. Consequently, the subject petition for letters of
administration was validly filed in the Regional Trial Court 50 which has territorial jurisdiction
over Alabang, Muntinlupa. The subject petition was filed on December 17, 1993. At that time,
Muntinlupa was still a municipality and the branches of the Regional Trial Court of the National
Capital Judicial Region which had territorial jurisdiction over Muntinlupa were then seated in
Makati City as per Supreme Court Administrative Order No. 3. 51 Thus, the subject petition was
validly filed before the Regional Trial Court of Makati City.

Anent the issue of respondent Felicidad’s legal personality to file the petition for letters of
administration, we must first resolve the issue of whether a Filipino who is divorced by his alien
spouse abroad may validly remarry under the Civil Code, considering that Felicidad’s marriage to
Felicisimo was solemnized on June 20, 1974, or before the Family Code took effect on August 3,
1988. In resolving this issue, we need not retroactively apply the provisions of the Family Code,
particularly Art. 26, par. (2) considering that there is sufficient jurisprudential basis allowing us to
rule in the affirmative.

The case of Van Dorn v. Romillo, Jr. 52 involved a marriage between a foreigner and his Filipino
wife, which marriage was subsequently dissolved through a divorce obtained abroad by the latter.
Claiming that the divorce was not valid under Philippine law, the alien spouse alleged that his
interest in the properties from their conjugal partnership should be protected. The Court, however,
recognized the validity of the divorce and held that the alien spouse had no interest in the properties
acquired by the Filipino wife after the divorce. Thus:

In this case, the divorce in Nevada released private respondent from the marriage from the
standards of American law, under which divorce dissolves the marriage. As stated by the Federal
Supreme Court of the United States in Atherton vs. Atherton, 45 L. Ed. 794, 799:

"The purpose and effect of a decree of divorce from the bond of matrimony by a competent
jurisdiction are to change the existing status or domestic relation of husband and wife, and to free
them both from the bond. The marriage tie, when thus severed as to one party, ceases to bind either.
A husband without a wife, or a wife without a husband, is unknown to the law. When the law
provides, in the nature of a penalty, that the guilty party shall not marry again, that party, as well
as the other, is still absolutely freed from the bond of the former marriage."

Thus, pursuant to his national law, private respondent is no longer the husband of petitioner. He
would have no standing to sue in the case below as petitioner’s husband entitled to exercise control
over conjugal assets. As he is bound by the Decision of his own country’s Court, which validly
exercised jurisdiction over him, and whose decision he does not repudiate, he is estopped by his
own representation before said Court from asserting his right over the alleged conjugal property.
53

As to the effect of the divorce on the Filipino wife, the Court ruled that she should no longer be
considered married to the alien spouse. Further, she should not be required to perform her marital
duties and obligations. It held:

To maintain, as private respondent does, that, under our laws, petitioner has to be considered still
married to private respondent and still subject to a wife's obligations under Article 109, et. seq. of
the Civil Code cannot be just. Petitioner should not be obliged to live together with, observe respect
and fidelity, and render support to private respondent. The latter should not continue to be one of
her heirs with possible rights to conjugal property. She should not be discriminated against in her
own country if the ends of justice are to be served. 54 (Emphasis added)
This principle was thereafter applied in Pilapil v. Ibay-Somera 55 where the Court recognized the
validity of a divorce obtained abroad. In the said case, it was held that the alien spouse is not a
proper party in filing the adultery suit against his Filipino wife. The Court stated that "the severance
of the marital bond had the effect of dissociating the former spouses from each other, hence the
actuations of one would not affect or cast obloquy on the other." 56

Likewise, in Quita v. Court of Appeals, 57 the Court stated that where a Filipino is divorced by
his naturalized foreign spouse, the ruling in Van Dorn applies. 58 Although decided on December
22, 1998, the divorce in the said case was obtained in 1954 when the Civil Code provisions were
still in effect.

The significance of the Van Dorn case to the development of limited recognition of divorce in the
Philippines cannot be denied. The ruling has long been interpreted as severing marital ties between
parties in a mixed marriage and capacitating the Filipino spouse to remarry as a necessary
consequence of upholding the validity of a divorce obtained abroad by the alien spouse. In his
treatise, Dr. Arturo M. Tolentino cited Van Dorn stating that "if the foreigner obtains a valid
foreign divorce, the Filipino spouse shall have capacity to remarry under Philippine law." 59 In
Garcia v. Recio, 60 the Court likewise cited the aforementioned case in relation to Article 26. 61

In the recent case of Republic v. Orbecido III, 62 the historical background and legislative intent
behind paragraph 2, Article 26 of the Family Code were discussed, to wit:

Brief Historical Background

On July 6, 1987, then President Corazon Aquino signed into law Executive Order No. 209,
otherwise known as the "Family Code," which took effect on August 3, 1988. Article 26 thereof
states:

All marriages solemnized outside the Philippines in accordance with the laws in force in the
country where they were solemnized, and valid there as such, shall also be valid in this country,
except those prohibited under Articles 35, 37, and 38.

On July 17, 1987, shortly after the signing of the original Family Code, Executive Order No. 227
was likewise signed into law, amending Articles 26, 36, and 39 of the Family Code. A second
paragraph was added to Article 26. As so amended, it now provides:

ART. 26. All marriages solemnized outside the Philippines in accordance with the laws in force in
the country where they were solemnized, and valid there as such, shall also be valid in this country,
except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the
Filipino spouse shall have capacity to remarry under Philippine law. (Emphasis supplied)

xxxx
Legislative Intent

Records of the proceedings of the Family Code deliberations showed that the intent of Paragraph
2 of Article 26, according to Judge Alicia Sempio-Diy, a member of the Civil Code Revision
Committee, is to avoid the absurd situation where the Filipino spouse remains married to the alien
spouse who, after obtaining a divorce, is no longer married to the Filipino spouse.

Interestingly, Paragraph 2 of Article 26 traces its origin to the 1985 case of Van Dorn v. Romillo,
Jr. The Van Dorn case involved a marriage between a Filipino citizen and a foreigner. The Court
held therein that a divorce decree validly obtained by the alien spouse is valid in the Philippines,
and consequently, the Filipino spouse is capacitated to remarry under Philippine law. 63 (Emphasis
added)
As such, the Van Dorn case is sufficient basis in resolving a situation where a divorce is validly
obtained abroad by the alien spouse. With the enactment of the Family Code and paragraph 2,
Article 26 thereof, our lawmakers codified the law already established through judicial
precedent.1awphi1.net

Indeed, when the object of a marriage is defeated by rendering its continuance intolerable to one
of the parties and productive of no possible good to the community, relief in some way should be
obtainable. 64 Marriage, being a mutual and shared commitment between two parties, cannot
possibly be productive of any good to the society where one is considered released from the marital
bond while the other remains bound to it. Such is the state of affairs where the alien spouse obtains
a valid divorce abroad against the Filipino spouse, as in this case.

Petitioners cite Articles 15 65 and 17 66 of the Civil Code in stating that the divorce is void under
Philippine law insofar as Filipinos are concerned. However, in light of this Court’s rulings in the
cases discussed above, the Filipino spouse should not be discriminated against in his own country
if the ends of justice are to be served. 67 In Alonzo v. Intermediate Appellate Court, 68 the Court
stated:

But as has also been aptly observed, we test a law by its results; and likewise, we may add, by its
purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge
should be to discover in its provisions the intent of the lawmaker. Unquestionably, the law should
never be interpreted in such a way as to cause injustice as this is never within the legislative intent.
An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is
to render justice.

Thus, we interpret and apply the law not independently of but in consonance with justice. Law and
justice are inseparable, and we must keep them so. To be sure, there are some laws that, while
generally valid, may seem arbitrary when applied in a particular case because of its peculiar
circumstances. In such a situation, we are not bound, because only of our nature and functions, to
apply them just the same, in slavish obedience to their language. What we do instead is find a
balance between the word and the will, that justice may be done even as the law is obeyed.

As judges, we are not automatons. We do not and must not unfeelingly apply the law as it is
worded, yielding like robots to the literal command without regard to its cause and consequence.
"Courts are apt to err by sticking too closely to the words of a law," so we are warned, by Justice
Holmes again, "where these words import a policy that goes beyond them."

xxxx

More than twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to
render every one his due." That wish continues to motivate this Court when it assesses the facts
and the law in every case brought to it for decision. Justice is always an essential ingredient of its
decisions. Thus when the facts warrants, we interpret the law in a way that will render justice,
presuming that it was the intention of the lawmaker, to begin with, that the law be dispensed with
justice. 69

Applying the above doctrine in the instant case, the divorce decree allegedly obtained by Merry
Lee which absolutely allowed Felicisimo to remarry, would have vested Felicidad with the legal
personality to file the present petition as Felicisimo’s surviving spouse. However, the records show
that there is insufficient evidence to prove the validity of the divorce obtained by Merry Lee as
well as the marriage of respondent and Felicisimo under the laws of the U.S.A. In Garcia v. Recio,
70 the Court laid down the specific guidelines for pleading and proving foreign law and divorce
judgments. It held that presentation solely of the divorce decree is insufficient and that proof of its
authenticity and due execution must be presented. Under Sections 24 and 25 of Rule 132, a writing
or document may be proven as a public or official record of a foreign country by either (1) an
official publication or (2) a copy thereof attested by the officer having legal custody of the
document. If the record is not kept in the Philippines, such copy must be (a) accompanied by a
certificate issued by the proper diplomatic or consular officer in the Philippine foreign service
stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his
office. 71

With regard to respondent’s marriage to Felicisimo allegedly solemnized in California, U.S.A.,

she submitted photocopies of the Marriage Certificate and the annotated text 72 of the Family Law
Act of California which purportedly show that their marriage was done in accordance with the said
law. As stated in Garcia, however, the Court cannot take judicial notice of foreign laws as they
must be alleged and proved. 73

Therefore, this case should be remanded to the trial court for further reception of evidence on the
divorce decree obtained by Merry Lee and the marriage of respondent and Felicisimo.

Even assuming that Felicisimo was not capacitated to marry respondent in 1974, nevertheless, we
find that the latter has the legal personality to file the subject petition for letters of administration,
as she may be considered the co-owner of Felicisimo as regards the properties that were acquired
through their joint efforts during their cohabitation.

Section 6, 74 Rule 78 of the Rules of Court states that letters of administration may be granted to
the surviving spouse of the decedent. However, Section 2, Rule 79 thereof also provides in part:

SEC. 2. Contents of petition for letters of administration. – A petition for letters of administration
must be filed by an interested person and must show, as far as known to the petitioner: x x x.

An "interested person" has been defined as one who would be benefited by the estate, such as an
heir, or one who has a claim against the estate, such as a creditor. The interest must be material
and direct, and not merely indirect or contingent. 75

In the instant case, respondent would qualify as an interested person who has a direct interest in
the estate of Felicisimo by virtue of their cohabitation, the existence of which was not denied by
petitioners. If she proves the validity of the divorce and Felicisimo’s capacity to remarry, but fails
to prove that her marriage with him was validly performed under the laws of the U.S.A., then she
may be considered as a co-owner under Article 144 76 of the Civil Code. This provision governs
the property relations between parties who live together as husband and wife without the benefit
of marriage, or their marriage is void from the beginning. It provides that the property acquired by
either or both of them through their work or industry or their wages and salaries shall be governed
by the rules on co-ownership. In a co-ownership, it is not necessary that the property be acquired
through their joint labor, efforts and industry. Any property acquired during the union is prima
facie presumed to have been obtained through their joint efforts. Hence, the portions belonging to
the co-owners shall be presumed equal, unless the contrary is proven. 77

Meanwhile, if respondent fails to prove the validity of both the divorce and the marriage, the
applicable provision would be Article 148 of the Family Code which has filled the hiatus in Article
144 of the Civil Code by expressly regulating the property relations of couples living together as
husband and wife but are incapacitated to marry. 78 In Saguid v. Court of Appeals, 79 we held
that even if the cohabitation or the acquisition of property occurred before the Family Code took
effect, Article 148 governs. 80 The Court described the property regime under this provision as
follows:

The regime of limited co-ownership of property governing the union of parties who are not legally
capacitated to marry each other, but who nonetheless live together as husband and wife, applies to
properties acquired during said cohabitation in proportion to their respective contributions. Co-
ownership will only be up to the extent of the proven actual contribution of money, property or
industry. Absent proof of the extent thereof, their contributions and corresponding shares shall be
presumed to be equal.
xxxx

In the cases of Agapay v. Palang, and Tumlos v. Fernandez, which involved the issue of co-
ownership of properties acquired by the parties to a bigamous marriage and an adulterous
relationship, respectively, we ruled that proof of actual contribution in the acquisition of the
property is essential. x x x

As in other civil cases, the burden of proof rests upon the party who, as determined by the pleadings
or the nature of the case, asserts an affirmative issue. Contentions must be proved by competent
evidence and reliance must be had on the strength of the party’s own evidence and not upon the
weakness of the opponent’s defense. x x x 81

In view of the foregoing, we find that respondent’s legal capacity to file the subject petition for
letters of administration may arise from her status as the surviving wife of Felicisimo or as his co-
owner under Article 144 of the Civil Code or Article 148 of the Family Code.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals reinstating and
affirming the February 28, 1994 Order of the Regional Trial Court which denied petitioners’
motion to dismiss and its October 24, 1994 Order which dismissed petitioners’ motion for
reconsideration is AFFIRMED. Let this case be REMANDED to the trial court for further
proceedings.

SO ORDERED.

22. G.R. No. 196049 June 26, 2013

MINORU FUJIKI, PETITIONER,

vs.
MARIA PAZ GALELA MARINAY, SHINICHI MAEKARA, LOCAL CIVIL
REGISTRAR OF QUEZON CITY, AND THE ADMINISTRATOR AND CIVIL
REGISTRAR GENERAL OF THE NATIONAL STATISTICS OFFICE, RESPONDENTS.

DECISION

CARPIO, J.:

The Case

This is a direct recourse to this Court from the Regional Trial Court (RTC), Branch 107, Quezon
City, through a petition for review on certiorari under Rule 45 of the Rules of Court on a pure
question of law. The petition assails the Order1 dated 31 January 2011 of the RTC in Civil Case
No. Q-11-68582 and its Resolution dated 2 March 2011 denying petitioner’s Motion for
Reconsideration. The RTC dismissed the petition for "Judicial Recognition of Foreign Judgment
(or Decree of Absolute Nullity of Marriage)" based on improper venue and the lack of personality
of petitioner, Minoru Fujiki, to file the petition.

The Facts

Petitioner Minoru Fujiki (Fujiki) is a Japanese national who married respondent Maria Paz Galela
Marinay (Marinay) in the Philippines2 on 23 January 2004. The marriage did not sit well with
petitioner’s parents. Thus, Fujiki could not bring his wife to Japan where he resides. Eventually,
they lost contact with each other.

In 2008, Marinay met another Japanese, Shinichi Maekara (Maekara). Without the first marriage
being dissolved, Marinay and Maekara were married on 15 May 2008 in Quezon City, Philippines.
Maekara brought Marinay to Japan. However, Marinay allegedly suffered physical abuse from
Maekara. She left Maekara and started to contact Fujiki.3
Fujiki and Marinay met in Japan and they were able to reestablish their relationship. In 2010, Fujiki
helped Marinay obtain a judgment from a family court in Japan which declared the marriage
between Marinay and Maekara void on the ground of bigamy.4 On 14 January 2011, Fujiki filed
a petition in the RTC entitled: "Judicial Recognition of Foreign Judgment (or Decree of Absolute
Nullity of Marriage)." Fujiki prayed that (1) the Japanese Family Court judgment be recognized;
(2) that the bigamous marriage between Marinay and Maekara be declared void ab initio under
Articles 35(4) and 41 of the Family Code of the Philippines;5 and (3) for the RTC to direct the
Local Civil Registrar of Quezon City to annotate the Japanese Family Court judgment on the
Certificate of Marriage between Marinay and Maekara and to endorse such annotation to the Office
of the Administrator and Civil Registrar General in the National Statistics Office (NSO).6

The Ruling of the Regional Trial Court

A few days after the filing of the petition, the RTC immediately issued an Order dismissing the
petition and withdrawing the case from its active civil docket.7 The RTC cited the following
provisions of the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC):

Sec. 2. Petition for declaration of absolute nullity of void marriages. –

(a) Who may file. – A petition for declaration of absolute nullity of void marriage may be filed
solely by the husband or the wife.

xxxx

Sec. 4. Venue. – The petition shall be filed in the Family Court of the province or city where the
petitioner or the respondent has been residing for at least six months prior to the date of filing, or
in the case of a non-resident respondent, where he may be found in the Philippines, at the election
of the petitioner. x x x

The RTC ruled, without further explanation, that the petition was in "gross violation" of the above
provisions. The trial court based its dismissal on Section 5(4) of A.M. No. 02-11-10-SC which
provides that "[f]ailure to comply with any of the preceding requirements may be a ground for
immediate dismissal of the petition."8 Apparently, the RTC took the view that only "the husband
or the wife," in this case either Maekara or Marinay, can file the petition to declare their marriage
void, and not Fujiki.

Fujiki moved that the Order be reconsidered. He argued that A.M. No. 02-11-10-SC contemplated
ordinary civil actions for declaration of nullity and annulment of marriage. Thus, A.M. No. 02-11-
10-SC does not apply. A petition for recognition of foreign judgment is a special proceeding, which
"seeks to establish a status, a right or a particular fact,"9 and not a civil action which is "for the
enforcement or protection of a right, or the prevention or redress of a wrong."10 In other words,
the petition in the RTC sought to establish (1) the status and concomitant rights of Fujiki and
Marinay as husband and wife and (2) the fact of the rendition of the Japanese Family Court
judgment declaring the marriage between Marinay and Maekara as void on the ground of bigamy.
The petitioner contended that the Japanese judgment was consistent with Article 35(4) of the
Family Code of the Philippines11 on bigamy and was therefore entitled to recognition by
Philippine courts.12

In any case, it was also Fujiki’s view that A.M. No. 02-11-10-SC applied only to void marriages
under Article 36 of the Family Code on the ground of psychological incapacity.13 Thus, Section
2(a) of A.M. No. 02-11-10-SC provides that "a petition for declaration of absolute nullity of void
marriages may be filed solely by the husband or the wife." To apply Section 2(a) in bigamy would
be absurd because only the guilty parties would be permitted to sue. In the words of Fujiki, "[i]t is
not, of course, difficult to realize that the party interested in having a bigamous marriage declared
a nullity would be the husband in the prior, pre-existing marriage."14 Fujiki had material interest
and therefore the personality to nullify a bigamous marriage.

Fujiki argued that Rule 108 (Cancellation or Correction of Entries in the Civil Registry) of the
Rules of Court is applicable. Rule 108 is the "procedural implementation" of the Civil Register
Law (Act No. 3753)15 in relation to Article 413 of the Civil Code.16 The Civil Register Law
imposes a duty on the "successful petitioner for divorce or annulment of marriage to send a copy
of the final decree of the court to the local registrar of the municipality where the dissolved or
annulled marriage was solemnized."17 Section 2 of Rule 108 provides that entries in the civil
registry relating to "marriages," "judgments of annulments of marriage" and "judgments declaring
marriages void from the beginning" are subject to cancellation or correction.18 The petition in the
RTC sought (among others) to annotate the judgment of the Japanese Family Court on the
certificate of marriage between Marinay and Maekara.

Fujiki’s motion for reconsideration in the RTC also asserted that the trial court "gravely erred"
when, on its own, it dismissed the petition based on improper venue. Fujiki stated that the RTC
may be confusing the concept of venue with the concept of jurisdiction, because it is lack of
jurisdiction which allows a court to dismiss a case on its own. Fujiki cited Dacoycoy v.
Intermediate Appellate Court19 which held that the "trial court cannot pre-empt the defendant’s
prerogative to object to the improper laying of the venue by motu proprio dismissing the case."20
Moreover, petitioner alleged that the trial court should not have "immediately dismissed" the
petition under Section 5 of A.M. No. 02-11-10-SC because he substantially complied with the
provision.

On 2 March 2011, the RTC resolved to deny petitioner’s motion for reconsideration. In its
Resolution, the RTC stated that A.M. No. 02-11-10-SC applies because the petitioner, in effect,
prays for a decree of absolute nullity of marriage.21 The trial court reiterated its two grounds for
dismissal, i.e. lack of personality to sue and improper venue under Sections 2(a) and 4 of A.M.
No. 02-11-10-SC. The RTC considered Fujiki as a "third person"22 in the proceeding because he
"is not the husband in the decree of divorce issued by the Japanese Family Court, which he now
seeks to be judicially recognized, x x x."23 On the other hand, the RTC did not explain its ground
of impropriety of venue. It only said that "[a]lthough the Court cited Sec. 4 (Venue) x x x as a
ground for dismissal of this case[,] it should be taken together with the other ground cited by the
Court x x x which is Sec. 2(a) x x x."24

The RTC further justified its motu proprio dismissal of the petition based on Braza v. The City
Civil Registrar of Himamaylan City, Negros Occidental.25 The Court in Braza ruled that "[i]n a
special proceeding for correction of entry under Rule 108 (Cancellation or Correction of Entries
in the Original Registry), the trial court has no jurisdiction to nullify marriages x x x."26 Braza
emphasized that the "validity of marriages as well as legitimacy and filiation can be questioned
only in a direct action seasonably filed by the proper party, and not through a collateral attack such
as [a] petition [for correction of entry] x x x."27

The RTC considered the petition as a collateral attack on the validity of marriage between Marinay
and Maekara. The trial court held that this is a "jurisdictional ground" to dismiss the petition.28
Moreover, the verification and certification against forum shopping of the petition was not
authenticated as required under Section 529 of A.M. No. 02-11-10-SC. Hence, this also warranted
the "immediate dismissal" of the petition under the same provision.

The Manifestation and Motion of the Office of the Solicitor General and the Letters of Marinay
and Maekara

On 30 May 2011, the Court required respondents to file their comment on the petition for review.30
The public respondents, the Local Civil Registrar of Quezon City and the Administrator and Civil
Registrar General of the NSO, participated through the Office of the Solicitor General. Instead of
a comment, the Solicitor General filed a Manifestation and Motion.31
The Solicitor General agreed with the petition. He prayed that the RTC’s "pronouncement that the
petitioner failed to comply with x x x A.M. No. 02-11-10-SC x x x be set aside" and that the case
be reinstated in the trial court for further proceedings.32 The Solicitor General argued that Fujiki,
as the spouse of the first marriage, is an injured party who can sue to declare the bigamous marriage
between Marinay and Maekara void. The Solicitor General cited Juliano-Llave v. Republic33
which held that Section 2(a) of A.M. No. 02-11-10-SC does not apply in cases of bigamy. In
Juliano-Llave, this Court explained:

[t]he subsequent spouse may only be expected to take action if he or she had only discovered
during the connubial period that the marriage was bigamous, and especially if the conjugal bliss
had already vanished. Should parties in a subsequent marriage benefit from the bigamous marriage,
it would not be expected that they would file an action to declare the marriage void and thus, in
such circumstance, the "injured spouse" who should be given a legal remedy is the one in a
subsisting previous marriage. The latter is clearly the aggrieved party as the bigamous marriage
not only threatens the financial and the property ownership aspect of the prior marriage but most
of all, it causes an emotional burden to the prior spouse. The subsequent marriage will always be
a reminder of the infidelity of the spouse and the disregard of the prior marriage which sanctity is
protected by the Constitution.34

The Solicitor General contended that the petition to recognize the Japanese Family Court judgment
may be made in a Rule 108 proceeding.35 In Corpuz v. Santo Tomas,36 this Court held that "[t]he
recognition of the foreign divorce decree may be made in a Rule 108 proceeding itself, as the
object of special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to
establish the status or right of a party or a particular fact."37 While Corpuz concerned a foreign
divorce decree, in the present case the Japanese Family Court judgment also affected the civil
status of the parties, especially Marinay, who is a Filipino citizen.

The Solicitor General asserted that Rule 108 of the Rules of Court is the procedure to record "[a]cts,
events and judicial decrees concerning the civil status of persons" in the civil registry as required
by Article 407 of the Civil Code. In other words, "[t]he law requires the entry in the civil registry
of judicial decrees that produce legal consequences upon a person’s legal capacity and status x x
x."38 The Japanese Family Court judgment directly bears on the civil status of a Filipino citizen
and should therefore be proven as a fact in a Rule 108 proceeding.

Moreover, the Solicitor General argued that there is no jurisdictional infirmity in assailing a void
marriage under Rule 108, citing De Castro v. De Castro39 and Niñal v. Bayadog40 which declared
that "[t]he validity of a void marriage may be collaterally attacked."41

Marinay and Maekara individually sent letters to the Court to comply with the directive for them
to comment on the petition.42 Maekara wrote that Marinay concealed from him the fact that she
was previously married to Fujiki.43 Maekara also denied that he inflicted any form of violence on
Marinay.44 On the other hand, Marinay wrote that she had no reason to oppose the petition.45 She
would like to maintain her silence for fear that anything she say might cause misunderstanding
between her and Fujiki.46

The Issues

Petitioner raises the following legal issues:

(1) Whether the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC) is applicable.

(2) Whether a husband or wife of a prior marriage can file a petition to recognize a foreign
judgment nullifying the subsequent marriage between his or her spouse and a foreign citizen on
the ground of bigamy.
(3) Whether the Regional Trial Court can recognize the foreign judgment in a proceeding for
cancellation or correction of entries in the Civil Registry under Rule 108 of the Rules of Court.

The Ruling of the Court

We grant the petition.

The Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable
Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to recognize a foreign judgment
relating to the status of a marriage where one of the parties is a citizen of a foreign country.
Moreover, in Juliano-Llave v. Republic,47 this Court held that the rule in A.M. No. 02-11-10-SC
that only the husband or wife can file a declaration of nullity or annulment of marriage "does not
apply if the reason behind the petition is bigamy."48

I.

For Philippine courts to recognize a foreign judgment relating to the status of a marriage where
one of the parties is a citizen of a foreign country, the petitioner only needs to prove the foreign
judgment as a fact under the Rules of Court. To be more specific, a copy of the foreign judgment
may be admitted in evidence and proven as a fact under Rule 132, Sections 24 and 25, in relation
to Rule 39, Section 48(b) of the Rules of Court.49 Petitioner may prove the Japanese Family Court
judgment through (1) an official publication or (2) a certification or copy attested by the officer
who has custody of the judgment. If the office which has custody is in a foreign country such as
Japan, the certification may be made by the proper diplomatic or consular officer of the Philippine
foreign service in Japan and authenticated by the seal of office.50

To hold that A.M. No. 02-11-10-SC applies to a petition for recognition of foreign judgment would
mean that the trial court and the parties should follow its provisions, including the form and
contents of the petition,51 the service of summons,52 the investigation of the public prosecutor,53
the setting of pre-trial,54 the trial55 and the judgment of the trial court.56 This is absurd because
it will litigate the case anew. It will defeat the purpose of recognizing foreign judgments, which is
"to limit repetitive litigation on claims and issues."57 The interpretation of the RTC is tantamount
to relitigating the case on the merits. In Mijares v. Rañada,58 this Court explained that "[i]f every
judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on
his/her original cause of action, rendering immaterial the previously concluded litigation."59

A foreign judgment relating to the status of a marriage affects the civil status, condition and legal
capacity of its parties. However, the effect of a foreign judgment is not automatic. To extend the
effect of a foreign judgment in the Philippines, Philippine courts must determine if the foreign
judgment is consistent with domestic public policy and other mandatory laws.60 Article 15 of the
Civil Code provides that "[l]aws relating to family rights and duties, or to the status, condition and
legal capacity of persons are binding upon citizens of the Philippines, even though living abroad."
This is the rule of lex nationalii in private international law. Thus, the Philippine State may require,
for effectivity in the Philippines, recognition by Philippine courts of a foreign judgment affecting
its citizen, over whom it exercises personal jurisdiction relating to the status, condition and legal
capacity of such citizen.

A petition to recognize a foreign judgment declaring a marriage void does not require relitigation
under a Philippine court of the case as if it were a new petition for declaration of nullity of
marriage. Philippine courts cannot presume to know the foreign laws under which the foreign
judgment was rendered. They cannot substitute their judgment on the status, condition and legal
capacity of the foreign citizen who is under the jurisdiction of another state. Thus, Philippine courts
can only recognize the foreign judgment as a fact according to the rules of evidence.

Section 48(b), Rule 39 of the Rules of Court provides that a foreign judgment or final order against
a person creates a "presumptive evidence of a right as between the parties and their successors in
interest by a subsequent title." Moreover, Section 48 of the Rules of Court states that "the judgment
or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact." Thus, Philippine courts exercise limited review
on foreign judgments. Courts are not allowed to delve into the merits of a foreign judgment. Once
a foreign judgment is admitted and proven in a Philippine court, it can only be repelled on grounds
external to its merits, i.e. , "want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact." The rule on limited review embodies the policy of efficiency and the
protection of party expectations,61 as well as respecting the jurisdiction of other states.62

Since 1922 in Adong v. Cheong Seng Gee,63 Philippine courts have recognized foreign divorce
decrees between a Filipino and a foreign citizen if they are successfully proven under the rules of
evidence.64 Divorce involves the dissolution of a marriage, but the recognition of a foreign divorce
decree does not involve the extended procedure under A.M. No. 02-11-10-SC or the rules of
ordinary trial. While the Philippines does not have a divorce law, Philippine courts may, however,
recognize a foreign divorce decree under the second paragraph of Article 26 of the Family Code,
to capacitate a Filipino citizen to remarry when his or her foreign spouse obtained a divorce decree
abroad.65

There is therefore no reason to disallow Fujiki to simply prove as a fact the Japanese Family Court
judgment nullifying the marriage between Marinay and Maekara on the ground of bigamy. While
the Philippines has no divorce law, the Japanese Family Court judgment is fully consistent with
Philippine public policy, as bigamous marriages are declared void from the beginning under
Article 35(4) of the Family Code. Bigamy is a crime under Article 349 of the Revised Penal Code.
Thus, Fujiki can prove the existence of the Japanese Family Court judgment in accordance with
Rule 132, Sections 24 and 25, in relation to Rule 39, Section 48(b) of the Rules of Court.

II.

Since the recognition of a foreign judgment only requires proof of fact of the judgment, it may be
made in a special proceeding for cancellation or correction of entries in the civil registry under
Rule 108 of the Rules of Court. Rule 1, Section 3 of the Rules of Court provides that "[a] special
proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact."
Rule 108 creates a remedy to rectify facts of a person’s life which are recorded by the State
pursuant to the Civil Register Law or Act No. 3753. These are facts of public consequence such
as birth, death or marriage,66 which the State has an interest in recording. As noted by the Solicitor
General, in Corpuz v. Sto. Tomas this Court declared that "[t]he recognition of the foreign divorce
decree may be made in a Rule 108 proceeding itself, as the object of special proceedings (such as
that in Rule 108 of the Rules of Court) is precisely to establish the status or right of a party or a
particular fact."67

Rule 108, Section 1 of the Rules of Court states:

Sec. 1. Who may file petition. — Any person interested in any act, event, order or decree
concerning the civil status of persons which has been recorded in the civil register, may file a
verified petition for the cancellation or correction of any entry relating thereto, with the Regional
Trial Court of the province where the corresponding civil registry is located. (Emphasis supplied)

Fujiki has the personality to file a petition to recognize the Japanese Family Court judgment
nullifying the marriage between Marinay and Maekara on the ground of bigamy because the
judgment concerns his civil status as married to Marinay. For the same reason he has the
personality to file a petition under Rule 108 to cancel the entry of marriage between Marinay and
Maekara in the civil registry on the basis of the decree of the Japanese Family Court.

There is no doubt that the prior spouse has a personal and material interest in maintaining the
integrity of the marriage he contracted and the property relations arising from it. There is also no
doubt that he is interested in the cancellation of an entry of a bigamous marriage in the civil
registry, which compromises the public record of his marriage. The interest derives from the
substantive right of the spouse not only to preserve (or dissolve, in limited instances68) his most
intimate human relation, but also to protect his property interests that arise by operation of law the
moment he contracts marriage.69 These property interests in marriage include the right to be
supported "in keeping with the financial capacity of the family"70 and preserving the property
regime of the marriage.71

Property rights are already substantive rights protected by the Constitution,72 but a spouse’s right
in a marriage extends further to relational rights recognized under Title III ("Rights and
Obligations between Husband and Wife") of the Family Code.73 A.M. No. 02-11-10-SC cannot
"diminish, increase, or modify" the substantive right of the spouse to maintain the integrity of his
marriage.74 In any case, Section 2(a) of A.M. No. 02-11-10-SC preserves this substantive right by
limiting the personality to sue to the husband or the wife of the union recognized by law.

Section 2(a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting marriage to
question the validity of a subsequent marriage on the ground of bigamy. On the contrary, when
Section 2(a) states that "[a] petition for declaration of absolute nullity of void marriage may be
filed solely by the husband or the wife"75—it refers to the husband or the wife of the subsisting
marriage. Under Article 35(4) of the Family Code, bigamous marriages are void from the
beginning. Thus, the parties in a bigamous marriage are neither the husband nor the wife under the
law. The husband or the wife of the prior subsisting marriage is the one who has the personality to
file a petition for declaration of absolute nullity of void marriage under Section 2(a) of A.M. No.
02-11-10-SC.

Article 35(4) of the Family Code, which declares bigamous marriages void from the beginning, is
the civil aspect of Article 349 of the Revised Penal Code,76 which penalizes bigamy. Bigamy is a
public crime. Thus, anyone can initiate prosecution for bigamy because any citizen has an interest
in the prosecution and prevention of crimes.77 If anyone can file a criminal action which leads to
the declaration of nullity of a bigamous marriage,78 there is more reason to confer personality to
sue on the husband or the wife of a subsisting marriage. The prior spouse does not only share in
the public interest of prosecuting and preventing crimes, he is also personally interested in the
purely civil aspect of protecting his marriage.

When the right of the spouse to protect his marriage is violated, the spouse is clearly an injured
party and is therefore interested in the judgment of the suit.79 Juliano-Llave ruled that the prior
spouse "is clearly the aggrieved party as the bigamous marriage not only threatens the financial
and the property ownership aspect of the prior marriage but most of all, it causes an emotional
burden to the prior spouse."80 Being a real party in interest, the prior spouse is entitled to sue in
order to declare a bigamous marriage void. For this purpose, he can petition a court to recognize a
foreign judgment nullifying the bigamous marriage and judicially declare as a fact that such
judgment is effective in the Philippines. Once established, there should be no more impediment to
cancel the entry of the bigamous marriage in the civil registry.

III.
In Braza v. The City Civil Registrar of Himamaylan City, Negros Occidental, this Court held that
a "trial court has no jurisdiction to nullify marriages" in a special proceeding for cancellation or
correction of entry under Rule 108 of the Rules of Court.81 Thus, the "validity of marriage[] x x
x can be questioned only in a direct action" to nullify the marriage.82 The RTC relied on Braza in
dismissing the petition for recognition of foreign judgment as a collateral attack on the marriage
between Marinay and Maekara.

Braza is not applicable because Braza does not involve a recognition of a foreign judgment
nullifying a bigamous marriage where one of the parties is a citizen of the foreign country.

To be sure, a petition for correction or cancellation of an entry in the civil registry cannot substitute
for an action to invalidate a marriage. A direct action is necessary to prevent circumvention of the
substantive and procedural safeguards of marriage under the Family Code, A.M. No. 02-11-10-SC
and other related laws. Among these safeguards are the requirement of proving the limited grounds
for the dissolution of marriage,83 support pendente lite of the spouses and children,84 the
liquidation, partition and distribution of the properties of the spouses,85 and the investigation of
the public prosecutor to determine collusion.86 A direct action for declaration of nullity or
annulment of marriage is also necessary to prevent circumvention of the jurisdiction of the Family
Courts under the Family Courts Act of 1997 (Republic Act No. 8369), as a petition for cancellation
or correction of entries in the civil registry may be filed in the Regional Trial Court "where the
corresponding civil registry is located."87 In other words, a Filipino citizen cannot dissolve his
marriage by the mere expedient of changing his entry of marriage in the civil registry.

However, this does not apply in a petition for correction or cancellation of a civil registry entry
based on the recognition of a foreign judgment annulling a marriage where one of the parties is a
citizen of the foreign country. There is neither circumvention of the substantive and procedural
safeguards of marriage under Philippine law, nor of the jurisdiction of Family Courts under R.A.
No. 8369. A recognition of a foreign judgment is not an action to nullify a marriage. It is an action
for Philippine courts to recognize the effectivity of a foreign judgment, which presupposes a case
which was already tried and decided under foreign law. The procedure in A.M. No. 02-11-10-SC
does not apply in a petition to recognize a foreign judgment annulling a bigamous marriage where
one of the parties is a citizen of the foreign country. Neither can R.A. No. 8369 define the
jurisdiction of the foreign court.

Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the effect of a
foreign divorce decree to a Filipino spouse without undergoing trial to determine the validity of
the dissolution of the marriage. The second paragraph of Article 26 of the Family Code provides
that "[w]here a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry,
the Filipino spouse shall have capacity to remarry under Philippine law." In Republic v.
Orbecido,88 this Court recognized the legislative intent of the second paragraph of Article 26
which is "to avoid the absurd situation where the Filipino spouse remains married to the alien
spouse who, after obtaining a divorce, is no longer married to the Filipino spouse"89 under the
laws of his or her country. The second paragraph of Article 26 of the Family Code only authorizes
Philippine courts to adopt the effects of a foreign divorce decree precisely because the Philippines
does not allow divorce. Philippine courts cannot try the case on the merits because it is tantamount
to trying a case for divorce.

The second paragraph of Article 26 is only a corrective measure to address the anomaly that results
from a marriage between a Filipino, whose laws do not allow divorce, and a foreign citizen, whose
laws allow divorce. The anomaly consists in the Filipino spouse being tied to the marriage while
the foreign spouse is free to marry under the laws of his or her country. The correction is made by
extending in the Philippines the effect of the foreign divorce decree, which is already effective in
the country where it was rendered. The second paragraph of Article 26 of the Family Code is based
on this Court’s decision in Van Dorn v. Romillo90 which declared that the Filipino spouse "should
not be discriminated against in her own country if the ends of justice are to be served."91

The principle in Article 26 of the Family Code applies in a marriage between a Filipino and a
foreign citizen who obtains a foreign judgment nullifying the marriage on the ground of bigamy.
The Filipino spouse may file a petition abroad to declare the marriage void on the ground of
bigamy. The principle in the second paragraph of Article 26 of the Family Code applies because
the foreign spouse, after the foreign judgment nullifying the marriage, is capacitated to remarry
under the laws of his or her country. If the foreign judgment is not recognized in the Philippines,
the Filipino spouse will be discriminated—the foreign spouse can remarry while the Filipino
spouse cannot remarry.

Under the second paragraph of Article 26 of the Family Code, Philippine courts are empowered to
correct a situation where the Filipino spouse is still tied to the marriage while the foreign spouse
is free to marry. Moreover, notwithstanding Article 26 of the Family Code, Philippine courts
already have jurisdiction to extend the effect of a foreign judgment in the Philippines to the extent
that the foreign judgment does not contravene domestic public policy. A critical difference
between the case of a foreign divorce decree and a foreign judgment nullifying a bigamous
marriage is that bigamy, as a ground for the nullity of marriage, is fully consistent with Philippine
public policy as expressed in Article 35(4) of the Family Code and Article 349 of the Revised
Penal Code. The Filipino spouse has the option to undergo full trial by filing a petition for
declaration of nullity of marriage under A.M. No. 02-11-10-SC, but this is not the only remedy
available to him or her. Philippine courts have jurisdiction to recognize a foreign judgment
nullifying a bigamous marriage, without prejudice to a criminal prosecution for bigamy.

In the recognition of foreign judgments, Philippine courts are incompetent to substitute their
judgment on how a case was decided under foreign law. They cannot decide on the "family rights
and duties, or on the status, condition and legal capacity" of the foreign citizen who is a party to
the foreign judgment. Thus, Philippine courts are limited to the question of whether to extend the
effect of a foreign judgment in the Philippines. In a foreign judgment relating to the status of a
marriage involving a citizen of a foreign country, Philippine courts only decide whether to extend
its effect to the Filipino party, under the rule of lex nationalii expressed in Article 15 of the Civil
Code.

For this purpose, Philippine courts will only determine (1) whether the foreign judgment is
inconsistent with an overriding public policy in the Philippines; and (2) whether any alleging party
is able to prove an extrinsic ground to repel the foreign judgment, i.e. want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact. If there is neither inconsistency
with public policy nor adequate proof to repel the judgment, Philippine courts should, by default,
recognize the foreign judgment as part of the comity of nations. Section 48(b), Rule 39 of the Rules
of Court states that the foreign judgment is already "presumptive evidence of a right between the
parties." Upon recognition of the foreign judgment, this right becomes conclusive and the
judgment serves as the basis for the correction or cancellation of entry in the civil registry. The
recognition of the foreign judgment nullifying a bigamous marriage is a subsequent event that
establishes a new status, right and fact92 that needs to be reflected in the civil registry. Otherwise,
there will be an inconsistency between the recognition of the effectivity of the foreign judgment
and the public records in the Philippines.1âwphi1

However, the recognition of a foreign judgment nullifying a bigamous marriage is without

prejudice to prosecution for bigamy under Article 349 of the Revised Penal Code.93 The
recognition of a foreign judgment nullifying a bigamous marriage is not a ground for extinction of
criminal liability under Articles 89 and 94 of the Revised Penal Code. Moreover, under Article 91
of the Revised Penal Code, "[t]he term of prescription [of the crime of bigamy] shall not run when
the offender is absent from the Philippine archipelago."

Since A.M. No. 02-11-10-SC is inapplicable, the Court no longer sees the need to address the
questions on venue and the contents and form of the petition under Sections 4 and 5, respectively,
of A.M. No. 02-11-10-SC.

WHEREFORE, we GRANT the petition. The Order dated 31 January 2011 and the Resolution
dated 2 March 2011 of the Regional Trial Court, Branch 107, Quezon City, in Civil Case No. Q-
11-68582 are REVERSED and SET ASIDE. The Regional Trial Court is ORDERED to
REINSTATE the petition for further proceedings in accordance with this Decision.

SO ORDERED.