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SECOND DIVISION

[G.R. No. 103493. June 19, 1997]

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS,


N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O.
DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG,respondents.
DECISION
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the
same cause of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati,
Branch 56, which, in view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground
of litis pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for
review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International
Finance Limited (hereafter called AYALA) [1] and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of
US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate
the payment of the loans, private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed
Ducats obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendors
Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas,
U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as
initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note executed
by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and
AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging
to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became
due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and
ATHONA in the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for
fraud allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc.
under the Agreement. Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was
docketed as Case No. 85-57746, the venue of the action was later transferred to the United States District Court for the
Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint.
ATHONA filed an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly
conspiring in selling the property at a price over its market value. Private respondent Perlas, who had allegedly appraised the
property, was later dropped as counterdefendant. ATHONA sought the recovery of damages and excess payment allegedly
made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a
motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied, they later filed a
joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSECs 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 Ducats 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 Daics 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-IFLs 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 Ducats 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 COURTS 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 appellants 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 Philippine 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 plaintiffs 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 courts 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.
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.
[15]

Second. Nor is the trial courts 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 courts 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 latters 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 Guevarras claim is not only admitted by petitioners, [20] it appears from the pleadings
that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. [21] Hence, the TRO should be lifted
and Civil Case No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional
Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this
decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-24170

February 28, 1969

ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and MOHAMMAD BANTALLA,petitioners,
vs.
THE COMMISSIONER OF CUSTOMS, respondent.
RESOLUTION
FERNANDO, J.:
Our decision of December 16, 1968, sustaining the action taken by respondent Commissioner of Customs, the case reaching
us in view of its affirmance by the Court of Tax Appeals, upholding the validity of the seizure of the vessels and cargo in
question, done outside our territorial jurisdiction, a decision intended, according to our opinion, to lend support to the
governmental "policy relentlessly adhered to and unhesitatingly pursued to minimize, if not to do away entirely, with the evil
and corruption that smuggling brings in its wake," is under fire from petitioners. In their printed motion for reconsideration,
dated January 14, 1969, substantially a rehash of the points previously raised by them, there is an insistence on the alleged
lack of jurisdiction of the Customs authorities justifying such seizure on the high seas. It may not be amiss therefore, to give
further thought to such a jurisdictional issue.
According to our decision of December 16, 1968, petitioners, "owners of five sailing vessels and the cargo loaded therein
declared forfeited by respondent Commissioner of Customs for smuggling," raised the principal question of "the validity of
their interception and seizure by customs officials on the high seas, the contention being raised that importation had not yet
begun and that the seizure was effected outside our territorial waters." The answer to such a question depended on the
finding of facts of the Court of Tax Appeals, well-nigh decisive in its effect. For we are bound by what was found by the Court
of Tax Appeals, the case having reached us in a petition for the review of its decision of November 19, 1964, the opinion
being penned by the late Associate Judge Augusto M. Luciano.
As noted in our decision: "The facts according to the above opinion 'are not controverted.' Thus: 'It appears that on
September 10, 1950, at about noontime a customs patrol team on board Patrol Boat ST-23 intercepted the five (5) sailing
vessels in question on the high seas, between British North Borneo and Sulu while they were heading towards Tawi-tawi,
Sulu. After ordering the vessels to stop, the customs officers boarded and found on board, 181 cases of 'Herald' cigarettes, 9
cases of 'Camel' cigarettes, and some pieces of rattan chairs. The sailing vessels are all Philippine registry, owned and
manned by Filipino residents of Sulu, and of less than thirty (30) tons burden. They came from Sandakan, British North
Borneo, but did not possess any permit from the Commissioner of Customs to engage in the importation of merchandise into
any port of the Sulu sea, as required by Section 1363(a) of the Revised Administrative Code. Their cargoes were not covered
by the required import license under Republic Act No. 426, otherwise known as the Import Control Law."'
It should not escape notice that the jurisdictional question was vigorously pressed before the Court of Tax Appeals. It was not
deemed persuasive. As noted in its opinion: "'We perfectly see the point of the petitioners but considering the circumstances
surrounding the apprehension of the vessels in question, we believe that Section 1363(a) of the Revised Administrative Code
should be applied to the case at bar. It has been established that the five vessels came from Sandakan, British North Borneo,
a foreign port, and when intercepted, all of them were heading towards Tawi-tawi, a domestic port within the Sulu sea. Laden
with foreign manufactured cigarettes, they did not possess the import license required by Republic Act No. 426, nor did they
carry a permit from the Commissioner of Customs to engage in importation into any port in the Sulu sea. Their course
announced loudly their intention not merely to skirt along the territorial boundary of the Philippines but to come within our
limits and land somewhere in Tawi-tawi towards which their prows were pointed. As a matter of fact, they were about to
cross our aquatic boundary but for the intervention of a customs patrol which, from all appearances, was more than eager to
accomplish its mission.'"
As a matter of fact, our decision likewise quoted the vigorous language employed by the late Judge Luciano in rejecting such
a plea, one that must have been prompted by his sense of realism. As he so emphatically expressed it: "'To entertain even
for a moment the thought that these vessels were probably not bound for a Philippine port would be too much a concession

even for a simpleton or a perennial optimist. It is quite irrational for Filipino sailors manning five Philippine vessels to sneak
out of the Philippines and go to British North Borneo, and come a long way back laden with highly taxable goods only to turn
about upon reaching the brink of our territorial waters and head for another foreign port.'"
We did not point out that our decision affirming that of the Court of Tax Appeals could be based correctly on such a finding.
No other outcome could be expected. It is rare, as was noted, for us to substitute our own discretion for the Court of Tax
Appeals. Certainly, the situation before us was not one of them.
Both the appreciation of the relevant facts and the appraisal made cannot be impugned. Nonetheless, we gave more than a
passing consideration to the allegation of absence of jurisdiction and upheld the action of the Commissioner of Customs as
affirmed by the Court of Tax Appeals. Why we did so was explained in our opinion thus: "It is unquestioned that all vessels
seized are of Philippine registry. The Revised Penal Code leaves no doubt as to its applicability and enforceability not only
within the Philippines, its interior waters and maritime zone, but also outside of its jurisdiction against those committing
offense while on a Philippine ship .... The principle of law that sustains the validity of such a provision equally supplies a firm
foundation for the seizure of the five sailing vessels found thereafter to have violated the applicable provisions of the Revised
Administrative Code."lawphi1.nt
There was an added reason for the conclusion reached by us. Thus: "Moreover, it is a well-settled doctrine of International
Law that goes back to Chief Justice Marshall's opinion in Church v. Hubbart, an 1804 decision, that a state has the right to
protect itself and its revenues, a right not limited to its own territory but extending to the high seas. In the language of Chief
Justice Marshall: 'The authority of a nation within its own territory is absolute and exclusive. The seizure of a vessel within
the range of its cannon by a foreign force is an invasion of that territory, and is a hostile act which it is its duty to repel. But
its power to secure itself from injury may certainly be exercised beyond the limits of its territory.'"
Petitioner, undeterred, would, invoking Section 1141 of the Revised Administrative Code, press, anew the jurisdiction
question. Thus: "The seizure of the said vessels and their cargoes, on the high seas, by the Collector, under whose direction
it was effected, constitutes a gross misuse of government powers, which is not only not legally justified in our system of
government, but in violation of our laws. Even under the present stress brought upon our government by the serious
problem of smuggling said misuse of government powers is condemned by the very system of our government." 1
Section 1141 of the Revised Administrative Code insofar as pertinent provides: "For the due and effective exercise of the
powers conferred by law in the Bureau of Customs, and to the extent requisite therefor, said Bureau shall have the right of
supervision and police authority over all seas within the jurisdiction of the Government of the Republic of the Philippines and
over all coasts, ports, harbors, bays, rivers, and inland waters navigable from the sea." 2 The present legal statutory provision
is found in the Tariff and Customs Code in the Philippines in almost identical language except for the explicit reference to
jurisdiction being exercised over airports. 3
The above section, while apparently lending support to the contention of petitioners in their motion for reconsideration,
should not be given a restrictive significance, especially one which would negate the power exercised by the Commissioner of
Customs in this case in view of the undeniable fact of smuggling. If, under the circumstances disclosed, the government
would be rendered powerless and its effort to protect itself from the evils of smuggling nugatory, then a competence, the
existence of which as above pointed out in Church v. Hubbart 4 is not subject to doubt in accordance with an accepted
International Law doctrine, would be taken away from it. We should be loathe to arrive at such a result, repugnant as it is, to
the constitutional precept that among the basic postulates of our policy is the adoption of "the generally accepted principles
of international law as part of the law of the nation." 5
There may be need of a more extensive citation from the opinion of Justice Marshall in Church v. Hubbart. Thus: "That the
law of nations prohibits the exercise of any act of authority over a vessel in the situation of the Aurora, and this seizure is, on
that account, a mere marine trespass, not within the exception, cannot be admitted. To reason from the extent of protection
a nation will afford to foreigners to the extent of the means it may use for its own security does not seem to be perfectly
correct. It is opposed by principles which are universally acknowledged. The authority of a nation within its own territory is
absolute and exclusive. The seizure of a vessel within the range of its cannon by a foreign force is an invasion of that
territory, and is a hostile act which it is its duty to repel. But its power to secure itself from injury may certainly be exercised
beyond the limits of its territory.... These means do not appear to be limited within any certain marked boundaries, which
remain the same at all times and in all situations." That Church v. Hubbart is a leading case is attested by its being cited
almost textually in such leading case books as Hudson, 6 Fenwick 7 and Briggs. 8
There is an equally valid ground for so construing the Administrative Code provision in question as to justify, the seizure
herein made. So it would necessarily follow from the decisive facts as found by the Court of Tax Appeals. Considering, as the

language of the late Judge Luciano so emphatically stressed, that even for "a simpleton or a perennial optimist" the thought
that these vessels "were probably not bound for a Philippine port," would be "quite irrational" for Filipino sailors "manning
five Philippine vessels [would not] sneak out of the Philippines and go to British North Borneo, and come a long way back
laden with highly taxable goods only to turn about upon reaching the brink of our territorial waters ...." There is thus more
than ample justification for indulging in the legal fiction that the seizure conducted tinder such peculiar circumstances could
be considered as having taken place within Philippine waters. Any other view would render nugatory a conceded
governmental power.
In the recent case of Tayag v. Benguet Consolidated, Inc., 9 in order to frustrate an attempt of the domicillary administrator,
the County Trust Company of New York, from refusing to honor a valid order of a probate court, we held that the shares of
stocks in the possession of such domicillary administrator could be considered as lost contrary to the admitted fact so that
new shares of stocks of the Benguet Consolidated, Inc. could be issued in their place for delivery to the ancillary
administrator in the Philippines. As we pointed out in our opinion: "It may be admitted of course that such alleged loss as
found by the lower court did not correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in
such a conclusion arrived at. It is to be remembered however, again to borrow from Frankfurter, 'that fictions which the law
may rely upon in the pursuit of legitimate ends have played an important part in its development.'" Nor did we stop there.
Thus: "Speaking of the common law in its earlier period, Cardozo could state that fictions 'were devices to advance the ends
of justice [even if] clumsy and at times offensive.' Some of them persisted even to the present, that eminent jurist, noting
'the quasi-contract, the adopted child, the constructive trust, all of flourishing vitality, to attest the empire of 'as if' today.' He
likewise noted 'a class of fictions of another order, the fiction which is a working tool at times hides itself from view till
reflection and analysis have brought it to the light.'" 10
The other point raised regarding the denial of due process was already passed upon by us in our decision. After quoting the
applicable statutory prescriptions, we stated in our opinion: "From the above recital of the legal provisions relied upon it
would appear most clearly that the due process question raised is insubstantial. Certainly, the facts on which the seizure was
based were not unknown to petitioners-appellants. On those facts the liability of the vessels and merchandise under the
above terms of the statute would appear to be undeniable. The action taken then by the Commissioner of Customs was in
accordance with law." There is nothing in the motion for reconsideration that should call for a different conclusion.
Our decision closed on this note: "It is thus most evident that the Court of Tax Appeals had not in any wise refused to adhere
faithfully to controlling legal principles when it sustained the action taken by respondent Commissioner of Customs. It would
be a reproach and a reflection on the law if on the facts as they had been shown to exist, the seizure and forfeiture of the
vessels and cargo in question were to be characterized as outside the legal competence of our government and violative of
the constitutional rights of petitioners-appellants. Fortunately, as had been made clear above, that would be an undeserved
reflection and an unwarranted reproach. The vigor of the war against smuggling must not be hampered by a misreading of
international law concepts and a misplaced reliance on a constitutional guaranty that has not in any wise been infringed." We
reiterate such a view. Authority, reason and policy are in unison in support of the decision thus reached.
WHEREFORE, the motion for reconsideration is denied.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-5887 December 16, 1910
THE UNITED STATES, plaintiff-appellee,
vs.
LOOK CHAW (alias LUK CHIU), defendant-appellant.
Thos. D. Aitken for appellant.
Attorney-General Villamor for appellee.

ARELLANO, C. J.:
The first complaint filed against the defendant, in the Court of First Instance of Cebu, stated that he "carried, kept, possessed
and had in his possession and control, 96 kilogrammes of opium," and that "he had been surprised in the act of selling 1,000
pesos worth prepared opium."
The defense presented a demurrer based on two grounds, the second of which was the more than one crime was charged in
the complaint. The demurrer was sustained, as the court found that the complaint contained two charges, one, for the
unlawful possession of opium, and the other, for the unlawful sale of opium, and, consequence of that ruling, it ordered that
the fiscal should separated one charge from the other and file a complaint for each violation; this, the fiscal did, and this
cause concerns only the unlawful possession of opium. It is registered as No. 375, in the Court of First Instance of Cebu, and
as No. 5887 on the general docket of this court.
The facts of the case are contained in the following finding of the trial court:
The evidence, it says, shows that between 11 and 12 o'clock a. m. on the present month (stated as August 19,
1909), several persons, among them Messrs. Jacks and Milliron, chief of the department of the port of Cebu and
internal-revenue agent of Cebu, respectively, went abroad the steamship Erroll to inspect and search its cargo, and
found, first in a cabin near the saloon, one sack (Exhibit A) and afterwards in the hold, another sack (Exhibit B). The
sack referred to as Exhibit A contained 49 cans of opium, and the other, Exhibit B, the larger sack, also contained
several cans of the same substance. The hold, in which the sack mentioned in Exhibit B was found, was under the
defendant's control, who moreover, freely and of his own will and accord admitted that this sack, as well as the other
referred to in Exhibit B and found in the cabin, belonged to him. The said defendant also stated, freely and

voluntarily, that he had bought these sacks of opium, in Hongkong with the intention of selling them as contraband
in Mexico or Vera Cruz, and that, as his hold had already been searched several times for opium, he ordered two
other Chinamen to keep the sack. Exhibit A.
It is to be taken into account that the two sacks of opium, designated as Exhibits A and B, properly constitute thecorpus
delicti. Moreover, another lot of four cans of opium, marked, as Exhibit C, was the subject matter of investigation at the trial,
and with respect to which the chief of the department of the port of Cebu testified that they were found in the part of the
ship where the firemen habitually sleep, and that they were delivered to the first officer of the ship to be returned to the said
firemen after the vessel should have left the Philippines, because the firemen and crew of foreign vessels, pursuant to the
instructions he had from the Manila custom-house, were permitted to retain certain amounts of opium, always provided it
should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," is also corpus delicti and important as evidence in this cause. With
regard to this the internal-revenue agent testified as follows:itc-alf
FISCAL. What is it?
WITNESS. It is a can opium which was bought from the defendant by a secret-service agent and taken to the office
of the governor to prove that the accused had opium in his possession to sell.
On motion by the defense, the court ruled that this answer might be stricken out "because it refers to a sale." But, with
respect to this answer, the chief of the department of customs had already given this testimony, to wit:
FISCAL. Who asked you to search the vessel?
WITNESS. The internal-revenue agent came to my office and said that a party brought him a sample of opium and
that the same party knew that there was more opium on board the steamer, and the agent asked that the vessel be
searched.
The defense moved that this testimony be rejected, on the ground of its being hearsay evidence, and the court only ordered
that the part thereof "that there was more opium, on board the vessel" be stricken out.
The defense, to abbreviate proceedings, admitted that the receptacles mentioned as Exhibits A, B, and C, contained opium
and were found on board the steamship Erroll, a vessel of English nationality, and that it was true that the defendant stated
that these sacks of opium were his and that he had them in his possession.
According to the testimony of the internal-revenue agent, the defendant stated to him, in the presence of the provincial
fiscal, of a Chinese interpreter (who afterwards was not needed, because the defendant spoke English), the warden of the
jail, and four guards, that the opium seized in the vessel had been bought by him in Hongkong, at three pesos for each round
can and five pesos for each one of the others, for the purpose of selling it, as contraband, in Mexico and Puerto de Vera Cruz;
that on the 15th the vessel arrived at Cebu, and on the same day he sold opium; that he had tried to sell opium for P16 a
can; that he had a contract to sell an amount of the value of about P500; that the opium found in the room of the other two
Chinamen prosecuted in another cause, was his, and that he had left it in their stateroom to avoid its being found in his
room, which had already been searched many times; and that, according to the defendant, the contents of the large sack
was 80 cans of opium, and of the small one, 49, and the total number, 129.
It was established that the steamship Erroll was of English nationality, that it came from Hongkong, and that it was bound for
Mexico, via the call ports of Manila and Cebu.
The defense moved for a dismissal of the case, on the grounds that the court had no jurisdiction to try the same and the
facts concerned therein did not constitute a crime. The fiscal, at the conclusion of his argument, asked that the maximum
penalty of the law be imposed upon the defendant, in view of the considerable amount of opium seized. The court ruled that
it did not lack jurisdiction, inasmuch as the crime had been committed within its district, on the wharf of Cebu.
The court sentenced the defendant to five years' imprisonment, to pay a fine of P10,000, with additional subsidiary
imprisonment in case of insolvency, though not to exceed one third of the principal penalty, and to the payment of the costs.
It further ordered the confiscation, in favor of the Insular Government, of the exhibits presented in the case, and that, in the
event of an appeal being taken or a bond given, or when the sentenced should have been served, the defendant be not

released from custody, but turned over to the customs authorities for the purpose of the fulfillment of the existing laws on
immigration.
From this judgment, the defendant appealed to this court.lawphi1.net
The appeal having been heard, together with the allegations made therein by the parties, it is found: That, although the
mere possession of a thing of prohibited use in these Islands, aboard a foreign vessel in transit, in any of their ports, does
not, as a general rule, constitute a crime triable by the courts of this country, on account of such vessel being considered as
an extension of its own nationality, the same rule does not apply when the article, whose use is prohibited within the
Philippine Islands, in the present case a can of opium, is landed from the vessel upon Philippine soil, thus committing an
open violation of the laws of the land, with respect to which, as it is a violation of the penal law in force at the place of the
commission of the crime, only the court established in that said place itself had competent jurisdiction, in the absence of an
agreement under an international treaty.
It is also found: That, even admitting that the quantity of the drug seized, the subject matter of the present case, was
considerable, it does not appear that, on such account, the two penalties fixed by the law on the subject, should be imposed
in the maximum degree.
Therefore, reducing the imprisonment and the fine imposed to six months and P1,000, respectively, we affirm in all other
respects the judgment appealed from, with the costs of this instance against the appellant. So ordered.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-18924

October 19, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,


vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
Attorney-General Villa-Real for appellant.
Eduardo Gutierrez Repide for appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the Court of First Instance of Manila, sustaining the
demurrer presented by the defendant to the information that initiated this case and in which the appellee is accused of
having illegally smoked opium, aboard the merchant vessel Changsa of English nationality while said vessel was anchored in
Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and dismissed the case.
The question that presents itself for our consideration is whether such ruling is erroneous or not; and it will or will not be
erroneous according as said court has or has no jurisdiction over said offense.

The point at issue is whether the courts of the Philippines have jurisdiction over crime, like the one herein involved,
committed aboard merchant vessels anchored in our jurisdiction waters. 1awph!l.net
There are two fundamental rules on this particular matter in connection with International Law; to wit, the French rule,
according to which crimes committed aboard a foreign merchant vessels should not be prosecuted in the courts of the
country within whose territorial jurisdiction they were committed, unless their commission affects the peace and security of
the territory; and the English rule, based on the territorial principle and followed in the United States, according to which,
crimes perpetrated under such circumstances are in general triable in the courts of the country within territory they were
committed. Of this two rules, it is the last one that obtains in this jurisdiction, because at present the theories and
jurisprudence prevailing in the United States on this matter are authority in the Philippines which is now a territory of the
United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116), Chief Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be obviously inconvenient and dangerous to
society, and would subject the laws to continual infraction, and the government to degradation, if such individuals or
merchants did not owe temporary and local allegiance, and were not amenable to the jurisdiction of the country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
. . . No court of the Philippine Islands had jurisdiction over an offense or crime committed on the high seas or within
the territorial waters of any other country, but when she came within three miles of a line drawn from the headlands,
which embrace the entrance to Manila Bay, she was within territorial waters, and a new set of principles became
applicable. (Wheaton, International Law [Dana ed.], p. 255, note 105; Bonfils, Le Droit Int., secs. 490 et seq.;
Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of the territorial sovereign
subject to such limitations as have been conceded by that sovereignty through the proper political agency. . . .
It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus vs. Keeper of the Common
Jail (120 U.., 1), wherein it was said that:
. . . The principle which governs the whole matter is this: Disorder which disturb only the peace of the ship or those
on board are to be dealt with exclusively by the sovereignty of the home of the ship, but those which disturb the
public peace may be suppressed, and, if need be, the offenders punished by the proper authorities of the local
jurisdiction. It may not be easy at all times to determine which of the two jurisdictions a particular act of disorder
belongs. Much will undoubtedly depend on the attending circumstances of the particular case, but all must concede
that felonious homicide is a subject for the local jurisdiction, and that if the proper authorities are proceeding with
the case in the regular way the consul has no right to interfere to prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:
Although the mere possession of an article of prohibited use in the Philippine Islands, aboard a foreign vessel in
transit in any local port, does not, as a general rule, constitute a crime triable by the courts of the Islands, such
vessels being considered as an extension of its own nationality, the same rule does not apply when the article, the
use of which is prohibited in the Islands, is landed from the vessels upon Philippine soil; in such a case an open
violation of the laws of the land is committed with respect to which, as it is a violation of the penal law in force at the
place of the commission of the crime, no court other than that established in the said place has jurisdiction of the
offense, in the absence of an agreement under an international treaty.
As to whether the United States has ever consented by treaty or otherwise to renouncing such jurisdiction or a part thereof,
we find nothing to this effect so far as England is concerned, to which nation the ship where the crime in question was
committed belongs. Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says the following:
There shall be between the territories of the United States of America, and all the territories of His Britanic Majesty
in Europe, a reciprocal liberty of commerce. The inhabitants of the two countries, respectively, shall have liberty
freely and securely to come with their ships and cargoes to all such places, ports and rivers, in the territories
aforesaid, to which other foreigners are permitted to come, to enter into the same, and to remain and reside in any
parts of the said territories, respectively; also to hire and occupy houses and warehouses for the purposes of their
commerce; and, generally, the merchants and traders of each nation respectively shall enjoy the most complete

protection and security for their commerce, but subject always to the laws and statutes of the two countries,
respectively. (Art. 1, Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a foreign vessel in transit was held by this court not triable by or
courts, because it being the primary object of our Opium Law to protect the inhabitants of the Philippines against the
disastrous effects entailed by the use of this drug, its mere possession in such a ship, without being used in our territory,
does not being about in the said territory those effects that our statute contemplates avoiding. Hence such a mere
possession is not considered a disturbance of the public order.
But to smoke opium within our territorial limits, even though aboard a foreign merchant ship, is certainly a breach of the
public order here established, because it causes such drug to produce its pernicious effects within our territory. It seriously
contravenes the purpose that our Legislature has in mind in enacting the aforesaid repressive statute. Moreover, as the
Attorney-General aptly observes:
. . . The idea of a person smoking opium securely on board a foreign vessel at anchor in the port of Manila in open
defiance of the local authorities, who are impotent to lay hands on him, is simply subversive of public order. It
requires no unusual stretch of the imagination to conceive that a foreign ship may come into the port of Manila and
allow or solicit Chinese residents to smoke opium on board.
The order appealed from is revoked and the cause ordered remanded to the court of origin for further proceedings in
accordance with law, without special findings as to costs. So ordered.

SECOND DIVISION

[G.R. No. 120135. March 31, 2003]

BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners, vs. COURT OF APPEALS, HON.
MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November 29, 1994 decision
of the Court of Appeals[1] and the April 28, 1995 resolution denying petitioners motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a Complaint [2] before the
Regional Trial Court of Pasig against the Bank of America NT&SA and Bank of America International, Ltd. (defendant banks
for brevity) alleging that: they were engaged in the shipping business; they owned two vessels: Don Aurelio and El
Champion, through their wholly-owned corporations; they deposited their revenues from said business together with other
funds with the branches of said banks in the United Kingdom and Hongkong up to 1979; with their business doing well, the
defendant banks induced them to increase the number of their ships in operation, offering them easy loans to acquire said
vessels;[3] thereafter, the defendant banks acquired, through their (Litonjuas) corporations as the borrowers: (a) El Carrier [4];
(b) El General[5]; (c) El Challenger[6]; and (d) El Conqueror[7]; the vessels were registered in the names of their corporations;
the operation and the funds derived therefrom were placed under the complete and exclusive control and disposition of the
petitioners;[8] and the possession the vessels was also placed by defendant banks in the hands of persons selected and
designated by them (defendant banks).[9]
The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the income derived from
the operation of the vessels as well as of the proceeds of the subsequent foreclosure sale; [10] because of the breach of their
fiduciary duties and/or negligence of the petitioners and/or the persons designated by them in the operation of private
respondents six vessels, the revenues derived from the operation of all the vessels declined drastically; the loans acquired for
the purchase of the four additional vessels then matured and remained unpaid, prompting defendant banks to have all the
six vessels, including the two vessels originally owned by the private respondents, foreclosed and sold at public auction to
answer for the obligations incurred for and in behalf of the operation of the vessels; they (Litonjuas) lost sizeable amounts of
their own personal funds equivalent to ten percent (10%) of the acquisition cost of the four vessels and were left with the
unpaid balance of their loans with defendant banks. [11] The Litonjuas prayed for the accounting of the revenues derived in the
operation of the six vessels and of the proceeds of the sale thereof at the foreclosure proceedings instituted by petitioners;
damages for breach of trust; exemplary damages and attorneys fees. [12]
Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against
them.[13]
On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:
WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby DENIED. The defendant is
therefore, given a period of ten (10) days to file its Answer to the complaint.
SO ORDERED.[14]
Instead of filing an answer the defendant banks went to the Court of Appeals on a Petition for Review on
Certiorari[15] which was aptly treated by the appellate court as a petition for certiorari.They assailed the above-quoted order
as well as the subsequent denial of their Motion for Reconsideration. [16] The appellate court dismissed the petition and denied
petitioners Motion for Reconsideration.[17]
Hence, herein petition anchored on the following grounds:
1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE PERSONALITIES OF THE PRIVATE
RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT,
BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS
NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF
FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.
3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF
FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING. [18]
As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the vessels are the
foreign corporations and not private respondents Litonjuas who are mere stockholders; and that the revenues derived from
the operations of all the vessels are deposited in the accounts of the corporations. Hence, petitioners maintain that these
foreign corporations are the legal entities that have the personalities to sue and not herein private respondents; that private
respondents, being mere shareholders, have no claim on the vessels as owners since they merely have an inchoate right to
whatever may remain upon the dissolution of the said foreign corporations and after all creditors have been fully paid and
satisfied;[19] and that while private respondents may have allegedly spent amounts equal to 10% of the acquisition costs of
the vessels in question, their 10% however represents their investments as stockholders in the foreign corporations. [20]

Anent the second assigned error, petitioners posit that while the application of the principle of forum non conveniens is
discretionary on the part of the Court, said discretion is limited by the guidelines pertaining to the private as well as public
interest factors in determining whether plaintiffs choice of forum should be disturbed, as elucidated in Gulf Oil Corp. vs.
Gilbert[21] and Piper Aircraft Co. vs. Reyno,[22] to wit:
Private interest factors include: (a) the relative ease of access to sources of proof; (b) the availability of compulsory process
for the attendance of unwilling witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all other practical
problems that make trial of a case easy, expeditious and inexpensive. Public interest factors include: (a) the administrative
difficulties flowing from court congestion; (b) the local interest in having localized controversies decided at home; (c) the
avoidance of unnecessary problems in conflict of laws or in the application of foreign law; or (d) the unfairness of burdening
citizens in an unrelated forum with jury duty.[23]
In support of their claim that the local court is not the proper forum, petitioners allege the following:
i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are based in Hongkong and England. As
such, the evidence and the witnesses are not readily available in the Philippines;
ii) The loan transactions were obtained, perfected, performed, consummated and partially paid outside the Philippines;
iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels were part of an offshore fleet,
not based in the Philippines;
iv) All the loans involved were granted to the Private Respondents foreign CORPORATIONS;
v) The Restructuring Agreements were ALL governed by the laws of England;
vi) The subsequent sales of the mortgaged vessels and the application of the sales proceeds occurred and transpired outside
the Philippines, and the deliveries of the sold mortgaged vessels were likewise made outside the Philippines;
vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and
viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in the Philippines. [24]
Petitioners argue further that the loan agreements, security documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they will be governed by the laws of England; [25] that Philippine Courts
would then have to apply English law in resolving whatever issues may be presented to it in the event it recognizes and
accepts herein case; that it would then be imposing a significant and unnecessary expense and burden not only upon the
parties to the transaction but also to the local court. Petitioners insist that the inconvenience and difficulty of applying English
law with respect to a wholly foreign transaction in a case pending in the Philippines may be avoided by its dismissal on the
ground of forum non conveniens. [26]
Finally, petitioners claim that private respondents have already waived their alleged causes of action in the case at bar
for their refusal to contest the foreign civil cases earlier filed by the petitioners against them in Hongkong and England, to
wit:
1.) Civil action in England in its High Court of Justice, Queens Bench Division Commercial Court (1992-Folio No. 2098)
against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d)
ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K.
LITONJUA & (h) AURELIO K. LITONJUA.
2.) Civil action in England in its High Court of Justice, Queens Bench Division, Commercial Court (1992-Folio No. 2245)
against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d)
AURELIO KATIPUNAN LITONJUA.
3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992), against (a) ESHLEY COMPANIA
NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION
(e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA.
4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992), against (a) ESHLEY COMPANIA
NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION
(e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA.

and that private respondents alleged cause of action is already barred by the pendency of another action or by litis
pendentia as shown above.[27]
On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or
misrepresented in the present petition for certiorari; that the prefatory statement failed to state that part of the security of
the foreign loans were mortgages on a 39-hectare piece of real estate located in the Philippines; [28] that while the complaint
was filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by the private respondents who
are Filipinos and therefore under Philippine laws, aside from the said corporate borrowers being but their alter-egos, they
have interests of their own in the vessels. [29] Private respondents also argue that the dismissal by the Court of Appeals of the
petition for certiorari was justified because there was neither allegation nor any showing whatsoever by the petitioners that
they had no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law from the Order of the trial
judge denying their Motion to Dismiss; that the remedy available to the petitioners after their Motion to Dismiss was denied
was to file an Answer to the complaint; [30] that as upheld by the Court of Appeals, the decision of the trial court in not
applying the principle of forum non conveniens is in the lawful exercise of its discretion. [31] Finally, private respondents aver
that the statement of petitioners that the doctrine of res judicata also applies to foreign judgment is merely an opinion
advanced by them and not based on a categorical ruling of this Court; [32] and that herein private respondents did not actually
participate in the proceedings in the foreign courts. [33]
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari.
Petitioners should have filed an answer to the complaint, proceed to trial and await judgment before making an appeal. As
repeatedly held by this Court:
An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or
mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his
motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in due course.
xxx Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court
issued the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or
(c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant
from the injurious effects of the patently mistaken order maintaining the plaintiffs baseless action and compelling the
defendant needlessly to go through a protracted trial and clogging the court dockets by another futile case. [34]
Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners
motion to dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would appeal,
under the circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in conjunction with
the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that
plaintiffs have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which are the
registered owners of the vessels and the borrowers of petitioners?
No. Petitioners argument that private respondents, being mere stockholders of the foreign corporations, have no
personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of
personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a
ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.
[35]
In San Lorenzo Village Association, Inc. vs. Court of Appeals, [36] this Court clarified that a complaint states a cause of
action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the
correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these
elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of
action.[37] To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of the complaint but
rather the fact that the complaint states no cause of action. [38] Failure to state a cause of action refers to the insufficiency of
allegation in the pleading, unlike lack of cause of action which refers to the insufficiency of factual basis for the action. Failure
to state a cause of action may be raised at the earliest stages of an action through a motion to dismiss the complaint, while
lack of cause of action may be raised any time after the questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented.[39]
In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein
private respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason
of the fiduciary relationship that was created between the parties involving the vessels in question; (2) petitioners have the
obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the
corporation; that the corporate entities have juridical personalities separate and distinct from those of the private
respondents. Private respondents maintain that the corporations are wholly owned by them and prior to the incorporation of
such entities, they were clients of petitioners which induced them to acquire loans from said petitioners to invest on the
additional ships.
We agree with private respondents. As held in the San Lorenzo case,[40]

xxx assuming that the allegation of facts constituting plaintiffs cause of action is not as clear and categorical as would
otherwise be desired, any uncertainty thereby arising should be so resolved as to enable a full inquiry into the merits of the
action.
As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law abhors,
and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on
account of the alleged fatal flaws of the complaint would obviously be indecisive and would not end the controversy, since the
institution of another action upon a revised complaint would not be foreclosed. [41]
Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning the forum is inconvenient, emerged in private international
law to deter the practice of global forum shopping, [42] that is to prevent non-resident litigants from choosing the forum or
place wherein to bring their suit for malicious reasons, such as to secure procedural advantages,
to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this doctrine, a
court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available
forum and the parties are not precluded from seeking remedies elsewhere. [43]
Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the
particular case and is addressed to the sound discretion of the trial court. [44] In the case of Communication Materials and
Design, Inc. vs. Court of Appeals,[45] this Court held that xxx [a] Philippine Court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties
may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision. [46] Evidently, all these requisites
are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,[47] that the doctrine of forum
non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does
not include said doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special
circumstances require the courts desistance; and that the propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly considered a matter of defense. [48]
Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will
amount to res judicata in the other.[49] Parenthetically, for litis pendentia to be a ground for the dismissal of an action there
must be: (a) identity of the parties or at least such as to represent the same interest in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two cases should be such
that the judgment which may be rendered in one would, regardless of which party is successful, amount to res judicata in the
other.[50]
In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties,
notwithstanding the presence of other respondents, [51] as well as the reversal in positions of plaintiffs and defendants [52], still
the other requirements necessary for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were
filed in Hongkong and England without however showing the identity of rights asserted and the reliefs sought for as well as
the presence of the elements of res judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:
xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, failed to
provide this Court with relevant and clear specifications that would show the presence of the above-quoted elements or
requisites for res judicata. While it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72), after
enumerating the various civil actions instituted abroad, did aver that Copies of the foreign judgments are hereto attached
and made integral parts hereof as Annexes B, C, D and E, they failed, wittingly or inadvertently, to include a single foreign
judgment in their pleadings submitted to this Court as annexes to their petition. How then could We have been expected to
rule on this issue even if We were to hold that foreign judgments could be the basis for the application of the aforementioned
principle of res judicata?[53]
Consequently, both courts correctly denied the dismissal of herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Callejo, Sr., JJ., concur.

FIRST DIVISION

[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.

DECISION
PARDO, J.:
The case before the Court is a petition for certiorari[1] 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 respondents 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 attorneys 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, Peoples 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), MHICL [10] 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 familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henks 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. Shmidts 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
attorneys 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 attorneys 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 un-expired 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)
attorneys fees of 10% of complainants total award.
SO ORDERED.
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Veras 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 petitioners 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 NLRC [33]
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 Peoples 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, Peoples 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 NLRCs 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 corporations 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 MHICLs 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 employees 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
respondents 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.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

THIRD DIVISION
[ G.R. Nos. 90306-07, July 30, 1990 ]
K.K. SHELL SEKIYU OSAKA HATSUBAISHO AND FU HING OIL CO., LTD., PETITIONERS, VS. THE HONORABLE
COURT OF APPEALS, ATLANTIC VENUS CO., S.A., AND THE VESSEL M/V "ESTELLA", RESPONDENTS.
DECISION
CORTES, J.:

Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered final and
conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step in to correct the
misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September 29,
1983, 124 SCRA 808.] This case is one such instance calling for the Court's review of the facts.
On January 7, 1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as "Kumagai"), a corporation formed and existing
under the laws of Japan, filed a complaint for the collection of a sum of money with preliminary attachment against Atlantic
Venus Co., S.A. (hereinafter referred to as "Atlantic"), a corporation registered in Panama, the vessel MV Estella
and Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine corporation. Atlantic is the
owner of the MV Estella. The complaint, docketed as Civil Case No. 87-38930 of the Regional Trial Court, Branch XIV, Manila,
alleged that Crestamonte, as bareboat charterer and operator of the MV Estella, appointed N.S. Shipping Corporation
(hereinafter referred to as "NSS"), a Japanese corporation, as its general agent in Japan. The appointment was formalized in
an Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan. Kumagai supplied the MV Estella
with supplies and services but despite repeated demands Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a "Keihin") filed complaints-in-intervention.
On May 19, 1987, petitioner Fu Hing Oil Co., Ltd (hereinafter referred to as "Fu Hing"), a corporation organized in Hong Kong
and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaint-in-intervention,
alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for the total sum of One
Hundred Fifty-Two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such has remained
unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of attachment was also prayed
for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as "K.K. Shell"), a corporation
organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an attached complaintin-intervention, alleging that upon request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided and supplied
marine diesel oil/fuel to the MV Estella at the ports of Tokyo and Mutsure in Japan and that despite previous
demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety-Six
Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shells claim constitutes a maritime lien on the MV
Estella. The complaint-in-intervention sought the issuance of a writ of preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19, 1987 and August 11, 1987, respectively. Writs
of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the posting
of counterbonds, the writs of attachment were discharged on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in-intervention filed by Fu Hing and K.K. Shell.
In the meantime, Atlantic and the MV Estella filed a petition in the Court of Appeals against the trial court
judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial
court dated April 30, 1987 and August 11, 1987. Among others, the omnibus order dated August 11, 1987 denied the
motion to reconsider the order allowing Fu Hings intervention and granted K.K. Shell's motion to intervene. Again
Fu Hing and K.K. Shell intervened. CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP No.
12341). Fu Hing and K.K. Shell intervened in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease and
desist from proceeding with the case.
According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were bound
by the Agency Agreement between Crestamonteand NSS, particularly, the choice of forum clause, which provides:
12.0 - That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the District
Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of Appeals. Hence this
petition.
In this case, we shall review the decision of the Court of Appeals only insofar as it relates to the intervention of K.K.
Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that an amicable
settlement had been reached with private respondents. The Court granted the motion on March 19, 1990.

After considering the pleadings filed by the parties and the arguments raised therein, the Court finds reversible error on the
part of the Court of Appeals insofar as it disallowed petitioners intervention in the case before the trial court and ordered the
latter to cease and desist from proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is, therefore,
bound by the agreement.
The body of the Agency Agreement entered into by and between Crestamonte (referred to in the agreement as "Owner") and
NSS (Agent) provides:
WITNESSETH
That the OWNER has appointed and by these presents hereby appoints the AGENT as its General Agents for all Japan in
connection with the Owners vessels and/or providing suitable vessels for Japan Ports under the following terms and
conditions:
1.0 - In general, the Agent will abide by the Owners decisions regarding the mode of operations of the vessels in Japan and
that all cargo bookings, vessels fixtures/charters, etc. by the Agent, shall always be subject to the prior approval and
consent of the Owners.
2.0 - That the Agent shall provide for the necessary services required for the husbanding of the Owner's vessels in
all Japan Ports and issue Bill(s) of Lading to Shippers in the form prescribed by the Owners.
3.0 - That the Agent shall be responsible for fixing south-bound cargoes with revenues sufficient to cover ordinary liner
operation expenses such as bunkers, additives, lubricating oil, water, running repairs, drydocking expenses, usual port
disbursement accounts, cargo handling charges including stevedorage, provisions and ships stores and cash advance to crew
(excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be essentially the Agent's responsibility, and should the
revenue for south-bound cargoes as above-mentioned be insufficient to cover the aforesaid expenses, the Agent shall provide
credit to the extent of the vessels requirements, provided however that said obligation shall be secured by the Owner
committing at least forty-eight (48) sailings of Japan/Philippines liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation costs on Owner's liner service
carried forward from the present Owners agent, subject to approval of Owner's Representative in Japan in regard to amount
and nature thereof.
4.0 - That the agent shall furnish office space of approximately thirty (30) square meters for the exclusive use of the Owner
and its representatives, within the premises of the Agent's office, free of charge.
5.0 - That the responsibilities of the Agent in regard to the cargo shall begin, in the case of imports into
the territory of Japan, from the time such cargo has left the ship's tackles, and shall cease, in case of export, upon
completion of loading.
6.0 - That the remuneration of the Agent from the Owner shall be as follows:
*

7.0 - That the Agent shall exert best efforts to recommend to Owners stevedoring and other expenses incurred in connection
with work on board the Owner's vessels, as well as customs house charges, pilotage, harbour dues, cables, etc. which are for
Owner's account, on the cheapest possible terms. Owners shall decide and may appoint through the Agent the
services described herein.
8.0 - That the Agent shall be responsible for the due collection of and due payment to the Owner of all outward freight
prepaid for cargo without delay upon the sailing of each vessel from the port. The Agent shall be also responsible for the due
collection of all inward freight payable at the port against delivery unless otherwise instructed by the Owner to the contrary.
9.0 - The account statements supported by vouchers in two copies itemized for each service and/or supply for
each vessel, shall be forwarded by the Agent to the Owner promptly after the departure of each vessel but in no case later
than 60 days thereafter.
10.0 - That the freightage to be collected by the Agent in Japan shall be paid to the Owner after deducting the total amount
of disbursements incurred in Japan.
11.0 - That this Agreement takes effect as of April 15, 1983 and shall remain in force unless terminated by either party upon
60 days notice.
12.0 - That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the District
Courts of Japan. [Annex "G" of the Petition, Rollo, pp. 100-104.]
No express reference to the contracting of sub?agents or the applicability of the terms of the agreement, particularly the
choice-of-forum clause, to sub-agents is made in the text of the agreement. What the contract clearly states are NSS
principal duties, i.e., that it shall provide for the necessary services required for the husbanding ofCrestamontes vessels in
Japanese ports (section 2.0) and shall be responsible for fixing south-bound cargoes with revenues sufficient to cover
ordinary expenses (section 3.0).

Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the MV Estella with
marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed agent of Crestamonte (Rollo, pp. 116117.] There is thus no basis for the Court of Appeals finding, as regards K.K. Shell in relation to its intervention in Civil Case
No. 87-38930, that "the sub-agents admitted in their pleadings that they were appointed as local agent/sub-agent or
representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of Appeals could
have been referring to was K.K. Shells Urgent Motion for Leave to Intervene dated February 24, 1987 in another case (Civil
Case No. 86-38704) in another court and involving other vessels (MV Ofelia and MV Christina C), where it was alleged that
K.K. Shell is "one of the representatives of N.S. Shipping Corporation for the supply of bunker oil, fuel oil, provisions and
other necessaries to vessels of which N.S. Shipping Corporation was the general agent." [Comment, p. 17; Rollo, p. 274.]
However, this allegation does not conclusively establish a sub-agency between NSS and K.K. Shell. It is therefore surprising
how the Court of Appeals could have come to the conclusion, just on the basis of the Agency Agreement and the pleadings
filed in the trial court, that "Crestamonteis the principal, NSS is the agent and . . . Fu Hing and K.K. Shell are the subagents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence, if
there be any, would still have to be presented to establish the allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown to be
binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense. K.K. Shell cannot
therefore, as of yet, be barred from instituting an action in the Philippines.
2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound by the
Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine
of forum non conveniens would be a valid ground to cause the dismissal of K.K. Shell's complaint-in?intervention.
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521, the Ship
Mortgage Decree of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries: person entitled to such lien. - Any person furnishing repairs, supplies, towage, use
of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner
of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by
suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the maritime
lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of Crestamonte in
general. Under the law it must be established that the credit was extended to the vessel itself. Now, this is a defense that
calls precisely for a factual determination by the trial court of who benefited from the delivery of the fuel. Hence, again, the
necessity for the reception of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their answer
in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed
maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents invocation of the doctrine of forum non conveniens, as the exact
nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of the trial
court judge who is in the best position, after some vital facts are established, to determine whether special circumstances
require that his court desist from assuming jurisdiction over the suit.
It was clearly reversible error on the part of the Court of Appeals to annul the trial court's orders, insofar as K.K. Shell is
concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 87-38930. There are still
numerous material facts to be established in order to arrive at a conclusion as to the true nature of the relationship
between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have been to allow the trial
court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised by private respondents after
they have filed their answer and evidence to support their conflicting claims has been presented. The Court of Appeals,
however, substituted its judgment for that of the trial court and decided the merits of the case, even in the absence of
evidence, on the pretext of reviewing an interlocutory order.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-G.R. SP No. 12999,
insofar as it annulled the order of the August 11, 1987 and directed the trial court to cease and desist from proceeding with
Civil Case No. 87-38930.
SO ORDERED.
Fernan, C.J., Gutierr

SECOND DIVISION
[ G.R. No. 102223, August 22, 1996 ]
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., (FORMERLY ASPAC-ITEC PHILIPPINES, INC.)
AND FRANCISCO S. AGUIRRE, PETITIONERS, VS. THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., AND ITEC, INC.,
RESPONDENTS.
DECISION
TORRES, JR., J.:
Business Corporations, according to Lord Coke, "have no souls." They do business peddling goods, wares or even services
across national boundaries in "soulless forms" in quest for profits albeit at times, unwelcomed in these strange lands
venturing into uncertain markets and, the risk of dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the Court of Appeals on June 7, 1991, sustaining the RTC

Order dated February 22, 1991, denying the petitioners Motion to Dismiss, and directing the issuance of a writ of preliminary
injunction, and its companion Resolution of October 9, 1991, denying the petitioners Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for
brevity) are both domestic corporations, while petitioner Francisco S. Aguirre is their President and majority stockholder.
Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly organized and
existing under the laws of the State of Alabama, United States of America. There is no dispute that ITEC is a foreign
corporation not licensed to do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as "Representative Agreement".
[1]
Pursuant to the contract, ITEC engaged ASPAC as its "exclusive representative" in the Philippines for the sale of ITECs
products, in consideration of which, ASPAC was paid a stipulated commission. The agreement was signed by G.A. Clark and
Francisco S. Aguirre, presidents of ITEC and ASPAC respectively, for and in behalf of their companies. [2] The said agreement
was initially for a term of twenty-four months. After the lapse of the agreed period, the agreement was renewed for another
twenty-four months.
Through a "License Agreement"[3] entered into by the same parties on November 10, 1988, ASPAC was able to incorporate
and use the name "ITEC" in its own name. Thus, ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC
(Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their sole customer, the Philippine Long
Distance Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT executed a document entitled "PLDTASPAC/ITEC PROTOCOL"[4] which defined the project details for the supply of ITECs Interface Equipment in connection with
the Fifth Expansion Program of PLDT.
One year into the second term of the parties Representative Agreement, ITEC decided to terminate the same, because
petitioner ASPAC allegedly violated its contractual commitment as stipulated in their agreements. [5]
ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for
brevity), the President of which is likewise petitioner Aguirre, of using knowledge and information of ITECs products
specifications to develop their own line of equipment and product support, which are similar, if not identical to ITECs own,
and offering them to ITECs former customer.
On January 31, 1991, the complaint[6] in Civil Case No. 91-294, was filed with the Regional Trial Court of Makati, Branch 134
by ITEC, INC. Plaintiff sought to enjoin, first, preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI,
and Francisco Aguirre and their agents and business associates, to cease and desist from selling or attempting to sell to PLDT
and to any other party, products which have been copied or manufactured "in like manner, similar or identical to the
products, wares and equipment of plaintiff," and (2) defendant ASPAC, to cease and desist from using in its corporate name,
letter heads, envelopes, sign boards and business dealings, plaintiffs trademark, internationally known as ITEC; and the
recovery from defendants in solidum, damages of at least P500,000.00, attorneys fees and litigation expenses.
In due time, defendants filed a motion to dismiss[7] the complaint on the following grounds: (1) That plaintiff has no legal
capacity to sue as it is a foreign corporation doing business in the Philippines without the required BOI authority and SEC
license, and (2) that plaintiff is simply engaged in forum shopping which justifies the application against it of the principle
of "forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which ITEC INTERNATIONAL, INC. was substituted as plaintiff
instead of ITEC, INC.[8]
In their Supplemental Motion to Dismiss,[9] defendants took note of the amendment of the complaint and asked the court to
consider in toto their motion to dismiss and their supplemental motion as their answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court a quo on February 22, 1991, issued its Order:
[10]
(1) denying the motion to dismiss for being devoid of legal merit with a rejection of both grounds relied upon by the
defendants in their motion to dismiss, and (2) directing the issuance of a writ of preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent Court of Appeals on a Petition for Certiorari and
Prohibition[11] under Rule 65 of the Revised Rules of Court, assailing and seeking the nullification and the setting aside of the
Order and the Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
"We find no reason whether in law or from the facts of record, to disagree with the (lower courts) ruling. We therefore are
unable to find in respondent Judges issuance of said writ the grave abuse of discretion ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not show that Certiorari lies in the present case and therefore, the petition
does not deserve to be given due course.

WHEREFORE, the present petition should be, as it is hereby, denied due course and accordingly, is hereby dismissed. Costs
against the petitioners.
SO ORDERED."[12]
Petitioners filed a motion for reconsideration[13] on June 7, 1991, which was likewise denied by the respondent court.
"WHEREFORE, the present motion for reconsideration should be, as it is hereby, denied for lack of merit. For the same
reason, the motion to have the motion for reconsideration set for oral argument likewise should be and is hereby denied.
SO ORDERED."[14]
Petitioners are now before us via Petition for Review on Certiorari [15] under Rule 45 of the Revised Rules of Court.
It is the petitioners submission that private respondents are foreign corporations actually doing business in the Philippines
without the requisite authority and license from the Board of Investments and the Securities and Exchange Commission, and
thus, disqualified from instituting the present action in our courts. It is their contention that the provisions of the
Representative Agreement, petitioner ASPAC executed with private respondent ITEC, are similarly "highly restrictive" in
nature as those found in the agreements which confronted the Court in the case of Top-Weld Manufacturing, Inc. vs. ECED
S.A. et al.,[16] as to reduce petitioner ASPAC to a mere conduit or extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign corporations are doing business in the Philippines because when the
respondents entered into the disputed contracts with the petitioner, they were carrying out the purposes for which they were
created, i.e., to manufacture and market welding products and equipment. The terms and conditions of the contracts as well
as the respondents conduct indicate that they established within our country a continuous business, and not merely one of a
temporary character. The respondents could be exempted from the requirements of Republic Act 5455 if the petitioner is an
independent entity which buys and distributes products not only of the petitioner, but also of other manufacturers or
transacts business in its name and for its account and not in the name or for the account of the foreign principal. A reading of
the agreements between the petitioner and the respondents shows that they are highly restrictive in nature, thus making the
petitioner a mere conduit or extension of the respondents.
It is alleged that certain provisions of the "Representative Agreement" executed by the parties are similar to those found in
the License Agreement of the parties in the Top-Weld case which were considered as "highly restrictive" by this Court. The
provisions in point are:
"2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to time. Unless otherwise expressly agreed to
in writing by ITEC the purchase price is net to ITEC and does not include any transportation charges, import charges or taxes
into or within the Territory. All orders from customers are subject to formal acceptance by ITEC at its Huntsville, Alabama
U.S.A. facility.
xxx

xxx

xxx

3.0 Duties of Representative


3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any product which competes with an existing ITEC product or any
product which ITEC has under active development.
3.1.2. Actively solicit all potential customers within the Territory in a systematic and businesslike manner.
3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales Goals for the first 24 months is set forth
on Attachment two (2) hereto. The Sales Goal for additional twelve month periods, if any, shall be sent to the Sales Agent by
ITEC at the beginning of each period. These Sales Goals shall be incorporated into this Agreement and made a part hereof.
xxx

xxx

xxx

xxx

xxx

xxx

6.0. Representative as Independent Contractor

6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit sales within the Territory on ITECs behalf
but is authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in writing." [17]
Aside from the abovestated provisions, petitioners point out the following matters of record, which allegedly witness to the
respondents' activities within the Philippines in pursuit of their business dealings:
"a. While petitioner ASPAC was the authorized exclusive representative for three (3) years, it solicited from and closed
several sales for and on behalf of private respondents as to their products only and no other, to PLDT, worth no less than US
$15 Million (p. 20, tsn, Feb. 18, 1991);

b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by private respondents sole witness, Mr.
Clarence Long, is not in the name of petitioner ASPAC as such representative, but in the name of private respondent ITEC,
INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL" (Annex C of the original and amended complaints) which
defined the responsibilities of the parties thereto as to the supply, installation and maintenance of the ITEC equipment sold
under said Contract No. 1 is, as its very title indicates, in the names jointly of the petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of US $15 Million, private respondent ITEC, Inc. issued in its letter head, a
Confirmation of payment dated November 13, 1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the
Motion to Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were identified by private respondents
sole witness, Mr. Clarence Long (pp. 25-27, tsn, Feb. 18, 1991)." [18]
Petitioners contend that the above acts or activities belie the supposed independence of petitioner ASPAC from private
respondents. "The unrebutted evidence on record below for the petitioners likewise reveal the continuous character of doing
business in the Philippines by private respondents based on the standards laid down by this Court in Wang Laboratories, Inc.
vs. Hon. Rafael T. Mendoza, et al.[19] and again in TOP-WELD. (supra)" It thus appears that as the respondent Court of
Appeals and the trial courts failure to give credence on the grounds relied upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion amounting to an excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no capacity to bring suit here, the Philippines is not the "most
convenient forum" because the trial court is devoid of any power to enforce its orders issued or decisions rendered in a case
that could not have been commenced to begin with, such that in insisting to assume and exercise jurisdiction over the case
below, the trial court had gravely abused its discretion and even actually exceeded its jurisdiction.
As against petitioners insistence that private respondent is "doing business" in the Philippines, the latter maintains that it is
not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations Implementing the Omnibus
Investments Code of 1987, the following:
"(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts business through middlemen, acting in
their own names, such as indebtors, commercial bookers or commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its representative domiciled in the Philippines has an independent
status in that it transacts business in its name and for its account." [20]
Private respondent argues that a scrutiny of its Representative Agreement with the Petitioners will show that although ASPAC
was named as representative of ITEC., ASPAC actually acted in its own name and for its own account. The following
provisions are particularly mentioned:
"3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC, REPRESENTATIVE will pay for its own account; all
customs duties and import fees imposed on any ITEC products; all import expediting or handling charges and expenses
imposed on ITEC products; and any stamp tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as representative under this Agreement, REPRESENTATIVE shall
receive a sales commission equivalent to a percentum of the FOB value of all ITEC equipment sold to customers within the
territory as a direct result of REPRESENTATIVEs sales efforts." [21]
More importantly, private respondents charge ASPAC of admitting its independence from ITEC by entering and ascribing to
provision No. 6 of the Representative Agreement.
"6.0. Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement, REPRESENTATIVE shall act as an independent contractor and
not as an employee, worker, laborer, partner, joint venturer of ITEC as these terms are defined by the laws, regulations,
decrees or the like of any jurisdiction, including the jurisdiction of the United States, the state of Alabama and the
Territory."[22]
Although it admits that the Representative Agreement contains provisions which both support and belie the independence of
ASPAC, private respondents echoes the respondent courts finding that the lower court did not commit grave abuse of
discretion nor acted in excess of jurisdiction when it found that the ground relied upon by the petitioners in their motion to
dismiss does not appear to be indubitable.[23]
The issues before us now are whether or not private respondent ITEC is an unlicensed corporation doing business in the
Philippines, and if it is, whether or not this fact bars it from invoking the injunctive authority of our courts.
Considering the above, it is necessary to state what is meant by "doing business" in the Philippines. Section 133 of the
Corporation Code, provides that "No foreign corporation, transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine Courts or
administrative tribunals on any valid cause of action recognized under Philippine laws." [24]

Generally, a "foreign corporation" has no legal existence within the state in which it is foreign. This proceeds from the
principle that juridical existence of a corporation is confined within the territory of the state under whose laws it was
incorporated and organized, and it has no legal status beyond such territory. Such foreign corporation may be excluded by
any other state from doing business within its limits, or conditions may be imposed on the exercise of such privileges.
[25]
Before a foreign corporation can transact business in this country, it must first obtain a license to transact business in the
Philippines, and a certificate from the appropriate government agency. If it transacts business in the Philippines without such
a license, it shall not be permitted to maintain or intervene in any action, suit, or proceeding in any court or administrative
agency of the Philippines, but it may be sued on any valid cause of action recognized under Philippine laws. [26]
In a long line of decisions, this Court has not altogether prohibited a foreign corporation not licensed to do business in the
Philippines from suing or maintaining an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing
business in the Philippines without a license from gaining access to Philippine Courts. [27]
The purpose of the law in requiring that foreign corporations doing business in the Philippines be licensed to do so and that
they appoint an agent for service of process is to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object is not to prevent the foreign corporation from performing single acts, but to prevent it
from acquiring a domicile for the purpose of business without taking steps necessary to render it amenable to suit in the local
courts.[28] The implication of the law is that it was never the purpose of the legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines, and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations.[29]
There is no exact rule or governing principle as to what constitutes "doing" or "engaging" or "transacting" business. Indeed,
such case must be judged in the light of its peculiar circumstances, upon its peculiar facts and upon the language of the
statute applicable. The true test, however, seems to be whether the foreign corporation is continuing the body or substance
of the business or enterprise for which it was organized.[30]
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
"soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totaling one hundred eighty (180) days or more; participating in the management, supervision or control of
any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity or
commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object
of the business organization."
Thus, a foreign corporation with a settling agent in the Philippines which issued twelve marine policies covering different
shipments to the Philippines[31]and a foreign corporation which had been collecting premiums on outstanding policies [32] were
regarded as doing business here.
The same rule was observed relating to a foreign corporation with an "exclusive distributing agent" in the Philippines, and
which has been selling its products here since 1929,[33] and a foreign corporation engaged in the business of manufacturing
and selling computers worldwide, and had installed at least 26 different products in several corporations in the Philippines,
and allowed its registered logo and trademark to be used and made it known that there exists a designated distributor in the
Philippines.[34]
In Georg Grotjahn GMBH and Co. vs. Isnani,[35] it was held that the uninterrupted performance by a foreign corporation of
acts pursuant to its primary purposes and functions as a regional area headquarters for its home office, qualifies such
corporation as one doing business in the country.
These foregoing instances should be distinguished from a single or isolated transaction or occasional, incidental, or casual
transactions, which do not come within the meaning of the law,[36] for in such case, the foreign corporation is deemed not
engaged in business in the Philippines.
Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporations intention
to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or "transacting"
business in the Philippines.[37]
In determining whether a corporation does business in the Philippines or not, aside from their activities within the forum,
reference may be made to the contractual agreements entered into by it with other entities in the country. Thus, in the TopWeld case (supra), the foreign corporations LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with
their local contacts were made the basis of their being regarded by this Tribunal as corporations doing business in the
country. Likewise, in Merill Lynch Futures, Inc. vs. Court of Appeals, etc. [38]the FUTURES CONTRACT entered into by the
petitioner foreign corporation weighed heavily in the courts ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private respondent had been "engaged in" or
"doing business" in the Philippines for some time now. This is the inevitable result after a scrutiny of the different contracts
and agreements entered into by ITEC with its various business contacts in the country, particularly ASPAC and Telephone
Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local electronics firm engaged by ITEC to be its local
technical representative, and to create a service center for ITEC products sold locally. Its arrangements, with these entities
indicate convincingly ITECs purpose to bring about the situation among its customers and the general public that they are

dealing directly with ITEC, and that ITEC is actively engaging in business in the country.
In its Master Service Agreement[39] with TESSI, private respondents required its local technical representative to provide the
employees of the technical and service center with ITEC identification cards and business cards, and to correspond only on
ITEC, Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC Technical Assistance Center.", such
telephone being listed in the telephone book under the heading of ITEC Technical Assistance Center, and all calls being
recorded and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure and repair of ITEC products, and
to requisition monthly the materials and components needed to replace stock consumed in the warranty repairs of the prior
month.
A perusal of the agreements between petitioner ASPAC and the respondents shows that there are provisions which are highly
restrictive in nature, such as to reduce petitioner ASPAC to a mere extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative Agreement between ITEC and ASPAC provides: "The
Representative shall not represent or offer for sale within the Territory any product which competes with an existing ITEC
product or any product which ITEC has under active development." Likewise pertinent is the following provision: "When
acting under this Agreement, REPRESENTATIVE is authorized to solicit sales within the Territory on ITECs behalf but is
authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on terms
and conditions expressly authorized by ITEC in writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI, they were carrying out the purposes for which it was
created, i.e., to market electronics and communications products. The terms and conditions of the contracts as well as ITECs
conduct indicate that they established within our country a continuous business, and not merely one of a temporary
character.[40]
Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from raising this
fact to bar ITEC from instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do business
here against a Philippine citizen or entity who had contracted with and benefited by said corporation. [41] To put it in another
way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a
contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic
corporations.[42] One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity. The principle will be applied to prevent a person contracting with a foreign corporation from later
taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the
contract.[43]
The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet - no person ought to
derive any advantage of his own wrong. This is as it should be for as mandated by law, "every person must in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith."[44]
Concededly, corporations act through agents like directors and officers. Corporate dealings must be characterized by utmost
good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are manned by
sophisticated officers with tried management skills and legal experts with practiced eye on legal problems. Each party to a
corporate transaction is expected to act with utmost candor and fairness and, thereby allow a reasonable proportion between
benefits and expected burdens. This is a norm which should be observed where one or the other is a foreign entity venturing
in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time they enter into a contract and at the time it is to
become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to
be more knowledgeable about his own state law than his alien or foreign contemporary. In this case, the record shows that,
at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract was executed and at all
times thereafter. This conclusion is compelled by the fact that the same statute is now being propounded by the petitioner to
bolster its claim. We, therefore sustain the appellate courts view that "it was incumbent upon TOP-WELD to know whether or
not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and
distributorship agreements." The very purpose of the law was circumvented and evaded when the petitioner entered into said
agreements despite the prohibition of R.A. No. 5455. The parties in this case being equally guilty of violating R.A. No. 5455,
they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this
case.
The doctrine of lack of capacity to sue based on the failure to acquire a local license is based on considerations of sound
public policy. The license requirement was imposed to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. It was never intended to favor domestic corporations who enter into solitary transactions with
unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this

country.[45]
In Antam Consolidated Inc. vs. Court of Appeals, et al. [46] we expressed our chagrin over this commonly used scheme of
defaulting local companies which are being sued by unlicensed foreign companies not engaged in business in the Philippines
to invoke the lack of capacity to sue of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to prevent
the injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly acquired in violation of fiduciary
arrangements between the parties.
By entering into the "Representative Agreement" with ITEC, Petitioner is charged with knowledge that ITEC was not licensed
to engage in business activities in the country, and is thus estopped from raising in defense such incapacity of ITEC, having
chosen to ignore or even presumptively take advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted from the license requirement in order to institute an
action in our courts if its representative in the country maintained an independent status during the existence of the disputed
contract. Petitioner is deemed to have acceded to such independent character when it entered into the Representative
Agreement with ITEC, particularly, provision 6.2 (supra).
Petitioners insistence on the dismissal of this action due to the application, or non application, of the private international law
rule of forum non conveniens defies well-settled rules of fair play. According to petitioner, the Philippine Court has no venue
to apply its discretion whether to give cognizance or not to the present action, because it has not acquired jurisdiction over
the person of the plaintiff in the case, the latter allegedly having no personality to sue before Philippine Courts. This
argument is misplaced because the court has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing
the original complaint. And as we have already observed, petitioner are not at liberty to question plaintiffs standing to sue,
having already acceded to the same by virtue of its entry into the Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the case, whether to give due
course to the suit or dismiss it, on the principle of forum non conveniens.[47] Hence, the Philippine Court may refuse to
assume jurisdiction in spite of its having acquired jurisdiction. Conversely, the 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. [48]
The aforesaid requirements having been met, and in view of the courts disposition to give due course to the questioned
action, the matter of the present forum not being the "most convenient" as a ground for the suits dismissal, deserves scant
consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby DISMISSED. The decision of the Court of Appeals
dated June 7, 1991, upholding the RTC Order dated February 22, 1991, denying the petitioners Motion to Dismiss, and
ordering the issuance of the Writ of Preliminary Injunction is hereby affirmed in toto.
SO ORDERED.

RAYTHEON INTERNATIONAL, G.R. No. 162894


INC.,
Petitioner, Present:

SECOND DIVISION

CARPIO, J.,*
SANDOVAL-GUTIERREZ,**
- versus - CARPIO MORALES,

Acting Chairperson,
TINGA, and
VELASCO, JR., JJ.

STOCKTON W. ROUZIE, JR.,


Respondent. Promulgated:
February 26, 2008
x----------------------------------------------------------------------------x

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 Decision[1] and Resolution[2] 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 thePhilippines 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 respondents money claims. [5] Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondents 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 respondents 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 Judgment[12] 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 Order[14] dated 13 September 2000, the RTC denied petitioners 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 Reconsideration [16] of the order, which motion was opposed by respondent. [17] In an Order
dated 31 July 2001,[18] the trial court denied petitioners motion. Thus, it filed a Rule 65 Petition [19] 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 Decision [21] denying the petition for certiorari for lack
of merit. It also denied petitioners 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 petitioners 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 Resolution [25] 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
instances[27] 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 law [30] 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] Petitioners 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 courts 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.

Republic of the Philippines


Supreme Court
Manila
FIRST DIVISION
BERNABE L. NAVIDA, VS DIZON

G.R. No. 125078


Present:
CORONA, C.J.,
Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.

Promulgated:

May 30, 2011


x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
LEONARDO-DE CASTRO, J.:
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. 125078[1] and 125598[2] both assail the Order[3] 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, 1996 [4] 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 128398[8] seek the reversal of the
Order[9] 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, 1997[11] 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 Complaint[14] 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 1970s up to the early 1980s 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 formers 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 Courts 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 DOWs Answer with
Counterclaim.
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration [26] of the RTC Order dated May 20, 1996,
while DOW filed a motion for reconsideration [27] of the RTC Order dated June 4, 1996. Subsequently, DOW and OCCIDENTAL
also filed a Joint Motion for Reconsideration[28] of the RTC Order dated May 20, 1996.
In an Order[29] 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 reconsideration [30] 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 Order[31] 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 Resolution[33] 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 Resolution[35] 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 Resolution [37] 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. 24,25196. These plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.) amended their JointComplaint 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 Order [41] 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 Order[42] 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 Resolution [43] 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 Resolution[44] dated October 8, 1997.
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court assailing the abovementioned 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, 1998[49] 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 Resolution[57] 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)
b)

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.
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.
b.

The acts complained of occurred within Philippine territory.


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 P2.7 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 P2.7 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, attorneys
fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred
thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the
abovementioned items exceeds Two hundred thousand pesos (P200,000.00).[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 (P1,500,00.00);
b)
TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand
Pesos (P400,000.00) each;
c)
TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand
Pesos (P600,000.00);
d)
(P200,000.00); and
e)

TO

PAY

EACH

PLAINTIFF

attorneys

fees

of

Two

Hundred

Thousand

Pesos

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 P2.7 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 ILLEFFECTS 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 plaintiffs
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 P2.7
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 defendants 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 courts jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from
later on impugning the court or bodys 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 latters 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 codefendant 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 Motion[73] 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 judicata[78] 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 debtors 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.
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.

THIRD DIVISION
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD.,
Petitioners,

G.R. No. 149177


Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

- versus -

MINORU KITAMURA,

Promulgated:
Respondent.

November 23, 2007

x------------------------------------------------------------------------------------x
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
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001 Resolution [2] denying the motion for
reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm providing
technical and management support in the infrastructure projects of foreign governments, [3] entered into an Independent
Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently residing in the Philippines.
[4]
The agreement provides that respondent was to extend professional services to Nippon for a year starting on April 1,
1999.[5] Nippon then assigned respondent to work as the project manager of the Southern Tagalog Access Road (STAR)
Project in the Philippines, following the company's consultancy contract with the Philippine Government. [6]
When the STAR Project was near completion, the Department of Public Works and Highways (DPWH) engaged the
consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering and construction supervision of
the Bongabon-Baler Road Improvement (BBRI) Project. [7] Respondent was named as the project manager in the contract's
Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division, informed
respondent that the company had no more intention of automatically renewing his ICA. His services would be engaged by the
company only up to the substantial completion of the STAR Project on March 31, 2000, just in time for theICA'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. Nipponinsisted that respondents contract was for a fixed term that had
already expired, and refused to negotiate for the renewal of the ICA.[10]
As he was not able to generate a positive response from the petitioners, respondent consequently initiated on June 1,
2000 Civil Case No. 00-0264 for specific performance and damages with the Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between Japanese
nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper pre-termination
of respondent's ICA could only be heard and ventilated in the proper courts of Japan following the principles of lex loci
celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by a certain Y.
Kotake as project manager of the BBRI Project.[13]
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that matters connected with the
performance of contracts are regulated by the law prevailing at the place of performance, [15] denied the motion to dismiss.
[16]
The trial court subsequently denied petitioners' motion for reconsideration, [17] prompting them to file with the appellate
court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].[18] On August
23, 2000, the CA resolved to dismiss the petition on procedural groundsfor lack of statement of material dates and for
insufficient verification and certification against forum shopping. [19] An Entry of Judgment was later issued by the appellate
court on September 20, 2000.[20]
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein the material dates and attaching thereto the proper
verification and certification. This second petition, which substantially raised the same issues as those in the first, was
docketed as CA-G.R. SP No. 60827.[21]
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001 Decision[22] finding no
grave abuse of discretion in the trial court's denial of the motion to dismiss. The CA ruled, among others, that the principle
of lex loci celebrationis was not applicable to the case, because nowhere in the pleadings was the validity of the written
agreement put in issue. The CA thus declared that the trial court was correct in applying instead the principle of lex loci
solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for Review
on Certiorari[25] imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN
PRIVATE INTERNATIONAL LAWS.[26]
The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of Philippine courts in
civil cases for specific performance and damages involving contracts executed outside the country by foreign nationals may
be assailed on the principles of lex loci celebrationis, lex contractus, the state of the most significant relationship rule,
or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already barred the filing of
the second petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues as those in the first one) and
the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective certification of nonforum shopping, it was a dismissal without prejudice. [27] The same holds true in the CA's dismissal of the said case due to
defects in the formal requirement of verification [28] and in the other requirement in Rule 46 of the Rules of Court on the
statement of the material dates.[29] The dismissal being without prejudice, petitioners can re-file the petition, or file a second
petition attaching thereto the appropriate verification and certificationas they, in fact didand stating therein the material
dates, within the prescribed period[30] in Section 4, Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the parties free to
litigate the matter in a subsequent action as though the dismissed action had not been commenced. In other words, the
termination of a case not on the merits does not bar another action involving the same parties, on the same subject matter
and theory.[32]

Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if petitioners still
indicated in the verification and certification of the secondcertiorari petition that the first had already been dismissed on
procedural grounds,[33] petitioners are no longer required by the Rules to indicate in their certification of non-forum
shopping in the instant petition for review of the second certiorari petition, the status of the aforesaid first petition before the
CA. In any case, an omission in the certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal and
nullification of the entire proceedings, considering that the evils sought to be prevented by the said certificate are no longer
present.[34]
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not the instant petition. True, the Authorization [35] dated
September 4, 2000, which is attached to the second certiorari petition and which is also attached to the instant petition for
review, is limited in scopeits wordings indicate that Hasegawa is given the authority to sign for and act on behalf of the
company only in the petition filed with the appellate court, and that authority cannot extend to the instant petition for review.
[36]
In a plethora of cases, however, this Court has liberally applied the Rules or even suspended its application whenever a
satisfactory explanation and a subsequent fulfillment of the requirements have been made. [37] Given that petitioners herein
sufficiently explained their misgivings on this point and appended to their Reply [38] an updated Authorization[39] for Hasegawa
to act on behalf of the company in the instant petition, the Court finds the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification and certification. As respondent
pointed out, and to which we agree, Hasegawa is truly not authorized to act on behalf of Nippon in this case. The aforesaid
September 4, 2000 Authorization and even the subsequent August 17, 2001 Authorization were issued only by Nippon's
president and chief executive officer, not by the company's board of directors. In not a few cases, we have ruled that
corporate powers are exercised by the board of directors; thus, no person, not even its officers, can bind the corporation, in
the absence of authority from the board. [40] Considering that Hasegawa verified and certified the petition only on his behalf
and not on behalf of the other petitioner, the petition has to be denied pursuant to Loquias v. Office of the Ombudsman.
[41]
Substantial compliance will not suffice in a matter that demands strict observance of the Rules. [42] While technical rules of
procedure are designed not to frustrate the ends of justice, nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court dockets. [43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial court's denial of their
motion to dismiss. It is a well-established rule that an order denying a motion to dismiss is interlocutory,
and cannot be the subject of the extraordinary petition for certiorari 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 parties [46] following the [state of the] most significant relationship rule in
Private International Law.[47]
The Court notes that petitioners adopted an additional but different theory when they elevated the case to the appellate
court. In the Motion to Dismiss[48] filed with the trial court, petitioners never contended that the RTC is an inconvenient
forum. They merely argued that the applicable law which will determine the validity or invalidity of respondent's claim is that
of Japan, following the principles of lex loci celebrationis and lex contractus.[49] While not abandoning this stance in their
petition before the appellate court, petitioners oncertiorari significantly invoked the defense of forum non conveniens.[50] On
petition for review before this Court, petitioners dropped their other arguments, maintained the forum non
conveniens defense, and introduced their new argument that the applicable principle is the [state of the] most significant
relationship rule.[51]
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.[52] We only pointed out petitioners' inconstancy in their arguments to emphasize
their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction, choice of law,
and recognition and enforcement of judgments. Corresponding to these phases are the following questions: (1) Where can or
should litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be enforced? [53]
Analytically, jurisdiction and choice of law are two distinct concepts. [54] Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further question whether the application of a substantive law which
will determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a
state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the
minimum contacts for one do not always provide the necessary significant contacts for the other. [55] The question of whether
the law of a state can be applied to a transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has various aspects. For a court to validly
exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the petitioner, over the defendant
or the respondent, over the subject matter, over the issues of the case and, in cases involving property, over the res or the
thing which is the subject of the litigation.[57] In assailing the trial court's jurisdiction herein, petitioners are actually referring
to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which establishes and
organizes the court. It is given only by law and in the manner prescribed by law. [58] It is further determined by the allegations
of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. [59] To succeed in
its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, [60] the movant must show
that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the
claims.[61]
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested by law with
jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific performance and damages is one
not capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City. [62] What they rather raise as grounds
to question subject matter 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 contractusmeans the law of the place where a contract is executed or to be
performed.[65] It controls the nature, construction, and validity of the contract [66] and it may pertain to the law voluntarily
agreed upon by the parties or the law intended by them either expressly or implicitly. [67] Under the state of the most

significant relationship rule, to ascertain what state law to apply to a dispute, the court should determine which state has the
most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider
where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of
incorporation of the parties.[68] This rule takes into account several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved. [69]
Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the
second phase, the choice of law.[70] They determine which state's law is to be applied in resolving the substantive issues of a
conflicts problem.[71] Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only
inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any
conflict between the laws of 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 courts power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign sovereigns. [75]

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