Conflicts Cases 2

CONFLICTS CASES2 Page 1
1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September

22, 2015
2. Norma Del Socorro vs. Ernst Johan Brinkman van Wilsen, G.R. No.
193707, December 10, 2014
3. LWV Construction Corporation vs. Marcelo Dupo, G.R. No. 172342,
July 13, 2009
4. Crescent Petroleum, Ltd. vs. M/V Lok Maheshwari, G.R. No. 155014,
November 11, 2005
5. Priscilla Mijares vs. Hon. Santiago Ranada, G.R. No. 139325, April 12,
2005
6. Philippine Export and Foreign Loan Guarantee Corporation vs. V.P.
Eusebio Construction, G.R. No. 140047, July 13, 2004
7. Bank of America vs. CA, G.R. No. 120135, March 31, 2003
8. Paula Llorente vs. CA, G.R. No. 124371, November 23, 2000
9. Bank of America vs. American Realty Corporation, G.R. No. 133876,
December 29, 1999
10. Asiavest Limited vs. CA, G.R. No. 128803, September 25, 1998
For those who would like to improve their grade, submit legibly
handwritten digests of the above cases in yellow paper on November
22. The case digests are optional but everybody has to read the cases.
1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September

22, 2015
2. Norma Del Socorro vs. Ernst Johan Brinkman van Wilsen, G.R. No.
193707, December 10, 2014
G.R. No. 193707, December 10, 2014
NORMA A. DEL SOCORRO, FOR AND IN BEHALF OF HER MINOR
CHILD RODERIGO NORJO VAN WILSEM, Petitioner, v. ERNST JOHAN
BRINKMAN VAN WILSEM, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court seeking to reverse and set aside the Orders 1 dated
February 19, 2010 and September 1, 2010, respectively, of the Regional
Trial Court of Cebu City (RTC-Cebu), which dismissed the criminal case
entitled People of the Philippines v. Ernst Johan Brinkman Van Wilsem,
docketed as Criminal Case No. CBU-85503, for violation of Republic Act
(R.A.) No. 9262, otherwise known as the Anti-Violence Against Women
and
Their
Children
Act
of
2004.
The
following
facts
are
culled
from
the
records:
Petitioner Norma A. Del Socorro and respondent Ernst Johan

Brinkman Van Wilsem contracted marriage in Holland on September
25, 1990.2 On January 19, 1994, they were blessed with a son named
Roderigo Norjo Van Wilsem, who at the time of the filing of the
instant
petition
was
sixteen
(16)
years
of
age. 3
Unfortunately, their marriage bond ended on July 19, 1995 by virtue of
a Divorce Decree issued by the appropriate Court of Holland. 4 At that
time, their son was only eighteen (18) months old. 5 Thereafter,
petitioner and her son came home to the Philippines. 6
According to petitioner, respondent made a promise to provide
monthly support to their son in the amount of Two Hundred Fifty
(250) Guildene (which is equivalent to Php17,500.00 more or less). 7
However, since the arrival of petitioner and her son in the Philippines,
respondent never gave support to the son, Roderigo. 8
Not long thereafter, respondent came to the Philippines and
remarried in Pinamungahan, Cebu, and since then, have been residing

thereat.9 Respondent and his new wife established a business known
as Paree Catering, located at Barangay Tajao, Municipality of
Pinamungahan, Cebu City.10 To date, all the parties, including their
son,
Roderigo,
are
presently
living
in
Cebu
City.11
On August 28, 2009, petitioner, through her counsel, sent a letter

demanding for support from respondent. However, respondent
refused
to
receive
the
letter.12
Because of the foregoing circumstances, petitioner filed a complaintaffidavit with the Provincial Prosecutor of Cebu City against
respondent for violation of Section 5, paragraph E(2) of R.A. No. 9262
for the latters unjust refusal to support his minor child with
petitioner.13 Respondent submitted his counter-affidavit thereto, to
which petitioner also submitted her reply-affidavit. 14 Thereafter, the
Provincial Prosecutor of Cebu City issued a Resolution recommending
the filing of an information for the crime charged against herein
respondent.
The information, which was filed with the RTC-Cebu and raffled to
Branch 20 thereof, states that:
That sometime in the year 1995 and up to the present,
more or less, in the Municipality of Minglanilla, Province
of Cebu, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, did then and
there wilfully, unlawfully and deliberately deprive, refuse
and still continue to deprive his son RODERIGO NORJO
VAN WILSEM, a fourteen (14) year old minor, of financial
support legally due him, resulting in economic abuse to
the
victim.
CONTRARY TO LAW.15
Upon motion and after notice and hearing, the RTC-Cebu issued a
Hold Departure Order against respondent. 16 Consequently,
respondent
was
arrested
and,
subsequently,
posted
bail. 17
Petitioner also filed a Motion/Application of Permanent Protection

Order to which respondent filed his Opposition. 18 Pending the
resolution
thereof,
respondent
was
arraigned. 19
Subsequently, without the RTC-Cebu having resolved the application

of the protection order, respondent filed a Motion to Dismiss on the
ground of: (1) lack of jurisdiction over the offense charged; and (2)
prescription
of
the
crime
charged. 20
On February 19, 2010, the RTC-Cebu issued the herein assailed
Order,21 dismissing the instant criminal case against respondent on
the ground that the facts charged in the information do not constitute
an offense with respect to the respondent who is an alien, the
dispositive part of which states:
WHEREFORE, the Court finds that the facts charged in the
information do not constitute an offense with respect to
the accused, he being an alien, and accordingly, orders
this
case
DISMISSED.
The bail bond posted by accused Ernst Johan Brinkman
Van Wilsem for his provisional liberty is hereby cancelled
(sic)
and
ordered
released.
SO ORDERED.
Cebu
City,
Philippines,
February
19,
2010. 22
Thereafter, petitioner filed her Motion for Reconsideration thereto

reiterating respondents obligation to support their child under
Article 19523 of the Family Code, thus, failure to do so makes him
liable under R.A. No. 9262 which equally applies to all persons in the
Philippines who are obliged to support their minor children
regardless
of
the
obligors
nationality.24
On September 1, 2010, the lower court issued an Order 25 denying
petitioners Motion for Reconsideration and reiterating its previous
ruling. Thus:
x x x The arguments therein presented are basically a
rehash of those advanced earlier in the memorandum of
the prosecution. Thus, the court hereby reiterates its
ruling that since the accused is a foreign national he is
not subject to our national law (The Family Code) in
regard to a parents duty and obligation to give support
to his child. Consequently, he cannot be charged of
violating R.A. 9262 for his alleged failure to support his
child. Unless it is conclusively established that R.A. 9262
applies to a foreigner who fails to give support to his
child, notwithstanding that he is not bound by our
domestic law which mandates a parent to give such
support, it is the considered opinion of the court that no

prima facie case exists against the accused herein, hence,
the
case
should
be
dismissed.
WHEREFORE, the motion for reconsideration is hereby
DENIED
for
lack
of
merit.
SO ORDERED.
Cebu
City,
Philippines,
September
1,
2010. 26
Hence, the present Petition for Review on Certiorari raising the

following issues:
1. Whether or not a foreign national has an
obligation to support his minor child under
Philippine law; and
2. Whether or not a foreign national can be held
criminally liable under R.A. No. 9262 for his
unjustified failure to support his minor child.27
At the outset, let it be emphasized that We are taking cognizance of

the instant petition despite the fact that the same was directly lodged
with the Supreme Court, consistent with the ruling in Republic v.
Sunvar Realty Development Corporation,28 which lays down the instances
when a ruling of the trial court may be brought on appeal directly to
the Supreme Court without violating the doctrine of hierarchy of
courts, to wit:
x x x Nevertheless, the Rules do not prohibit any of the
parties from filing a Rule 45 Petition with this Court, in
case only questions of law are raised or involved.
This latter situation was one that petitioners found
themselves in when they filed the instant Petition to raise
only
questions
of
law.
In Republic v. Malabanan, the Court clarified the three
modes of appeal from decisions of the RTC, to wit: (1) by
ordinary appeal or appeal by writ of error under Rule 41,
whereby judgment was rendered in a civil or criminal
action by the RTC in the exercise of its original
jurisdiction; (2) by a petition for review under Rule 42,
whereby judgment was rendered by the RTC in the
exercise of its appellate jurisdiction; and (3) by a petition
for review on certiorari before the Supreme Court under
Rule 45. The first mode of appeal is taken to the [Court
of Appeals] on questions of fact or mixed questions of fact
and law. The second mode of appeal is brought to the CA
on questions of fact, of law, or mixed questions of fact and

law. The third mode of appeal is elevated to the
Supreme Court only on questions of law. (Emphasis
supplied)
There is a question of law when the issue does not call for
an examination of the probative value of the evidence
presented or of the truth or falsehood of the facts being
admitted, and the doubt concerns the correct application
of law and jurisprudence on the matter. The resolution of
the issue must rest solely on what the law provides on the
given set of circumstances.29
Indeed, the issues submitted to us for resolution involve questions of

law the response thereto concerns the correct application of law and
jurisprudence on a given set of facts, i.e., whether or not a foreign
national has an obligation to support his minor child under Philippine
law; and whether or not he can be held criminally liable under R.A.
No.
9262
for
his
unjustified
failure
to
do
so.
It cannot be negated, moreover, that the instant petition highlights a
novel question of law concerning the liability of a foreign national
who allegedly commits acts and omissions punishable under special
criminal laws, specifically in relation to family rights and duties. The
inimitability of the factual milieu of the present case, therefore,
deserves a definitive ruling by this Court, which will eventually serve
as a guidepost for future cases. Furthermore, dismissing the instant
petition and remanding the same to the CA would only waste the time,
effort and resources of the courts. Thus, in the present case,
considerations of efficiency and economy in the administration of
justice should prevail over the observance of the hierarchy of courts.
Now, on the matter of the substantive issues, We find the petition
meritorious. Nonetheless, we do not fully agree with petitioners
contentions.
To determine whether or not a person is criminally liable under R.A.
No. 9262, it is imperative that the legal obligation to support exists.
Petitioner invokes Article 19530 of the Family Code, which provides
the parents obligation to support his child. Petitioner contends that
notwithstanding the existence of a divorce decree issued in relation to
Article 26 of the Family Code, 31 respondent is not excused from
complying with his obligation to support his minor child with
petitioner.
On the other hand, respondent contends that there is no sufficient

and clear basis presented by petitioner that she, as well as her minor
son, are entitled to financial support. 32 Respondent also added that
by reason of the Divorce Decree, he is not obligated to petitioner for
any
financial
support.33
On this point, we agree with respondent that petitioner cannot rely on
Article 19534 of the New Civil Code in demanding support from
respondent, who is a foreign citizen, since Article 1535 of the New
Civil Code stresses the principle of nationality. In other words, insofar
as Philippine laws are concerned, specifically the provisions of the
Family Code on support, the same only applies to Filipino citizens. By
analogy, the same principle applies to foreigners such that they are
governed by their national law with respect to family rights and
duties.36
The obligation to give support to a child is a matter that falls under
family rights and duties. Since the respondent is a citizen of Holland
or the Netherlands, we agree with the RTC-Cebu that he is subject to
the laws of his country, not to Philippine law, as to whether he is
obliged to give support to his child, as well as the consequences of his
failure
to
do
so.37
In the case of Vivo v. Cloribel,38 the Court held that
Furthermore, being still aliens, they are not in
position to invoke the provisions of the Civil Code of
the Philippines, for that Code cleaves to the
principle that family rights and duties are governed
by their personal law, i.e., the laws of the nation to
which they belong even when staying in a foreign
country (cf. Civil Code, Article 15).39
It cannot be gainsaid, therefore, that the respondent is not obliged to

support petitioners son under Article 195 of the Family Code as a
consequence of the Divorce Covenant obtained in Holland. This does
not, however, mean that respondent is not obliged to support
petitioners
son
altogether.
In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the foreign
law.40 In the present case, respondent hastily concludes that being a
national of the Netherlands, he is governed by such laws on the

matter of provision of and capacity to support.41 While respondent
pleaded the laws of the Netherlands in advancing his position that he
is not obliged to support his son, he never proved the same.
It is incumbent upon respondent to plead and prove that the national
law of the Netherlands does not impose upon the parents the
obligation to support their child (either before, during or after the
issuance of a divorce decree), because Llorente v. Court of Appeals,42 has
already enunciated that:
True, foreign laws do not prove themselves in our
jurisdiction and our courts are not authorized to take
judicial notice of them. Like any other fact, they must
be alleged and proved. 43
In view of respondents failure to prove the national law of the

Netherlands in his favor, the doctrine of processual presumption shall
govern. Under this doctrine, if the foreign law involved is not properly
pleaded and proved, our courts will presume that the foreign law is
the same as our local or domestic or internal law.44 Thus, since the
law of the Netherlands as regards the obligation to support has not
been properly pleaded and proved in the instant case, it is presumed
to be the same with Philippine law, which enforces the obligation of
parents to support their children and penalizing the non-compliance
therewith.
Moreover, while in Pilapil v. Ibay-Somera',45 the Court held that a
divorce obtained in a foreign land as well as its legal effects may be
recognized in the Philippines in view of the nationality principle on
the matter of status of persons, the Divorce Covenant presented by
respondent does not completely show that he is not liable to give
support to his son after the divorce decree was issued. Emphasis is
placed on petitioners allegation that under the second page of the
aforesaid covenant, respondents obligation to support his child is
specifically stated,46 which was not disputed by respondent.
We likewise agree with petitioner that notwithstanding that the
national law of respondent states that parents have no obligation to
support their children or that such obligation is not punishable by
law, said law would still not find applicability, in light of the ruling in
Bank of America, NT and SA v. American Realty Corporation,47 to wit:
In the instant case, assuming arguendo that the English
Law on the matter were properly pleaded and proved in

accordance with Section 24, Rule 132 of the Rules of Court
and the jurisprudence laid down in Yao Kee, et al. vs. SyGonzales, said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to
a sound and established public policy of the forum, the said
foreign law, judgment or order shall not be applied.
Additionally, prohibitive laws concerning persons, their
acts or property, and those which have for their object
public order, public policy and good customs shall not be
rendered ineffective by laws or judgments promulgated,
or by determinations or conventions agreed upon in a
foreign
country.
The public policy sought to be protected in the instant
case is the principle imbedded in our jurisdiction
proscribing the splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is
pertinent
If two or more suits are instituted on the
basis of the same cause of action, the filing of
one or a judgment upon the merits in any
one is available as a ground for the dismissal
of the others.
Moreover, foreign law should not be applied when its
application would work undeniable injustice to the citizens or
residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract
that is obviously unjust negates the fundamental
principles of Conflict of Laws.48
Applying the foregoing, even if the laws of the Netherlands neither

enforce a parents obligation to support his child nor penalize the
non-compliance therewith, such obligation is still duly enforceable in
the Philippines because it would be of great injustice to the child to be
denied of financial support when the latter is entitled thereto.
We emphasize, however, that as to petitioner herself, respondent is no
longer liable to support his former wife, in consonance with the ruling
in San Luis v. San Luis,49 to wit:
As to the effect of the divorce on the Filipino wife, the
Court ruled that she should no longer be considered
married to the alien spouse. Further, she should not be
required to perform her marital duties and obligations. It
held:
To maintain, as private respondent does, that, under
our laws, petitioner has to be considered still
married to private respondent and still subject to a
wife's obligations under Article 109, et. seq. of the
Civil Code cannot be just . Petitioner should not be
obliged to live together with, observe respect and fidelity,
and render support to private respondent. The latter
should not continue to be one of her heirs with possible
rights to conjugal property. She should not be
discriminated against in her own country if the ends
of justice are to be served. (Emphasis added)50
Based on the foregoing legal precepts, we find that respondent may be

made liable under Section 5(e) and (i) of R.A. No. 9262 for unjustly
refusing or failing to give support to petitioners son, to wit:
SECTION 5. Acts of Violence Against Women and Their
Children.- The crime of violence against women and their
children is committed through any of the following
acts:chanroblesvirtuallawlibrary
x
(e) Attempting to compel or compelling the

woman or her child to engage in conduct
which the woman or her child has the right
to desist from or desist from conduct which
the woman or her child has the right to
engage in, or attempting to restrict or
restricting the woman's or her child's
freedom of movement or conduct by force or
threat of force, physical or other harm or
threat of physical or other harm, or
intimidation directed against the woman or
child. This shall include, but not limited to,
the following acts committed with the
purpose or effect of controlling or restricting
the woman's or her child's movement or
conduct:
xxxx
(2) Depriving or threatening to deprive the woman or her
children of financial support legally due her or her family , or
deliberately providing the woman's children insufficient
financial
support;
x
(i) Causing mental or emotional anguish, public ridicule
or humiliation to the woman or her child, including, but

not limited to, repeated verbal and emotional abuse, and
denial of financial support or custody of minor children of
access to the woman's child/children.51
Under the aforesaid special law, the deprivation or denial of financial

support to the child is considered an act of violence against women
and
children.
In addition, considering that respondent is currently living in the
Philippines, we find strength in petitioners claim that the
Territoriality Principle in criminal law, in relation to Article 14 of the
New Civil Code, applies to the instant case, which provides
that:[p]enal laws and those of public security and safety shall be
obligatory upon all who live and sojourn in Philippine territory,
subject to the principle of public international law and to treaty
stipulations. On this score, it is indisputable that the alleged
continuing acts of respondent in refusing to support his child with
petitioner is committed here in the Philippines as all of the parties
herein are residents of the Province of Cebu City. As such, our courts
have territorial jurisdiction over the offense charged against
respondent. It is likewise irrefutable that jurisdiction over the
respondent
was
acquired
upon
his
arrest.
Finally, we do not agree with respondents argument that granting,
but not admitting, that there is a legal basis for charging violation of
R.A. No. 9262 in the instant case, the criminal liability has been
extinguished on the ground of prescription of crime 52 under Section
24 of R.A. No. 9262, which provides that:
SECTION 24. Prescriptive Period. Acts falling under
Sections 5(a) to 5(f) shall prescribe in twenty (20) years.
Acts falling under Sections 5(g) to 5(I) shall prescribe in
ten (10) years.
The act of denying support to a child under Section 5(e)(2) and (i) of
R.A. No. 9262 is a continuing offense, 53 which started in 1995 but is
still ongoing at present. Accordingly, the crime charged in the instant
case
has
clearly
not
prescribed.
Given, however, that the issue on whether respondent has provided
support to petitioners child calls for an examination of the probative
value of the evidence presented, and the truth and falsehood of facts
being admitted, we hereby remand the determination of this issue to
the
RTC-Cebu
which
has
jurisdiction
over
the
case.
WHEREFORE, the petition is GRANTED. The Orders dated February

19, 2010 and September 1, 2010, respectively, of the Regional Trial
Court of the City of Cebu are hereby REVERSED and SET ASIDE. The
case is REMANDED to the same court to conduct further proceedings
based
on
the
merits
of
the
case.
SO
ORDERED.
Velasco, Jr., (Chairperson), Villarama, Jr., Mendoza,*and Reyes, JJ., concur.
3. LWV Construction Corporation vs. Marcelo Dupo, G.R. No. 172342,

July 13, 2009
SECOND DIVISION
LWV CONSTRUCTION CORPORATION,
G.R. No. 172342

Present:
Petitioner,
QUISUMBING, J., Chairperson,
- versus CARPIO MORALES,
MARCELO B. DUPO,
CHICO-NAZARIO,*
Respondent.
LEONARDO-DE CASTRO,** and
BRION, JJ.
Promulgated:
July 13, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
Petitioner LWV Construction Corporation appeals the Decision[1]

dated of the Court of Appeals in CA-G.R. SP No. 76843 and its
Resolution[2] dated , denying the motion for reconsideration. The
Court of Appeals had ruled that under Article 87 of the Saudi Labor
and Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is

entitled to a service award or longevity pay amounting to US$12,640.33.
The antecedent facts are as follows:
Petitioner, a domestic corporation which recruits Filipino workers,

hired respondent as Civil Structural Superintendent to work in for its
principal, Mohammad Al-Mojil Group/Establishment (MMG). On ,
respondent signed his first overseas employment contract, renewable
after one year. It was renewed five times on the following dates: , , , ,
and . All were fixed-period contracts for one year. The sixth and last
contract stated that respondents employment starts upon reporting
to work and ends when he leaves the work site. Respondent left on
and arrived in the on .
On , respondent informed MMG, through the petitioner, that he needs

to extend his vacation because his son was hospitalized. He also
sought a promotion with salary adjustment.[3] In reply, MMG
informed respondent that his promotion is subject to managements
review; that his services are still needed; that he was issued a plane
ticket for his return flight to on ; and that his decision regarding his
employment must be made within seven days, otherwise, MMG will be
compelled to cancel [his] slot.[4]
On , respondent resigned. In his letter to MMG, he also stated:

xxxx
I am aware that I still have to do a final settlement with the company
and hope that during my more than seven (7) [years] services, as the
Saudi Law stated, I am entitled for a long service award.[5] (Emphasis
supplied.)
xxxx
According to respondent, when he followed up his claim for long

service award on , petitioner informed him that MMG did not respond.
[6]
On , respondent filed a complaint[7] for payment of service award

against petitioner before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch, Cordillera Administrative
Region, Baguio . In support of his claim, respondent averred in his
position paper that:
xxxx
Under the Law of Saudi Arabia, an employee who rendered at least
five (5) years in a company within the jurisdiction of , is entitled to the
so-called long service award which is known to others as longevity pay of at
least one half month pay for every year of service. In excess of five
years an employee is entitled to one month pay for every year of
service. In both cases inclusive of all benefits and allowances.
This benefit was offered to complainant before he went on vacation,
hence, this was engrained in his mind. He reconstructed the
computation of his long service award or longevity pay and he arrived
at the following computation exactly the same with the amount he
was previously offered [which is US$12,640.33].[8] (Emphasis
supplied.)
xxxx
Respondent said that he did not grab the offer for he intended to
return after his vacation.
For its part, petitioner offered payment and prescription as defenses.

Petitioner maintained that MMG pays its workers their Service Award
or Severance Pay every conclusion of their Labor Contracts pursuant to
Article 87 of the [Saudi Labor Law]. Under Article 87, payment of the
award is at the end or termination of the Labor Contract concluded for
a specific period. Based on the payroll,[9] respondent was already paid
his service award or severance pay for his latest (sixth) employment
contract.
Petitioner added that under Article 13[10] of the Saudi Labor Law, the
action to enforce payment of the service award must be filed within
one year from the termination of a labor contract for a specific period.
Respondents six contracts ended when he left on the following dates: ,
, , , and . Petitioner concluded that the one-year prescriptive period
had lapsed because respondent filed his complaint on or one year and
seven months after his sixth contract ended.[11]
In his June 18, 2001 Decision,[12] the Labor Arbiter ordered petitioner
to pay respondent longevity pay of US$12,640.33 or P648,562.69 and
attorneys fees of P64,856.27 or a total of P713,418.96.[13]
The Labor Arbiter ruled that respondents seven-year employment

with MMG had sufficiently oriented him on the benefits given to
workers; that petitioner was unable to convincingly refute
respondents claim that MMG offered him longevity pay before he
went on vacation on May 1, 1999; and that respondents claim was not
barred by prescription since his claim on July 6, 1999, made a month
after his cause of action accrued, interrupted the prescriptive period
under the Saudi Labor Law until his claim was categorically denied.
Petitioner appealed. However, the NLRC dismissed the appeal and

affirmed the Labor Arbiters decision.[14] The NLRC ruled that
respondent is entitled to longevity pay which is different from severance
pay.
Aggrieved, petitioner brought the case to the Court of Appeals

through a petition for certiorari under Rule 65 of the Rules of Court.
The Court of Appeals denied the petition and affirmed the NLRC. The
Court of Appeals ruled that service award is the same as longevity pay,
and that the severance pay received by respondent cannot be equated
with service award. The dispositive portion of the Court of Appeals
decision reads:
WHEREFORE, finding no grave abuse of discretion amounting to lack
or in (sic) excess of jurisdiction on the part of public respondent
NLRC, the petition is denied. The NLRC decision dated as well as and
(sic) its Resolution are hereby AFFIRMED in toto.
SO ORDERED.[15]
After its motion for reconsideration was denied, petitioner filed the
instant petition raising the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
FINDING NO GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION ON THE PART OF PUBLIC RESPONDENT
NATIONAL LABOR RELATIONS COMMISSION.
II.
FINDING THAT THE SERVICE AWARD OF THE RESPONDENT [HAS] NOT
PRESCRIBED WHEN HIS COMPLAINT WAS FILED ON .
III.
APPLYING IN THE CASE AT BAR [ARTICLE 1155 OF THE CIVIL CODE].
IV.
APPLYING ARTICLE NO. 7 OF THE SAUDI LABOR AND WORKMEN LAW
TO SUPPORT ITS FINDING THAT THE BASIS OF THE SERVICE AWARD IS
LONGEVITY [PAY] OR LENGTH OF SERVICE RENDERED BY AN
EMPLOYEE.[16]
Essentially, the issue is whether the Court of Appeals erred in ruling

that respondent is entitled to a service award or longevity pay of
US$12,640.33 under the provisions of the Saudi Labor Law. Related to
this issue are petitioners defenses of payment and prescription.
Petitioner points out that the Labor Arbiter awarded longevity pay
although the Saudi Labor Law grants no such benefit, and the NLRC
confused longevity pay and service award. Petitioner maintains that the
benefit granted by Article 87 of the Saudi Labor Law is service award
which was already paid by MMG each time respondents contract

ended.
Petitioner insists that prescription barred respondents claim for

service award as the complaint was filed one year and seven months
after the sixth contract ended. Petitioner alleges that the Court of
Appeals erred in ruling that respondents claim interrupted the
running of the prescriptive period. Such ruling is contrary to Article
13 of the Saudi Labor Law which provides that no case or claim
relating to any of the rights provided for under said law shall be heard
after the lapse of 12 months from the date of the termination of the
contract.
Respondent counters that he is entitled to longevity pay under the

provisions of the Saudi Labor Law and quotes extensively the decision
of the Court of Appeals. He points out that petitioner has not refuted
the Labor Arbiters finding that MMG offered him longevity pay of
US$12,640.33 before his one-month vacation in the in 1999. Thus, he
submits that such offer indeed exists as he sees no reason for MMG to
offer the benefit if no law grants it.
After a careful study of the case, we are constrained to reverse the

Court of Appeals. We find that respondents service award under Article
87 of the Saudi Labor Law has already been paid. Our computation will
show that the severance pay received by respondent was his service
award.
Article 87 clearly grants a service award. It reads:

Article 87
Where the term of a labor contract concluded for a specified
period comes to an end or where the employer cancels a contract of
unspecified period, the employer shall pay to the workman an
award for the period of his service to be computed on the basis of
half a months pay for each of the first five years and one months pay
for each of the subsequent years. The last rate of pay shall be taken as
basis for the computation of the award. For fractions of a year, the
workman shall be entitled to an award which is proportionate to his
service period during that year. Furthermore, the workman shall be
entitled to the service award provided for at the beginning of this
article in the following cases:
A.
If he is called to military service.
B.
If a workman resigns because of marriage or childbirth.
C.
If the workman is leaving the work as a result of a force
majeure beyond his control.[17] (Emphasis supplied.)
Respondent, however, has called the benefit other names such as long
service award and longevity pay. On the other hand, petitioner claimed
that the service award is the same as severance pay. Notably, the Labor
Arbiter was unable to specify any law to support his award of longevity
pay.[18] He anchored the award on his finding that respondents
allegations were more credible because his seven-year employment at
MMG had sufficiently oriented him on the benefits given to workers.
To the NLRC, respondent is entitled to service award or longevity pay
under Article 87 and that longevity pay is different from severance pay.
The Court of Appeals agreed.
Considering that Article 87 expressly grants a service award, why is it

correct to agree with respondent that service award is the same as
longevity pay, and wrong to agree with petitioner that service award
is the same as severance pay? And why would it be correct to say that
service award is severance pay, and wrong to call service award as
longevity pay?
We found the answer in the pleadings and evidence presented.

Respondents position paper mentioned how his long service award or
longevity pay is computed: half-months pay per year of service and
one-months pay per year after five years of service. Article 87 has the
same formula to compute the service award.
The payroll submitted by petitioner showed that respondent received
severance pay of SR2,786 for his sixth employment contract covering

the period to .[19] The computation below shows that respondents
severance pay of SR2,786 was his service award under Article 87.
Service Award = (SR5,438)[20] + (9 days/365 days)[21] x
(SR5,438)
Service Award = SR2,786.04
Respondents service award for the sixth contract is equivalent only to

half-months pay plus the proportionate amount for the additional
nine days of service he rendered after one year. Respondents
employment contracts expressly stated that his employment ended
upon his departure from work. Each year he departed from work and
successively new contracts were executed before he reported for work
anew. His service was not cumulative. Pertinently, in Brent School, Inc.
v. Zamora,[22] we said that a fixed term is an essential and natural
appurtenance of overseas employment contracts,[23] as in this case.
We also said in that case that under American law, [w]here a contract
specifies the period of its duration, it terminates on the expiration of
such period. A contract of employment for a definite period
terminates by its own terms at the end of such period.[24] As it is,
Article 72 of the Saudi Labor Law is also of similar import. It reads:
A labor contract concluded for a specified period shall terminate upon
the expiry of its term. If both parties continue to enforce the contract,
thereafter, it shall be considered renewed for an unspecified period.
[25]
Regarding respondents claim that he was offered US$12,640.33 as

longevity pay before he returned to the on , we find that he was not
candid on this particular point. His categorical assertion about the
offer being engrained in his mind such that he reconstructed the
computation and arrived at the computation exactly the same with
the amount he was previously offered is not only beyond belief. Such
assertion is also a stark departure from his letter to MMG where he
could only express his hope that he was entitled to a long service
award and where he never mentioned the supposed previous offer.

Moreover, respondents claim that his monthly compensation is
SR10,248.92[26] is belied by the payroll which shows that he receives
SR5,438 per month.
We therefore emphasize that such payroll should have prompted the

lower tribunals to examine closely respondents computation of his
supposed longevity pay before adopting that computation as their
own.
On the matter of prescription, however, we cannot agree with

petitioner that respondents action has prescribed under Article 13 of
the Saudi Labor Law. What applies is Article 291 of our Labor Code
which reads:
ART. 291. Money claims. All money claims arising from employeremployee relations accruing during the effectivity of this Code shall
be filed within three (3) years from the time the cause of action
accrued; otherwise they shall be forever barred.
xxxx
In Cadalin v. POEAs Administrator,[27] we held that Article 291 covers all
money claims from employer-employee relationship and is broader in
scope than claims arising from a specific law. It is not limited to
money claims recoverable under the Labor Code, but applies also to
claims of overseas contract workers.[28] The following ruling in
Cadalin v. POEAs Administrator is instructive:
First to be determined is whether it is the law on prescription of
action based on the Amiri Decree No. 23 of 1976 or a Philippine law on
prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be
actionable after the lapse of one year from the date of the expiry of
the contract x x x.
As a general rule, a foreign procedural law will not be applied in the
forum. Procedural matters, such as service of process, joinder of

actions, period and requisites for appeal, and so forth, are governed by
the laws of the forum. This is true even if the action is based upon a
foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the
sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
xxxx
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the forum
has a borrowing statute. Said statute has the practical effect of
treating the foreign statute of limitation as one of substance
(Goodrich, Conflict of Laws, 152-153 [1938]). A borrowing statute
directs the state of the forum to apply the foreign statute of
limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of borrowing
statutes, one form provides that an action barred by the laws of the
place where it accrued, will not be enforced in the forum even though
the local statute has not run against it (Goodrich and Scoles, Conflict
of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of
this kind. Said Section provides:
If by the laws of the state or country where the cause of action arose,
the action is barred, it is also barred in the Philippine Islands.
Section 48 has not been repealed or amended by the Civil Code of the .
Article 2270 of said Code repealed only those provisions of the Code of
Civil Procedure as to which were inconsistent with it. There is no
provision in the Civil Code of the Philippines, which is inconsistent
with or contradictory to Section 48 of the Code of Civil Procedure
(Paras, Philippine Conflict of Laws, 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 [of the Code
of Civil Procedure] cannot be enforced ex proprio vigore insofar as it
ordains the application in this jurisdiction of [Article] 156 of the Amiri
Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious
to the forums public policy x x x. To enforce the one-year prescriptive
period of the Amiri Decree No. 23 of 1976 as regards the claims in
question would contravene the public policy on the protection to

labor.[29]
xxxx
Thus, in our considered view, respondents complaint was filed well
within the three-year prescriptive period under Article 291 of our
Labor Code. This point, however, has already been mooted by our
finding that respondents service award had been paid, albeit the
payroll termed such payment as severance pay.
WHEREFORE, the petition is GRANTED. The assailed Decision dated
and Resolution dated , of the Court of Appeals in CA-G.R. SP No. 76843,
as well as the Decision dated of the Labor Arbiter in NLRC Case No.
RAB-CAR-12-0649-00 and the Decision dated and Resolution dated of
the NLRC in NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are
REVERSED and SET ASIDE. The Complaint of respondent is hereby
DISMISSED.
No pronouncement as to costs.
4. Crescent Petroleum, Ltd. vs. M/V Lok Maheshwari, G.R. No. 155014,
November 11, 2005
SECOND DIVISION
CRESCENT PETROLEUM, LTD., G.R. No. 155014 Petitioner,

Present:
Puno, J.,
- versus - Chairman,
Austria-Martinez,
Callejo, Sr.,
Tinga, and
*Chico-Nazario, JJ.
M/V LOK MAHESHWARI,
THE SHIPPING CORPORATION
OF INDIA, and PORTSERV LIMITED Promulgated:
and/or TRANSMAR SHIPPING, INC.,
Respondents. November 11, 2005
x-------------------------------------------------x
DECISION
PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a)
reversal of the November 28, 2001 Decision of the Court of Appeals in
CA-G.R. No. CV-54920,[1] which dismissed for want of jurisdiction the
instant case, and the September 3, 2002 Resolution of the same
appellate
court,[2]
which
denied
petitioners
motion
for
reconsideration, and (b) reinstatement of the July 25, 1996 Decision[3]

of the Regional Trial Court (RTC) in Civil Case No. CEB-18679, which
held that respondents were solidarily liable to pay petitioner the sum
prayed for in the complaint.
The facts are as follows: Respondent M/V Lok Maheshwari (Vessel) is

an oceangoing vessel of Indian registry that is owned by respondent
Shipping Corporation of India (SCI), a corporation organized and
existing under the laws of India and principally owned by the
Government of India. It was time-chartered by respondent SCI to Halla
Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in
turn, sub-chartered the Vessel through a time charter to Transmar

Shipping, Inc. (Transmar). Transmar further sub-chartered the Vessel
to Portserv Limited (Portserv). Both Transmar and Portserv are
corporations organized and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent

Petroleum, Ltd. (Crescent), a corporation organized and existing
under the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing
vessels, to deliver marine fuel oils (bunker fuels) to the Vessel.
Petitioner Crescent granted and confirmed the request through an
advice via facsimile dated November 2, 1995. As security for the
payment of the bunker fuels and related services, petitioner Crescent
received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier,
Marine Petrobulk Limited (Marine Petrobulk), another Canadian
corporation, for the physical delivery of the bunker fuels to the
Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker
fuels amounting to US$103,544 inclusive of barging and demurrage
charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada.
The Chief Engineer Officer of the Vessel duly acknowledged and
received the delivery receipt. Marine Petrobulk issued an invoice to
petitioner Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in favor of
Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised
invoice dated November 21, 1995 to Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V
Lok Maheshwari in the amount of US$103,544.00 with instruction to
remit the amount on or before December 1, 1995. The period lapsed
and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment of
the bunker fuels were dishonored for insufficiency of funds. As a
consequence, petitioner Crescent incurred additional expenses of
US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City,
petitioner Crescent instituted before the RTC of Cebu City an action
for a sum of money with prayer for temporary restraining order and
writ of preliminary attachment against respondents Vessel and SCI,

Portserv and/or Transmar. The case was raffled to Branch 10 and
docketed as Civil Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of attachment against the
Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its
prayer for a temporary restraining order and posted the required
bond.
On May 18, 1996, summonses were served to respondents Vessel and
SCI, and Portserv and/or Transmar through the Master of the Vessel.
On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte
motion to approve Pioneers letter of undertaking, to consider it as
counter-bond and to discharge the attachment. On May 29, 1996, the
trial court granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of

petitioner Crescent, the trial court declared respondents Vessel and
SCI, Portserv and/or Transmar in default. Petitioner Crescent was
allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor of
petitioner Crescent, thus:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiff [Crescent] and against the defendants [Vessel, SCI,
Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff jointly and
solidarily, the following:
(a) the sum of US$103,544.00,

representing the outstanding
obligation;
(b) interest of US$10,978.50 as of
July 3, 1996, plus additional
interest at 18% per annum for the
period thereafter, until the
principal account is fully paid;
(c) attorneys fees of P300,000.00; and
(d) P200,000.00 as litigation expenses.
SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to

the Court of Appeals. They attached copies of the charter parties
between respondent SCI and Halla, between Halla and Transmar, and
between Transmar and Portserv. They pointed out that Portserv was a
time charterer and that there is a clause in the time charters between
respondent SCI and Halla, and between Halla and Transmar, which
states that the Charterers shall provide and pay for all the fuel except
as otherwise agreed. They submitted a copy of Part II of the Bunker
Fuel Agreement between petitioner Crescent and Portserv containing
a stipulation that New York law governs the construction, validity
and performance of the contract. They likewise submitted certified
copies of the Commercial Instruments and Maritime Lien Act of the
United States (U.S.), some U.S. cases, and some Canadian cases to
support their defense.
On November 28, 2001, the Court of Appeals issued its assailed

Decision, which reversed that of the trial court, viz:
WHEREFORE, premises considered, the Decision dated July 25, 1996,
issued by the Regional Trial Court of Cebu City, Branch 10, is hereby
REVERSED and SET ASIDE, and a new one is entered DISMISSING the
instant case for want of jurisdiction.
The appellate court denied petitioner Crescents motion for

reconsideration explaining that it dismissed the instant action
primarily on the ground of forum non conveniens considering that the
parties are foreign corporations which are not doing business in the
Philippines.
Hence, this petition submitting the following issues for resolution, viz:
1.
Philippine courts have
jurisdiction over a foreign vessel found
inside Philippine waters for the enforcement
of a maritime lien against said vessel and/or
its owners and operators;
2.
The principle of forum non
conveniens is inapplicable to the instant case;
3.
The trial court acquired
jurisdiction over the subject matter of the
instant case, as well as over the res and over
the persons of the parties;
4.
The enforcement of a maritime
lien on the subject vessel is expressly
granted by law. The Ship Mortgage Acts as
well as the Code of Commerce provides for
relief to petitioner for its unpaid claim;
5.
The arbitration clause in the
contract was not rigid or inflexible but
expressly allowed petitioner to enforce its
maritime lien in Philippine courts provided
the vessel was in the Philippines;
6.
The law of the state of New York
is inapplicable to the present controversy as
the same has not been properly pleaded and
proved;
7.
Petitioner has legal capacity to
sue before Philippine courts as it is suing

upon an isolated business transaction;
8.
Respondents were duly served
summons although service of summons
upon respondents is not a jurisdictional
requirement, the action being a suit quasi in
rem;
9.
The trial courts decision has
factual and legal bases; and,
10.
The respondents should be held
jointly and solidarily liable.
In a nutshell, this case is for the satisfaction of unpaid

supplies furnished by a foreign supplier in a foreign port to a vessel of
foreign registry that is owned, chartered and sub-chartered by foreign
entities.
Under Batas Pambansa Bilang 129, as amended by Republic Act No.

7691, RTCs exercise exclusive original jurisdiction (i)n all actions in
admiralty and maritime where the demand or claim exceeds two
hundred thousand pesos (P200,000) or in Metro Manila, where such
demand or claim exceeds four hundred thousand pesos (P400,000).
Two (2) tests have been used to determine whether a case involving a
contract comes within the admiralty and maritime jurisdiction of a
court - the locational test and the subject matter test. The English
rule follows the locational test wherein maritime and admiralty
jurisdiction, with a few exceptions, is exercised only on contracts
made upon the sea and to be executed thereon. This is totally rejected
under the American rule where the criterion in determining whether
a contract is maritime depends on the nature and subject matter of
the contract, having reference to maritime service and transactions.
[4] In International Harvester Company of the Philippines v.
Aragon,[5] we adopted the American rule and held that (w)hether or
not a contract is maritime depends not on the place where the
contract is made and is to be executed, making the locality the test,
but on the subject matter of the contract, making the true criterion a
maritime service or a maritime transaction.
A contract for furnishing supplies like the one involved in this case is
maritime and within the jurisdiction of admiralty.[6] It may be
invoked before our courts through an action in rem or quasi in rem or
an action in personam. Thus: [7]
xxx
Articles 579 and 584 [of the Code of Commerce] provide a method of
collecting or enforcing not only the liens created under Section 580
but also for the collection of any kind of lien whatsoever.[8] In the
Philippines, we have a complete legislation, both substantive and
adjective, under which to bring an action in rem against a vessel for
the purpose of enforcing liens. The substantive law is found in Article
580 of the Code of Commerce. The procedural law is to be found in
Article 584 of the same Code. The result is, therefore, that in the
Philippines any vessel even though it be a foreign vessel found in any
port of this Archipelago may be attached and sold under the
substantive law which defines the right, and the procedural law
contained in the Code of Commerce by which this right is to be
enforced.[9] x x x. But where neither the law nor the contract
between the parties creates any lien or charge upon the vessel, the
only way in which it can be seized before judgment is by pursuing the
remedy relating to attachment under Rule 59 [now Rule 57] of the
Rules of Court.[10]
But, is petitioner Crescent entitled to a maritime lien under our laws?

Petitioner Crescent bases its claim of a maritime lien on Sections 21,
22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also
known as the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. Any person furnishing repairs, supplies, towage, use of dry dock or
maritime railway, or other necessaries, to any vessel, whether foreign
or domestic, upon the order of the owner of such vessel, or of a person
authorized by the owner, shall have a maritime lien on the vessel,
which may be enforced by suit in rem, and it shall be necessary to
allege or prove that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs,

Supplies and Necessaries. - The following persons
shall be presumed to have authority from the owner
to procure repairs, supplies, towage, use of dry dock
or marine railway, and other necessaries for the
vessel: The managing owner, ships husband, master

or any person to whom the management of the
vessel at the port of supply is entrusted. No person
tortuously or unlawfully in possession or charge of a
vessel shall have authority to bind the vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies
and Necessaries. - The officers and agents of a vessel
specified in Section 22 of this Decree shall be taken to
include such officers and agents when appointed by a
charterer, by an owner pro hac vice, or by an agreed
purchaser in possession of the vessel; but nothing in
this Decree shall be construed to confer a lien when
the furnisher knew, or by exercise of reasonable
diligence could have ascertained, that because of the
terms of a charter party, agreement for sale of the
vessel, or for any other reason, the person ordering
the repairs, supplies, or other necessaries was
without authority to bind the vessel therefor.
Petitioner Crescent submits that these provisions apply to both

domestic and foreign vessels, as well as domestic and foreign suppliers
of necessaries. It contends that the use of the term any person in
Section 21 implies that the law is not restricted to domestic suppliers
but also includes all persons who supply provisions and necessaries to
a vessel, whether foreign or domestic. It points out further that the
law does not indicate that the supplies or necessaries must be
furnished in the Philippines in order to give petitioner the right to
seek enforcement of the lien with a Philippine court.[11]
Respondents Vessel and SCI, on the other hand, maintain that Section
21 of the P.D. No. 1521 or the Ship Mortgage Decree of 1978 does not
apply to a foreign supplier like petitioner Crescent as the provision
refers only to a situation where the person furnishing the supplies is
situated inside the territory of the Philippines and not where the
necessaries were furnished in a foreign jurisdiction like Canada.[12]
We find against petitioner Crescent.
I.
P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to
accelerate the growth and development of the shipping industry and

to extend the benefits accorded to overseas shipping under
Presidential Decree No. 214 to domestic shipping.[13] It is patterned
closely from the U.S. Ship Mortgage Act of 1920 and the Liberian
Maritime Law relating to preferred mortgages.[14] Notably, Sections
21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are
identical to Subsections P, Q, and R, respectively, of the U.S. Ship
Mortgage Act of 1920, which is part of the Federal Maritime Lien Act.
Hence, U.S. jurisprudence finds relevance to determining whether P.D.
No. 1521 or the Ship Mortgage Decree of 1978 applies in the present
case.
The various tests used in the U.S. to determine whether a maritime
lien exists are the following:
One. In a suit to establish and enforce a maritime lien for supplies
furnished to a vessel in a foreign port, whether such lien exists, or
whether the court has or will exercise jurisdiction, depends on the
law of the country where the supplies were furnished , which
must be pleaded and proved.[15] This principle was laid down in the
1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm II[17]
(1916), in The Woudrichem[18] (1921) and in The City of
Atlanta[19] (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases , which
replaced such single-factor methodologies as the law of the place of
supply.[20]
In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in
New York, joined the crew of a ship of Danish flag and registry that is
owned by a Danish citizen. He signed the ships articles providing that
the rights of the crew members would be governed by Danish law and
by the employers contract with the Danish Seamens Union, of which
he was a member. While in Havana and in the course of his
employment, he was negligently injured. He sued the shipowner in a
federal district court in New York for damages under the Jones Act. In
holding that Danish law and not the Jones Act was applicable, the
Supreme Court adopted a multiple-contact test to determine, in the
absence of a specific Congressional directive as to the statutes reach,
which jurisdictions law should be applied. The following factors were
considered: (1) place of the wrongful act; (2) law of the flag; (3)
allegiance or domicile of the injured; (4) allegiance of the
defendant shipowner; (5) place of contract; (6) inaccessibility of
foreign forum; and (7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case of
Romero v. International Terminal Operating Co. [22] again
considered a foreign seamans personal injury claim under both the
Jones Act and the general maritime law. The Court held that the
factors first announced in the case of Lauritzen were applicable not
only to personal injury claims arising under the Jones Act but
to all matters arising under maritime law in general .[23]
Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones
Act by a Greek seaman injured aboard a ship of Greek registry while in
American waters. The ship was operated by a Greek corporation
which has its largest office in New York and another office in New
Orleans and whose stock is more than 95% owned by a U.S. domiciliary
who is also a Greek citizen. The ship was engaged in regularly
scheduled runs between various ports of the U.S. and the Middle East,
Pakistan, and India, with its entire income coming from either
originating or terminating in the U.S. The contract of employment
provided that Greek law and a Greek collective bargaining agreement
would apply between the employer and the seaman and that all claims
arising out of the employment contract were to be adjudicated by a
Greek court. The U.S. Supreme Court observed that of the seven
factors listed in the Lauritzen test, four were in favor of the
shipowner and against jurisdiction. In arriving at the conclusion
that the Jones Act applies, it ruled that the application of the
Lauritzen test is not a mechanical one. It stated thus: [t]he
significance of one or more factors must be considered in light of the
national interest served by the assertion of Jones Act jurisdiction.
(footnote omitted) Moreover, the list of seven factors in Lauritzen was
not intended to be exhaustive. x x x [T]he shipowners base of
operations is another factor of importance in determining whether
the Jones Act is applicable; and there well may be others.
The principles enunciated in these maritime tort cases have been
extended to cases involving unpaid supplies and necessaries such as
the
cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture ,

[25] and Comoco Marine Services v. M/V El Centroamericano.
[26]
Three. The factors provided in Restatement (Second) of
Conflicts of Law have also been applied, especially in resolving cases
brought under the Federal Maritime Lien Act. Their application
suggests that in the absence of an effective choice of law by the
parties, the forum contacts to be considered include: (a) the place of
contracting; (b) the place of negotiation of the contract; (c) the place
of performance; (d) the location of the subject matter of the contract;
and (e) the domicile, residence, nationality, place of incorporation and
place of business of the parties.[27]
In Gulf Trading and Transportation Co. v. The Vessel Hoegh
Shield,[28] an admiralty action in rem was brought by an American
supplier against a vessel of Norwegian flag owned by a Norwegian
Company and chartered by a London time charterer for unpaid fuel oil
and marine diesel oil delivered while the vessel was in U.S. territory.
The contract was executed in London. It was held that because the
bunker fuel was delivered to a foreign flag vessel within the
jurisdiction of the U.S., and because the invoice specified payment in
the U.S., the admiralty and maritime law of the U.S. applied. The U.S.
Court of Appeals recognized the modern approach to maritime
conflict of law problems introduced in the Lauritzen case. However, it
observed that Lauritzen involved a torts claim under the Jones Act
while the present claim involves an alleged maritime lien arising from
unpaid supplies. It made a disclaimer that its conclusion is limited to
the unique circumstances surrounding a maritime lien as well as the
statutory directives found in the Maritime Lien Statute and that the
initial choice of law determination is significantly affected by
the statutory policies surrounding a maritime lien. It ruled that
the facts in the case call for the application of the Restatement
(Second) of Conflicts of Law. The U.S. Court gave much significance to
the congressional intent in enacting the Maritime Lien Statute to
protect the interests of American supplier of goods, services or
necessaries by making maritime liens available where traditional
services are routinely rendered. It concluded that the Maritime Lien
Statute represents a relevant policy of the forum that serves the needs
of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance to the
predictability of result and protection of justified expectations in a
particular field of law. In the maritime realm, it is expected that when
necessaries are furnished to a vessel in an American port by an

American supplier, the American Lien Statute will apply to protect
that supplier regardless of the place where the contract was formed or
the nationality of the vessel.
The same principle was applied in the case of Swedish Telecom
Radio v. M/V Discovery I[29] where the American court refused to
apply the Federal Maritime Lien Act to create a maritime lien for
goods and services supplied by foreign companies in foreign ports. In
this case, a Swedish company supplied radio equipment in a Spanish
port to refurbish a Panamanian vessel damaged by fire. Some of the
contract negotiations occurred in Spain and the agreement for
supplies between the parties indicated Swedish companys willingness
to submit to Swedish law. The ship was later sold under a contract of
purchase providing for the application of New York law and was
arrested in the U.S. The U.S. Court of Appeals also held that while the
contacts-based framework set forth in Lauritzen was useful in the
analysis of all maritime choice of law situations, the factors were
geared towards a seamans injury claim. As in Gulf Trading, the lien
arose by operation of law because the ships owner was not a party to
the contract under which the goods were supplied. As a result, the
court found it more appropriate to consider the factors contained in
Section 6 of the Restatement (Second) of Conflicts of Law. The U.S.
Court held that the primary concern of the Federal Maritime Lien Act
is the protection of American suppliers of goods and services.
The same factors were applied in the case of Ocean Ship Supply, Ltd.
v. M/V Leah.[30]
II.
Finding guidance from the foregoing decisions, the Court cannot

sustain petitioner Crescents insistence on the application of P.D. No.
1521 or the Ship Mortgage Decree of 1978 and hold that a maritime
lien exists.
First. Out of the seven basic factors listed in the case of Lauritzen,
Philippine law only falls under one the law of the forum. All other
elements are foreign Canada is the place of the wrongful act, of the
allegiance or domicile of the injured and the place of contract; India is
the law of the flag and the allegiance of the defendant shipowner.
Balancing these basic interests, it is inconceivable that the Philippine
court has any interest in the case that outweighs the interests of
Canada or India for that matter.

Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is
inapplicable following the factors under Restatement (Second) of
Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D.
No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily
to protect Filipino suppliers and was not intended to create a lien
from a contract for supplies between foreign entities delivered in a
foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978
and rule that a maritime lien exists would not promote the public
policy behind the enactment of the law to develop the domestic
shipping industry. Opening up our courts to foreign suppliers by
granting them a maritime lien under our laws even if they are not
entitled to a maritime lien under their laws will encourage forum
shopping.
Finally. The submission of petitioner is not in keeping with the
reasonable expectation of the parties to the contract. Indeed, when
the parties entered into a contract for supplies in Canada, they could
not have intended the laws of a remote country like the Philippines to
determine the creation of a lien by the mere accident of the Vessels
being in Philippine territory.
III.
But under which law should petitioner Crescent prove the existence of
its maritime lien?
In light of the interests of the various foreign elements involved, it is

clear that Canada has the most significant interest in this dispute. The
injured party is a Canadian corporation, the sub-charterer which
placed the orders for the supplies is also Canadian, the entity which
physically delivered the bunker fuels is in Canada, the place of
contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
The arbitration clause contained in the Bunker Fuel Agreement which

states that New York law governs the construction, validity and
performance of the contract is only a factor that may be considered in
the choice-of-law analysis but is not conclusive. As in the cases of Gulf
Trading and Swedish Telecom, the lien that is the subject matter of
this case arose by operation of law and not by contract because the
shipowner was not a party to the contract under which the goods
were supplied.
It is worthy to note that petitioner Crescent never alleged and proved
Canadian law as basis for the existence of a maritime lien. To the end,
it insisted on its theory that Philippine law applies. Petitioner
contends that even if foreign law applies, since the same was not
properly pleaded and proved, such foreign law must be presumed to
be the same as Philippine law pursuant to the doctrine of processual
presumption.
Thus, we are left with two choices: (1) dismiss the case for petitioners
failure to establish a cause of action[31] or (2) presume that Canadian
law is the same as Philippine law. In either case, the case has to be
dismissed.
It is well-settled that a party whose cause of action or defense
depends upon a foreign law has the burden of proving the foreign law.
Such foreign law is treated as a question of fact to be properly pleaded
and proved.[32] Petitioner Crescents insistence on enforcing a
maritime lien before our courts depended on the existence of a
maritime lien under the proper law. By erroneously claiming a
maritime lien under Philippine law instead of proving that a maritime
lien exists under Canadian law, petitioner Crescent failed to establish a
cause of action.[33]
Even if we apply the doctrine of processual presumption, the result
will still be the same. Under P.D. No. 1521 or the Ship Mortgage Decree
of 1978, the following are the requisites for maritime liens on
necessaries to exist: (1) the necessaries must have been furnished to
and for the benefit of the vessel; (2) the necessaries must have been
necessary for the continuation of the voyage of the vessel; (3) the
credit must have been extended to the vessel; (4) there must be
necessity for the extension of the credit; and (5) the necessaries must
be ordered by persons authorized to contract on behalf of the vessel.
[34] These do not avail in the instant case.
First. It was not established that benefit was extended to the vessel.
While this is presumed when the master of the ship is the one who
placed the order, it is not disputed that in this case it was the subcharterer Portserv which placed the orders to petitioner Crescent.[35]
Hence, the presumption does not arise and it is incumbent upon
petitioner Crescent to prove that benefit was extended to the vessel.
Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine
products were necessary for the continuation of the vessel.
Third. It was not established that credit was extended to the vessel. It
is presumed that in the absence of fraud or collusion, where advances
are made to a captain in a foreign port, upon his request, to pay for
necessary repairs or supplies to enable his vessel to prosecute her
voyage, or to pay harbor dues, or for pilotage, towage and like
services rendered to the vessel, that they are made upon the credit of
the vessel as well as upon that of her owners.[36] In this case, it was
the sub-charterer Portserv which requested for the delivery of the
bunker fuels. The issuance of two checks amounting to US$300,000 in
favor of petitioner Crescent prior to the delivery of the bunkers as
security for the payment of the obligation weakens petitioner
Crescents contention that credit was extended to the Vessel.
We also note that when copies of the charter parties were submitted
by respondents in the Court of Appeals, the time charters between
respondent SCI and Halla and between Halla and Transmar were
shown to contain a clause which states that the Charterers shall
provide and pay for all the fuel except as otherwise agreed. This
militates against petitioner Crescents position that Portserv is
authorized by the shipowner to contract for supplies upon the credit
of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of
credit will be presumed where it appears that the repairs and supplies
were necessary for the ship and that they were ordered by the master.
This presumption does not arise in this case since the fuels were not
ordered by the master and there was no proof of necessity for the
supplies.
Finally. The necessaries were not ordered by persons authorized to
contract in behalf of the vessel as provided under Section 22 of P.D.
No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner,
the ships husband, master or any person with whom the management
of the vessel at the port of supply is entrusted. Clearly, Portserv, a
sub-charterer under a time charter, is not someone to whom the
management of the vessel has been entrusted. A time charter is a

contract for the use of a vessel for a specified period of time or for the
duration of one or more specified voyages wherein the owner of the
time-chartered vessel retains possession and control through the
master and crew who remain his employees.[37] Not enjoying the
presumption of authority, petitioner Crescent should have proved
that Portserv was authorized by the shipowner to contract for
supplies. Petitioner failed.
A discussion on the principle of forum non conveniens is unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R.
No. CV 54920, dated November 28, 2001, and its subsequent Resolution
of September 3, 2002 are AFFIRMED. The instant petition for review on
certiorari is DENIED for lack of merit. Cost against petitioner.
5. Priscilla Mijares vs. Hon. Santiago Ranada, G.R. No. 139325, April 12,
2005
G.R. No. 139325
April 12, 2005
PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B.

NARCISO, SR. MARIANI DIMARANAN, SFIC, and JOEL C.
LAMANGAN in their behalf and on behalf of the Class Plaintiffs
in Class Action No. MDL 840, United States District Court of
Hawaii, Petitioner,
vs.
HON. SANTIAGO JAVIER RANADA, in his capacity as Presiding
Judge of Branch 137, Regional Trial Court, Makati City, and the
ESTATE OF FERDINAND E. MARCOS, through its court appointed
legal representatives in Class Action MDL 840, United States
District Court of Hawaii, namely: Imelda R. Marcos and
Ferdinand Marcos, Jr., Respondents.
DECISION
TINGA, J.:
Our martial law experience bore strange unwanted fruits, and we have
yet to finish weeding out its bitter crop. While the restoration of
freedom and the fundamental structures and processes of democracy
have been much lauded, according to a significant number, the
changes, however, have not sufficiently healed the colossal damage
wrought under the oppressive conditions of the martial law period.
The cries of justice for the tortured, the murdered, and the
desaparecidos arouse outrage and sympathy in the hearts of the fairminded, yet the dispensation of the appropriate relief due them
cannot be extended through the same caprice or whim that
characterized the ill-wind of martial rule. The damage done was not
merely personal but institutional, and the proper rebuke to the
iniquitous past has to involve the award of reparations due within the
confines of the restored rule of law.
The petitioners in this case are prominent victims of human rights
violations1 who, deprived of the opportunity to directly confront the
man who once held absolute rule over this country, have chosen to do
battle instead with the earthly representative, his estate. The clash
has been for now interrupted by a trial court ruling, seemingly
comported to legal logic, that required the petitioners to pay a
whopping filing fee of over Four Hundred Seventy-Two Million Pesos
(P472,000,000.00) in order that they be able to enforce a judgment
awarded them by a foreign court. There is an understandable
temptation to cast the struggle within the simplistic confines of a
morality tale, and to employ short-cuts to arrive at what might seem
the desirable solution. But easy, reflexive resort to the equity principle
all too often leads to a result that may be morally correct, but legally
wrong.
Nonetheless, the application of the legal principles involved in this
case will comfort those who maintain that our substantive and
procedural laws, for all their perceived ambiguity and susceptibility to
myriad interpretations, are inherently fair and just. The relief sought
by the petitioners is expressly mandated by our laws and conforms to
established legal principles. The granting of this petition for certiorari
is warranted in order to correct the legally infirm and unabashedly
unjust ruling of the respondent judge.
The essential facts bear little elaboration. On 9 May 1991, a complaint
was filed with the United States District Court (US District Court),
District of Hawaii, against the Estate of former Philippine President
Ferdinand E. Marcos (Marcos Estate). The action was brought forth by
ten Filipino citizens2 who each alleged having suffered human rights
abuses such as arbitrary detention, torture and rape in the hands of
police or military forces during the Marcos regime. 3 The Alien Tort
Act was invoked as basis for the US District Court's jurisdiction over
the complaint, as it involved a suit by aliens for tortious violations of
international law.4 These plaintiffs brought the action on their own
behalf and on behalf of a class of similarly situated individuals,
particularly consisting of all current civilian citizens of the
Philippines, their heirs and beneficiaries, who between 1972 and 1987
were tortured, summarily executed or had disappeared while in the
custody of military or paramilitary groups. Plaintiffs alleged that the
class consisted of approximately ten thousand (10,000) members;
hence, joinder of all these persons was impracticable.

The institution of a class action suit was warranted under Rule 23(a)
and (b)(1)(B) of the US Federal Rules of Civil Procedure, the provisions
of which were invoked by the plaintiffs. Subsequently, the US District
Court certified the case as a class action and created three (3) subclasses of torture, summary execution and disappearance victims. 5
Trial ensued, and subsequently a jury rendered a verdict and an award
of compensatory and exemplary damages in favor of the plaintiff
class. Then, on 3 February 1995, the US District Court, presided by
Judge Manuel L. Real, rendered a Final Judgment (Final Judgment)
awarding the plaintiff class a total of One Billion Nine Hundred Sixty
Four Million Five Thousand Eight Hundred Fifty Nine Dollars and
Ninety Cents ($1,964,005,859.90). The Final Judgment was eventually
affirmed by the US Court of Appeals for the Ninth Circuit, in a decision
rendered on 17 December 1996.6
On 20 May 1997, the present petitioners filed Complaint with the
Regional Trial Court, City of Makati (Makati RTC) for the enforcement
of the Final Judgment. They alleged that they are members of the
plaintiff class in whose favor the US District Court awarded damages. 7
They argued that since the Marcos Estate failed to file a petition for
certiorari with the US Supreme Court after the Ninth Circuit Court of
Appeals had affirmed the Final Judgment, the decision of the US District
Court had become final and executory, and hence should be
recognized and enforced in the Philippines, pursuant to Section 50,
Rule 39 of the Rules of Court then in force.8
On 5 February 1998, the Marcos Estate filed a motion to dismiss,
raising, among others, the non-payment of the correct filing fees. It
alleged that petitioners had only paid Four Hundred Ten Pesos
(P410.00) as docket and filing fees, notwithstanding the fact that they
sought to enforce a monetary amount of damages in the amount of
over Two and a Quarter Billion US Dollars (US$2.25 Billion). The
Marcos Estate cited Supreme Court Circular No. 7, pertaining to the
proper computation and payment of docket fees. In response, the
petitioners claimed that an action for the enforcement of a foreign
judgment is not capable of pecuniary estimation; hence, a filing fee of
only Four Hundred Ten Pesos (P410.00) was proper, pursuant to
Section 7(c) of Rule 141.9
On 9 September 1998, respondent Judge Santiago Javier Ranada 10 of
the Makati RTC issued the subject Order dismissing the complaint
without prejudice. Respondent judge opined that contrary to the
petitioners' submission, the subject matter of the complaint was
indeed capable of pecuniary estimation, as it involved a judgment

rendered by a foreign court ordering the payment of definite sums of
money, allowing for easy determination of the value of the foreign
judgment. On that score, Section 7(a) of Rule 141 of the Rules of Civil
Procedure would find application, and the RTC estimated the proper
amount of filing fees was approximately Four Hundred Seventy Two
Million Pesos, which obviously had not been paid.
Not surprisingly, petitioners filed a Motion for Reconsideration, which
Judge Ranada denied in an Order dated 28 July 1999. From this denial,
petitioners filed a Petition for Certiorari under Rule 65 assailing the twin
orders of respondent judge.11 They prayed for the annulment of the
questioned orders, and an order directing the reinstatement of Civil
Case No. 97-1052 and the conduct of appropriate proceedings thereon.
Petitioners submit that their action is incapable of pecuniary
estimation as the subject matter of the suit is the enforcement of a
foreign judgment, and not an action for the collection of a sum of
money or recovery of damages. They also point out that to require
the class plaintiffs to pay Four Hundred Seventy Two Million Pesos
(P472,000,000.00) in filing fees would negate and render inutile the
liberal construction ordained by the Rules of Court, as required by
Section 6, Rule 1 of the Rules of Civil Procedure, particularly the
inexpensive disposition of every action.
Petitioners invoke Section 11, Article III of the Bill of Rights of the
Constitution, which provides that "Free access to the courts and
quasi-judicial bodies and adequate legal assistance shall not be denied
to any person by reason of poverty," a mandate which is essentially
defeated by the required exorbitant filing fee. The adjudicated amount
of the filing fee, as arrived at by the RTC, was characterized as
indisputably unfair, inequitable, and unjust.
The Commission on Human Rights (CHR) was permitted to intervene
in this case.12 It urged that the petition be granted and a judgment
rendered, ordering the enforcement and execution of the District
Court judgment in accordance with Section 48, Rule 39 of the 1997
Rules of Civil Procedure. For the CHR, the Makati RTC erred in
interpreting the action for the execution of a foreign judgment as a
new case, in violation of the principle that once a case has been
decided between the same parties in one country on the same issue
with finality, it can no longer be relitigated again in another
country.13 The CHR likewise invokes the principle of comity, and of
vested rights.
The Court's disposition on the issue of filing fees will prove a useful
jurisprudential guidepost for courts confronted with actions
enforcing foreign judgments, particularly those lodged against an

estate. There is no basis for the issuance a limited pro hac vice ruling
based on the special circumstances of the petitioners as victims of
martial law, or on the emotionally-charged allegation of human rights
abuses.
An examination of Rule 141 of the Rules of Court readily evinces that
the respondent judge ignored the clear letter of the law when he
concluded that the filing fee be computed based on the total sum
claimed or the stated value of the property in litigation.
In dismissing the complaint, the respondent judge relied on Section
7(a), Rule 141 as basis for the computation of the filing fee of over
P472 Million. The provision states:
SEC. 7. Clerk of Regional Trial Court.(a) For filing an action or a permissive counterclaim or
money claim against an estate not based on
judgment, or for filing with leave of court a thirdparty, fourth-party, etc., complaint, or a complaint in
intervention, and for all clerical services in the same
time, if the total sum claimed, exclusive of interest, or
the started value of the property in litigation, is:
1. Less than P 100,00.00
P 500.00
2. P 100,000.00 or more but less than P 150,000.00
P 800.00
P 1,000.00
P 1,500.00
P 1,750.00
6. P 300,000.00 or more but not more than P 400,000.00
P 2,000.00
7. P 350,000.00 or more but not more than P400,000.00
P 2,250.00
8. For each P 1,000.00 in excess of P 400,000.00
P 10.00
(Emphasis supplied)
Obviously, the above-quoted provision covers, on one hand, ordinary
actions, permissive counterclaims, third-party, etc. complaints and

complaints-in-interventions, and on the other, money claims against
estates which are not based on judgment. Thus, the relevant question
for purposes of the present petition is whether the action filed with
the lower court is a "money claim against an estate not based on
judgment."
Petitioners' complaint may have been lodged against an estate, but it
is clearly based on a judgment, the Final Judgment of the US District
Court. The provision does not make any distinction between a local
judgment and a foreign judgment, and where the law does not
distinguish, we shall not distinguish.
A reading of Section 7 in its entirety reveals several instances wherein
the filing fee is computed on the basis of the amount of the relief
sought, or on the value of the property in litigation. The filing fee for
requests for extrajudicial foreclosure of mortgage is based on the
amount of indebtedness or the mortgagee's claim. 14 In special
proceedings involving properties such as for the allowance of wills,
the filing fee is again based on the value of the property. 15 The
aforecited rules evidently have no application to petitioners'
complaint.
Petitioners rely on Section 7(b), particularly the proviso on actions
where the value of the subject matter cannot be estimated. The
provision reads in full:
SEC. 7. Clerk of Regional Trial Court.(b) For filing
1.
Actions where the value

of the subject matter
cannot be estimated
2.
---
P 600.00
Special civil actions except

judicial foreclosure which
shall be governed by
paragraph (a) above
3.
---
P 600.00
---
P 600.00
All other actions not

involving property
In a real action, the assessed value of the property, or if there is none,

the estimated value, thereof shall be alleged by the claimant and shall
be the basis in computing the fees.
It is worth noting that the provision also provides that in real actions,
the assessed value or estimated value of the property shall be alleged
by the claimant and shall be the basis in computing the fees. Yet
again, this provision does not apply in the case at bar. A real action is
one where the plaintiff seeks the recovery of real property or an
action affecting title to or recovery of possession of real property.16
Neither the complaint nor the award of damages adjudicated by the
US District Court involves any real property of the Marcos Estate.
Thus, respondent judge was in clear and serious error when he
concluded that the filing fees should be computed on the basis of the
schematic table of Section 7(a), as the action involved pertains to a
claim against an estate based on judgment. What provision, if any,
then should apply in determining the filing fees for an action to
enforce a foreign judgment?
To resolve this question, a proper understanding is required on the
nature and effects of a foreign judgment in this jurisdiction.
The rules of comity, utility and convenience of nations have
established a usage among civilized states by which final judgments of
foreign courts of competent jurisdiction are reciprocally respected
and rendered efficacious under certain conditions that may vary in
different countries.17 This principle was prominently affirmed in the
leading American case of Hilton v. Guyot18 and expressly recognized in
our jurisprudence beginning with Ingenholl v. Walter E. Olsen & Co.19
The conditions required by the Philippines for recognition and
enforcement of a foreign judgment were originally contained in
Section 311 of the Code of Civil Procedure, which was taken from the
California Code of Civil Procedure which, in turn, was derived from
the California Act of March 11, 1872. 20 Remarkably, the procedural
rule now outlined in Section 48, Rule 39 of the Rules of Civil Procedure
has remained unchanged down to the last word in nearly a century.
Section 48 states:
SEC. 48.
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;
In either case, the judgment or final order may be repelled by

evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
There is an evident distinction between a foreign judgment in an
action in rem and one in personam. For an action in rem, the foreign
judgment is deemed conclusive upon the title to the thing, while in an
action in personam, the foreign judgment is presumptive, and not
conclusive, of a right as between the parties and their successors in
interest by a subsequent title. 21 However, in both cases, the foreign
judgment is susceptible to impeachment in our local courts on the
grounds of want of jurisdiction or notice to the party,22 collusion,
fraud,23 or clear mistake of law or fact.24 Thus, the party aggrieved by
the foreign judgment is entitled to defend against the enforcement of
such decision in the local forum. It is essential that there should be an
opportunity to challenge the foreign judgment, in order for the court
in this jurisdiction to properly determine its efficacy.25
It is clear then that it is usually necessary for an action to be filed in
order to enforce a foreign judgment26, even if such judgment has
conclusive effect as in the case of in rem actions, if only for the
purpose of allowing the losing party an opportunity to challenge the
foreign judgment, and in order for the court to properly determine its
efficacy.27 Consequently, the party attacking a foreign judgment has
the burden of overcoming the presumption of its validity.28
The rules are silent as to what initiatory procedure must be
undertaken in order to enforce a foreign judgment in the Philippines.
But there is no question that the filing of a civil complaint is an
appropriate measure for such purpose. A civil action is one by which a
party sues another for the enforcement or protection of a right, 29 and
clearly an action to enforce a foreign judgment is in essence a
vindication of a right prescinding either from a "conclusive judgment
upon title" or the "presumptive evidence of a right." 30 Absent
perhaps a statutory grant of jurisdiction to a quasi-judicial body, the
claim for enforcement of judgment must be brought before the
regular courts.31
There are distinctions, nuanced but discernible, between the cause of
action arising from the enforcement of a foreign judgment, and that
arising from the facts or allegations that occasioned the foreign
judgment. They may pertain to the same set of facts, but there is an
essential difference in the right-duty correlatives that are sought to
be vindicated. For example, in a complaint for damages against a
tortfeasor, the cause of action emanates from the violation of the right
of the complainant through the act or omission of the respondent. On
the other hand, in a complaint for the enforcement of a foreign
judgment awarding damages from the same tortfeasor, for the
violation of the same right through the same manner of action, the
cause of action derives not from the tortious act but from the foreign
judgment itself.
More importantly, the matters for proof are different. Using the above
example, the complainant will have to establish before the court the
tortious act or omission committed by the tortfeasor, who in turn is
allowed to rebut these factual allegations or prove extenuating
circumstances. Extensive litigation is thus conducted on the facts,
and from there the right to and amount of damages are assessed. On
the other hand, in an action to enforce a foreign judgment, the matter
left for proof is the foreign judgment itself, and not the facts from
which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally
restricted to a review of jurisdiction of the foreign court, the service
of personal notice, collusion, fraud, or mistake of fact or law. The
limitations on review is in consonance with a strong and pervasive
policy in all legal systems to limit repetitive litigation on claims and
issues.32 Otherwise known as the policy of preclusion, it seeks to
protect party expectations resulting from previous litigation, to
safeguard against the harassment of defendants, to insure that the
task of courts not be increased by never-ending litigation of the same
disputes, and in a larger sense to promote what Lord Coke in the
Ferrer's Case of 1599 stated to be the goal of all law: "rest and
quietness."33 If every judgment of a foreign court were reviewable on
the merits, the plaintiff would be forced back on his/her original
cause of action, rendering immaterial the previously concluded
litigation.34
Petitioners appreciate this distinction, and rely upon it to support the
proposition that the subject matter of the complaint the
enforcement of a foreign judgmentis incapable of pecuniary
estimation. Admittedly the proposition, as it applies in this case, is
counter-intuitive, and thus deserves strict scrutiny. For in all practical
intents and purposes, the matter at hand is capable of pecuniary
estimation, down to the last cent. In the assailed Order, the respondent
judge pounced upon this point without equivocation:
The Rules use the term "where the value of the subject matter
cannot be estimated." The subject matter of the present case
is the judgment rendered by the foreign court ordering
defendant to pay plaintiffs definite sums of money, as and for

compensatory damages. The Court finds that the value of the
foreign judgment can be estimated; indeed, it can even be
easily determined. The Court is not minded to distinguish
between the enforcement of a judgment and the amount of
said judgment, and separate the two, for purposes of
determining the correct filing fees. Similarly, a plaintiff suing
on promissory note for P1 million cannot be allowed to pay
only P400 filing fees (sic), on the reasoning that the subject
matter of his suit is not the P1 million, but the enforcement of
the promissory note, and that the value of such
"enforcement" cannot be estimated.35
The jurisprudential standard in gauging whether the subject matter of
an action is capable of pecuniary estimation is well-entrenched. The
Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of
Appeals, which ruled:
[I]n determining whether an action is one the subject matter
of which is not capable of pecuniary estimation this Court has
adopted the criterion of first ascertaining the nature of the
principal action or remedy sought. If it is primarily for the
recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the courts of first instance would
depend on the amount of the claim. However, where the basic
issue is something other than the right to recover a sum of
money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has
considered such actions as cases where the subject of the
litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance (now
Regional Trial Courts).
On the other hand, petitioners cite the ponencia of Justice JBL Reyes in
Lapitan v. Scandia,36 from which the rule in Singsong and Raymundo
actually derives, but which incorporates this additional nuance
omitted in the latter cases:
xxx However, where the basic issue is something other than
the right to recover a sum of money, where the money claim is
purely incidental to, or a consequence of, the principal relief
sought, like in suits to have the defendant perform his
part of the contract (specific performance) and in
actions for support, or for annulment of judgment or to
foreclose a mortgage, this Court has considered such actions
as cases where the subject of the litigation may not be

estimated in terms of money, and are cognizable exclusively
by courts of first instance.37
Petitioners go on to add that among the actions the Court has
recognized as being incapable of pecuniary estimation include legality
of conveyances and money deposits, 38 validity of a mortgage,39 the
right to support,40 validity of documents, 41 rescission of contracts,42
specific performance,43 and validity or annulment of judgments.44 It
is urged that an action for enforcement of a foreign judgment belongs
to the same class.
This is an intriguing argument, but ultimately it is self-evident that
while the subject matter of the action is undoubtedly the enforcement
of a foreign judgment, the effect of a providential award would be the
adjudication of a sum of money. Perhaps in theory, such an action is
primarily for "the enforcement of the foreign judgment," but there is
a certain obtuseness to that sort of argument since there is no
denying that the enforcement of the foreign judgment will necessarily
result in the award of a definite sum of money.
But before we insist upon this conclusion past beyond the point of
reckoning, we must examine its possible ramifications. Petitioners
raise the point that a declaration that an action for enforcement of
foreign judgment may be capable of pecuniary estimation might lead
to an instance wherein a first level court such as the Municipal Trial
Court would have jurisdiction to enforce a foreign judgment. But
under the statute defining the jurisdiction of first level courts, B.P.
129, such courts are not vested with jurisdiction over actions for the
enforcement of foreign judgments.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in civil cases.
Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and
probate proceedings, testate and intestate, including the grant
of provisional remedies in proper cases, where the value of the
personal property, estate, or amount of the demand does not
exceed One hundred thousand pesos (P100,000.00) or, in Metro
Manila where such personal property, estate, or amount of the
demand does not exceed Two hundred thousand pesos
(P200,000.00) exclusive of interest damages of whatever kind,
attorney's fees, litigation expenses, and costs, the amount of
which must be specifically alleged: Provided, That where
there are several claims or causes of action between the same

or different parties, embodied in the same complaint, the
amount of the demand shall be the totality of the claims in all
the causes of action, irrespective of whether the causes of
action arose out of the same or different transactions;
(2) Exclusive original jurisdiction over cases of forcible entry
and unlawful detainer: Provided, That when, in such cases, the
defendant raises the question of ownership in his pleadings
and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession.
(3) Exclusive original jurisdiction in all civil actions which
involve title to, or possession of, real property, or any interest
therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty thousand pesos (P50,000.00) exclusive of
interest, damages of whatever kind, attorney's fees, litigation
expenses and costs: Provided, That value of such property shall
be determined by the assessed value of the adjacent lots. 45
Section 33 of B.P. 129 refers to instances wherein the cause of action
or subject matter pertains to an assertion of rights and interests over
property or a sum of money. But as earlier pointed out, the subject
matter of an action to enforce a foreign judgment is the foreign
judgment itself, and the cause of action arising from the adjudication
of such judgment.
An examination of Section 19(6), B.P. 129 reveals that the instant
complaint for enforcement of a foreign judgment, even if capable of
pecuniary estimation, would fall under the jurisdiction of the Regional
Trial Courts, thus negating the fears of the petitioners. Indeed, an
examination of the provision indicates that it can be relied upon as
jurisdictional basis with respect to actions for enforcement of foreign
judgments, provided that no other court or office is vested
jurisdiction over such complaint:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall
exercise exclusive original jurisdiction:
xxx
(6) In all cases not within the exclusive jurisdiction of any
court, tribunal, person or body exercising jurisdiction or any
court, tribunal, person or body exercising judicial or quasijudicial functions.
Thus, we are comfortable in asserting the obvious, that the complaint

to enforce the US District Court judgment is one capable of pecuniary
estimation. But at the same time, it is also an action based on
judgment against an estate, thus placing it beyond the ambit of
Section 7(a) of Rule 141. What provision then governs the proper
computation of the filing fees over the instant complaint? For this
case and other similarly situated instances, we find that it is covered
by Section 7(b)(3), involving as it does, "other actions not involving
property."
Notably, the amount paid as docket fees by the petitioners on the
premise that it was an action incapable of pecuniary estimation
corresponds to the same amount required for "other actions not
involving property." The petitioners thus paid the correct amount of
filing fees, and it was a grave abuse of discretion for respondent judge
to have applied instead a clearly inapplicable rule and dismissed the
complaint.
There is another consideration of supreme relevance in this case, one
which should disabuse the notion that the doctrine affirmed in this
decision is grounded solely on the letter of the procedural rule. We
earlier adverted to the the internationally recognized policy of
preclusion,46 as well as the principles of comity, utility and
convenience of nations47 as the basis for the evolution of the rule
calling for the recognition and enforcement of foreign judgments. The
US Supreme Court in Hilton v. Guyot48 relied heavily on the concept of
comity, as especially derived from the landmark treatise of Justice
Story in his Commentaries on the Conflict of Laws of 1834. 49 Yet the
notion of "comity" has since been criticized as one "of dim
contours"50 or suffering from a number of fallacies. 51 Other
conceptual bases for the recognition of foreign judgments have
evolved such as the vested rights theory or the modern doctrine of
obligation.52
There have been attempts to codify through treaties or multilateral
agreements the standards for the recognition and enforcement of
foreign judgments, but these have not borne fruition. The members of
the European Common Market accede to the Judgments Convention,
signed in 1978, which eliminates as to participating countries all of
such obstacles to recognition such as reciprocity and rvision au
fond.53 The most ambitious of these attempts is the Convention on the
Recognition and Enforcement of Foreign Judgments in Civil and Commercial
Matters, prepared in 1966 by the Hague Conference of International
Law.54 While it has not received the ratifications needed to have it
take effect,55 it is recognized as representing current scholarly

thought on the topic.56 Neither the Philippines nor the United States
are signatories to the Convention.
Yet even if there is no unanimity as to the applicable theory behind
the recognition and enforcement of foreign judgments or a universal
treaty rendering it obligatory force, there is consensus that the
viability of such recognition and enforcement is essential. Steiner and
Vagts note:
. . . The notion of unconnected bodies of national law on
private international law, each following a quite separate path,
is not one conducive to the growth of a transnational
community encouraging travel and commerce among its
members. There is a contemporary resurgence of writing
stressing the identity or similarity of the values that systems
of public and private international law seek to further a
community interest in common, or at least reasonable, rules
on these matters in national legal systems. And such generic
principles as reciprocity play an important role in both
fields.57
Salonga, whose treatise on private international law is of worldwide
renown, points out:
Whatever be the theory as to the basis for recognizing foreign
judgments, there can be little dispute that the end is to
protect the reasonable expectations and demands of the
parties. Where the parties have submitted a matter for
adjudication in the court of one state, and proceedings there
are not tainted with irregularity, they may fairly be expected
to submit, within the state or elsewhere, to the enforcement
of the judgment issued by the court.58
There is also consensus as to the requisites for recognition of a foreign
judgment and the defenses against the enforcement thereof. As
earlier discussed, the exceptions enumerated in Section 48, Rule 39
have remain unchanged since the time they were adapted in this
jurisdiction from long standing American rules. The requisites and
exceptions as delineated under Section 48 are but a restatement of
generally accepted principles of international law. Section 98 of The
Restatement, Second, Conflict of Laws, states that "a valid judgment
rendered in a foreign nation after a fair trial in a contested proceeding
will be recognized in the United States," and on its face, the term
"valid" brings into play requirements such notions as valid
jurisdiction over the subject matter and parties. 59 Similarly, the
notion that fraud or collusion may preclude the enforcement of a

foreign judgment finds affirmation with foreign jurisprudence and
commentators,60 as well as the doctrine that the foreign judgment
must not constitute "a clear mistake of law or fact." 61 And finally, it
has been recognized that "public policy" as a defense to the
recognition of judgments serves as an umbrella for a variety of
concerns in international practice which may lead to a denial of
recognition.62
The viability of the public policy defense against the enforcement of a
foreign judgment has been recognized in this jurisdiction. 63 This
defense allows for the application of local standards in reviewing the
foreign judgment, especially when such judgment creates only a
presumptive right, as it does in cases wherein the judgment is against
a person.64 The defense is also recognized within the international
sphere, as many civil law nations adhere to a broad public policy
exception which may result in a denial of recognition when the
foreign court, in the light of the choice-of-law rules of the recognizing
court, applied the wrong law to the case. 65 The public policy defense
can safeguard against possible abuses to the easy resort to offshore
litigation if it can be demonstrated that the original claim is noxious
to our constitutional values.
There is no obligatory rule derived from treaties or conventions that
requires the Philippines to recognize foreign judgments, or allow a
procedure for the enforcement thereof. However, generally accepted
principles of international law, by virtue of the incorporation clause of
the Constitution, form part of the laws of the land even if they do not
derive from treaty obligations.66 The classical formulation in
international law sees those customary rules accepted as binding
result from the combination two elements: the established,
widespread, and consistent practice on the part of States; and a
psychological element known as the opinion juris sive necessitates
(opinion as to law or necessity). Implicit in the latter element is a
belief that the practice in question is rendered obligatory by the
existence of a rule of law requiring it.67
While the definite conceptual parameters of the recognition and
enforcement of foreign judgments have not been authoritatively
established, the Court can assert with certainty that such an
undertaking is among those generally accepted principles of
international law.68 As earlier demonstrated, there is a widespread
practice among states accepting in principle the need for such
recognition and enforcement, albeit subject to limitations of varying
degrees. The fact that there is no binding universal treaty governing

the practice is not indicative of a widespread rejection of the
principle, but only a disagreement as to the imposable specific rules
governing the procedure for recognition and enforcement.
Aside from the widespread practice, it is indubitable that the
procedure for recognition and enforcement is embodied in the rules
of law, whether statutory or jurisprudential, adopted in various
foreign jurisdictions. In the Philippines, this is evidenced primarily by
Section 48, Rule 39 of the Rules of Court which has existed in its
current form since the early 1900s. Certainly, the Philippine legal
system has long ago accepted into its jurisprudence and procedural
rules the viability of an action for enforcement of foreign judgment,
as well as the requisites for such valid enforcement, as derived from
internationally accepted doctrines. Again, there may be distinctions
as to the rules adopted by each particular state, 69 but they all
prescind from the premise that there is a rule of law obliging states to
allow for, however generally, the recognition and enforcement of a
foreign judgment. The bare principle, to our mind, has attained the
status of opinio juris in international practice.
This is a significant proposition, as it acknowledges that the procedure
and requisites outlined in Section 48, Rule 39 derive their efficacy not
merely from the procedural rule, but by virtue of the incorporation
clause of the Constitution. Rules of procedure are promulgated by the
Supreme Court,70 and could very well be abrogated or revised by the
high court itself. Yet the Supreme Court is obliged, as are all State
components, to obey the laws of the land, including generally
accepted principles of international law which form part thereof, such
as those ensuring the qualified recognition and enforcement of
foreign judgments.71
Thus, relative to the enforcement of foreign judgments in the
Philippines, it emerges that there is a general right recognized within
our body of laws, and affirmed by the Constitution, to seek
recognition and enforcement of foreign judgments, as well as a right
to defend against such enforcement on the grounds of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
The preclusion of an action for enforcement of a foreign judgment in
this country merely due to an exhorbitant assessment of docket fees is
alien to generally accepted practices and principles in international
law. Indeed, there are grave concerns in conditioning the amount of
the filing fee on the pecuniary award or the value of the property
subject of the foreign decision. Such pecuniary award will almost
certainly be in foreign denomination, computed in accordance with

the applicable laws and standards of the forum. 72 The vagaries of
inflation, as well as the relative low-income capacity of the Filipino, to
date may very well translate into an award virtually unenforceable in
this country, despite its integral validity, if the docket fees for the
enforcement thereof were predicated on the amount of the award
sought to be enforced. The theory adopted by respondent judge and
the Marcos Estate may even lead to absurdities, such as if applied to
an award involving real property situated in places such as the United
States or Scandinavia where real property values are inexorably high.
We cannot very well require that the filing fee be computed based on
the value of the foreign property as determined by the standards of
the country where it is located.
As crafted, Rule 141 of the Rules of Civil Procedure avoids
unreasonableness, as it recognizes that the subject matter of an action
for enforcement of a foreign judgment is the foreign judgment itself,
and not the right-duty correlatives that resulted in the foreign
judgment. In this particular circumstance, given that the complaint is
lodged against an estate and is based on the US District Court's Final
Judgment, this foreign judgment may, for purposes of classification
under the governing procedural rule, be deemed as subsumed under
Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions
not involving property." Thus, only the blanket filing fee of minimal
amount is required.
Finally, petitioners also invoke Section 11, Article III of the
Constitution, which states that "[F]ree access to the courts and quasijudicial bodies and adequate legal assistance shall not be denied to
any person by reason of poverty." Since the provision is among the
guarantees ensured by the Bill of Rights, it certainly gives rise to a
demandable right. However, now is not the occasion to elaborate on
the parameters of this constitutional right. Given our preceding
discussion, it is not necessary to utilize this provision in order to grant
the relief sought by the petitioners. It is axiomatic that the
constitutionality of an act will not be resolved by the courts if the
controversy can be settled on other grounds73 or unless the
resolution thereof is indispensable for the determination of the
case.74
One more word. It bears noting that Section 48, Rule 39 acknowledges
that the Final Judgment is not conclusive yet, but presumptive evidence
of a right of the petitioners against the Marcos Estate. Moreover, the
Marcos Estate is not precluded to present evidence, if any, of want of
mistake of law or fact. This ruling, decisive as it is on the question of

filing fees and no other, does not render verdict on the enforceability
of the Final Judgment before the courts under the jurisdiction of the
Philippines, or for that matter any other issue which may legitimately
be presented before the trial court. Such issues are to be litigated
before the trial court, but within the confines of the matters for proof
as laid down in Section 48, Rule 39. On the other hand, the speedy
resolution of this claim by the trial court is encouraged, and
contumacious delay of the decision on the merits will not be brooked
by this Court.
WHEREFORE, the petition is GRANTED. The assailed orders are
NULLIFIED and SET ASIDE, and a new order REINSTATING Civil Case
No. 97-1052 is hereby issued. No costs.
SO ORDERED.
6. Philippine Export and Foreign Loan Guarantee Corporation vs. V.P.

Eusebio Construction, G.R. No. 140047, July 13, 2004
G.R. No. 140047
July 13, 2004
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE

CORPORATION, petitioner,
vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL,
INC.; VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E.
SANTOS; ILUMINADA SANTOS; AND FIRST INTEGRATED
BONDING AND INSURANCE COMPANY, INC., respondents.
DECISION
DAVIDE, JR., C.J.:

This case is an offshoot of a service contract entered into by a Filipino
construction firm with the Iraqi Government for the construction of
the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad,
Iraq, at a time when the Iran-Iraq war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch 58,
petitioner Philippine Export and Foreign Loan Guarantee
Corporation1 (hereinafter Philguarantee) sought reimbursement from
the respondents of the sum of money it paid to Al Ahli Bank of Kuwait
pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).

The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB),
Ministry of Housing and Construction, Baghdad, Iraq, awarded the
construction of the Institute of Physical TherapyMedical
Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the
Project) to Ajyal Trading and Contracting Company (hereinafter
Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for
a total contract price of ID5,416,089/046 (or about US$18,739,668). 2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos,
in behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex),
a local contractor engaged in construction business, entered into a
joint venture agreement with Ajyal wherein the former undertook the
execution of the entire Project, while the latter would be entitled to a
commission of 4% of the contract price. 3 Later, or on 8 April 1981,
respondent
Philippine
transferred
agreement
3-Plex, not being accredited by or registered with the

Overseas Construction Board (POCB), assigned and
all its rights and interests under the joint venture
to VPECI, a construction and engineering firm duly
registered with the POCB.4 However, on 2 May 1981, 3-Plex and VPECI
entered into an agreement that the execution of the Project would be
under their joint management.5
The SOB required the contractors to submit (1) a performance bond of
ID271,808/610 representing 5% of the total contract price and (2) an
advance payment bond of ID541,608/901 representing 10% of the
advance payment to be released upon signing of the contract. 6 To
comply with these requirements, respondents 3-Plex and VPECI
applied for the issuance of a guarantee with petitioner Philguarantee,
a government financial institution empowered to issue guarantees for
qualified Filipino contractors to secure the performance of approved
service contracts abroad.7
Petitioner
Philguarantee
approved respondents' application.

Subsequently, letters of guarantee 8 were issued by Philguarantee to
the Rafidain Bank of Baghdad covering 100% of the performance and
advance payment bonds, but they were not accepted by SOB. What
SOB required was a letter-guarantee from Rafidain Bank, the
government bank of Iraq. Rafidain Bank then issued a performance
bond in favor of SOB on the condition that another foreign bank, not
Philguarantee, would issue a counter-guarantee to cover its exposure.
Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-
guarantee to Rafidain Bank, but it required a similar counterguarantee in its favor from the petitioner. Thus, three layers of
guarantees had to be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner
Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of
Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the
amount of ID271,808/610 and Letter of Guarantee No. 81-195-F 11
(Advance Payment Guarantee) in the amount of ID541,608/901, both
for a term of eighteen months from 25 May 1981. These letters of
guarantee were secured by (1) a Deed of Undertaking 12 executed by
respondents VPECI, Spouses Vicente P. Eusebio and Soledad C.
Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos;
and (2) a surety bond13 issued by respondent First Integrated Bonding
and Insurance Company, Inc. (FIBICI). The Surety Bond was later
amended on 23 June 1981 to increase the amount of coverage from
P6.4 million to P6.967 million and to change the bank in whose favor
the petitioner's guarantee was issued, from Rafidain Bank to Al Ahli
Bank of Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed
the service contract15 for the construction of the Institute of Physical
Therapy Medical Rehabilitation Center, Phase II, in Baghdad, Iraq,
wherein the joint venture contractor undertook to complete the
Project within a period of 547 days or 18 months. Under the Contract,
the Joint Venture would supply manpower and materials, and SOB
would refund to the former 25% of the project cost in Iraqi Dinar and
the 75% in US dollars at the exchange rate of 1 Dinar to 3.37777 US
Dollars.16
The construction, which was supposed to start on 2 June 1981,
commenced only on the last week of August 1981. Because of this
delay and the slow progress of the construction work due to some
setbacks and difficulties, the Project was not completed on 15
November 1982 as scheduled. But in October 1982, upon foreseeing the
impossibility of meeting the deadline and upon the request of Al Ahli
Bank, the joint venture contractor worked for the renewal or
extension of the Performance Bond and Advance Payment Guarantee.
Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond)
and 81-195-F (Advance Payment Bond) with expiry date of 25
November 1982 were then renewed or extended to 9 February 1983
and 9 March 1983, respectively.17 The surety bond was also extended
for another period of one year, from 12 May 1982 to 12 May 1983. 18
The Performance Bond was further extended twelve times with

validity of up to 8 December 1986, 19 while the Advance Payment
Guarantee was extended three times more up to 24 May 1984 when
the latter was cancelled after full refund or reimbursement by the
joint venture contractor.20 The surety bond was likewise extended to
8 May 1987.21
As of March 1986, the status of the Project was 51% accomplished,
meaning the structures were already finished. The remaining 47%
consisted in electro-mechanical works and the 2%, sanitary works,
which both required importation of equipment and materials.22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the
petitioner demanding full payment of its performance bond counterguarantee.
Upon receiving a copy of that telex message on 27 October 1986,
respondent VPECI requested Iraq Trade and Economic Development
Minister Mohammad Fadhi Hussein to recall the telex call on the
performance guarantee for being a drastic action in contravention of
its mutual agreement with the latter that (1) the imposition of penalty
would be held in abeyance until the completion of the project; and (2)
the time extension would be open, depending on the developments on
the negotiations for a foreign loan to finance the completion of the
project.23 It also wrote SOB protesting the call for lack of factual or
legal basis, since the failure to complete the Project was due to (1) the
Iraqi government's lack of foreign exchange with which to pay its
(VPECI's) accomplishments and (2) SOB's noncompliance for the past
several years with the provision in the contract that 75% of the
billings would be paid in US dollars. 24 Subsequently, or on 19
November 1986, respondent VPECI advised the petitioner not to pay
yet Al Ahli Bank because efforts were being exerted for the amicable
settlement of the Project.25
On 14 April 1987, the petitioner received another telex message from
Al Ahli Bank stating that it had already paid to Rafidain Bank the sum
of US$876,564 under its letter of guarantee, and demanding
reimbursement by the petitioner of what it paid to the latter bank
plus interest thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the
assistance of some government agencies of the Philippines. On 10
August 1987, VPECI requested the Central Bank to hold in abeyance
the payment by the petitioner "to allow the diplomatic machinery to
take its course, for otherwise, the Philippine government , through
the Philguarantee and the Central Bank, would become instruments of

the Iraqi Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for its
account of the amount of US$876,564 (equivalent to ID271, 808/610) to
Al Ahli Bank representing full payment of the performance counterguarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would
remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary
obligation of the respondents to reimburse the petitioner for the
advances made on its counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of
Kuwait on 21 January 1988.30 Then, on 6 May 1988, the petitioner paid
to Al Ahli Bank of Kuwait US$59,129.83 representing interest and
penalty charges demanded by the latter bank.31
On 19 June 1991, the petitioner sent to the respondents separate
letters demanding full payment of the amount of P47,872,373.98 plus
accruing interest, penalty charges, and 10% attorney's fees pursuant
to their joint and solidary obligations under the deed of undertaking
and surety bond.32 When the respondents failed to pay, the petitioner
filed on 9 July 1991 a civil case for collection of a sum of money
against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held
that the latter had no valid cause of action against the respondents. It
opined that at the time the call was made on the guarantee which was
executed for a specific period, the guarantee had already lapsed or
expired. There was no valid renewal or extension of the guarantee for
failure of the petitioner to secure respondents' express consent
thereto. The trial court also found that the joint venture contractor
incurred no delay in the execution of the Project. Considering the
Project owner's violations of the contract which rendered impossible
the joint venture contractor's performance of its undertaking, no
valid call on the guarantee could be made. Furthermore, the trial
court held that no valid notice was first made by the Project owner
SOB to the joint venture contractor before the call on the guarantee.
Accordingly, it dismissed the complaint, as well as the counterclaims
and cross-claim, and ordered the petitioner to pay attorney's fees of
P100,000 to respondents VPECI and Eusebio Spouses and P100,000 to
3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial
court's decision, ratiocinating as follows:

First, appellant cannot deny the fact that it was fully aware of
the status of project implementation as well as the problems
besetting the contractors, between 1982 to 1985, having sent
some of its people to Baghdad during that period. The
successive renewals/extensions of the guarantees in fact, was
prompted by delays, not solely attributable to the contractors,
and such extension understandably allowed by the SOB
(project owner) which had not anyway complied with its
contractual commitment to tender 75% of payment in US
Dollars, and which still retained overdue amounts collectible
by VPECI.
Second, appellant was very much aware of the violations

committed by the SOB of its contractual undertakings with
VPECI, principally, the payment of foreign currency (US$) for
75% of the total contract price, as well as of the complications
and injustice that will result from its payment of the full
amount of the performance guarantee, as evident in
PHILGUARANTEE's letter dated 13 May 1987 .
Third, appellant was fully aware that SOB was in fact still
obligated to the Joint Venture and there was still an amount
collectible from and still being retained by the project owner,
which amount can be set-off with the sum covered by the
performance guarantee.
Fourth, well-apprised of the above conditions obtaining at the

Project site and cognizant of the war situation at the time in
Iraq, appellant, though earlier has made representations with
the SOB regarding a possible amicable termination of the
Project as suggested by VPECI, made a complete turn-around
and insisted on acting in favor of the unjustified "call" by the
foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of
Court claiming that the Court of Appeals erred in affirming the trial
court's ruling that
I
RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF
UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER IN
CONSIDERATION FOR THE ISSUANCE OF ITS COUNTERGUARANTEE AND THAT PETITIONER CANNOT PASS ON TO
RESPONDENTS WHAT IT HAD PAID UNDER THE SAID
COUNTER-GUARANTEE.
II
PETITIONER CANNOT CLAIM SUBROGATION.
III
IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD
RESPONDENTS
LIABLE
UNDER
THEIR
DEED
OF
UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to
reimbursement of what it paid under Letter of Guarantee No. 81-194-F
it issued to Al Ahli Bank of Kuwait based on the deed of undertaking
and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute,
unconditional, and irrevocable the nature and extent of its liability
are analogous to those of suretyship. Its liability accrued upon the
failure of the respondents to finish the construction of the Institute of
Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so. If a person binds himself solidarily with the
principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of
the principles are common to both. In both contracts, there is a
promise to answer for the debt or default of another. However, in this
jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is
the guarantor's own separate undertaking often supported by
a consideration separate from that supporting the contract of
the principal; the original contract of his principal is not his
contract.
2. A surety assumes liability as a regular party to the
undertaking; while the liability of a guarantor is conditional
depending on the failure of the primary debtor to pay the
obligation.
3. The obligation of a surety is primary, while that of a
guarantor is secondary.
4. A surety is an original promissor and debtor from the
beginning, while a guarantor is charged on his own
undertaking.
5. A surety is, ordinarily, held to know every default of his
principal; whereas a guarantor is not bound to take notice of
the non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere
indulgence of the creditor to the principal or by want of
notice of the default of the principal, no matter how much he
may be injured thereby. A guarantor is often discharged by the
mere indulgence of the creditor to the principal, and is usually
not liable unless notified of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of
Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay
you on your first written or telex demand Iraq Dinars Two
Hundred Seventy One Thousand Eight Hundred Eight and fils
six hundred ten (ID271,808/610) representing 100% of the
performance bond required of V.P. EUSEBIO for the
construction of the Physical Therapy Institute, Phase II,
Baghdad, Iraq, plus interest and other incidental expenses
related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you
100% of the obligation unpaid but in no case shall such
amount exceed Iraq Dinars (ID) 271,808/610 plus interest and
other incidental expenses. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a
guaranty, as well as the factual milieu of this case, we find that the
Court of Appeals and the trial court were correct in ruling that the
petitioner is a guarantor and not a surety. That the guarantee issued
by the petitioner is unconditional and irrevocable does not make the
petitioner a surety. As a guaranty, it is still characterized by its
subsidiary and conditional quality because it does not take effect until
the fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound
himself.40 In other words, an unconditional guarantee is still subject
to the condition that the principal debtor should default in his
obligation first before resort to the guarantor could be had. A
conditional guaranty, as opposed to an unconditional guaranty, is one

which depends upon some extraneous event, beyond the mere default
of the principal, and generally upon notice of the principal's default
and reasonable diligence in exhausting proper remedies against the
principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that
in the event of default by respondent VPECI the petitioner shall pay,
the obligation assumed by the petitioner was simply that of an
unconditional guaranty, not conditional guaranty. But as earlier ruled
the fact that petitioner's guaranty is unconditional does not make it a
surety. Besides, surety is never presumed. A party should not be
considered a surety where the contract itself stipulates that he is
acting only as a guarantor. It is only when the guarantor binds himself
solidarily with the principal debtor that the contract becomes one of
suretyship.42
Having determined petitioner's liability as guarantor, the next
question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify resort to
the guaranty. This is a mixed question of fact and law that is better
addressed by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial
court and the Court of Appeals are binding or conclusive upon this
Court unless they are not supported by the evidence or unless strong
and cogent reasons dictate otherwise.43 The factual findings of the
Court of Appeals are normally not reviewable by us under Rule 45 of
the Rules of Court except when they are at variance with those of the
trial court. 44 The trial court and the Court of Appeals were in unison
that the respondent contractor cannot be considered to have
defaulted in its obligations because the cause of the delay was not
primarily attributable to it.
A corollary issue is what law should be applied in determining
whether the respondent contractor has defaulted in the performance
of its obligations under the service contract. The question of whether
there is a breach of an agreement, which includes default or mora,45
pertains to the essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as

substantial connection with the transaction, or the nationality or
domicile of the parties.47 Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the limitation
that it is not against the law, morals, or public policy of the forum and that
the chosen law must bear a substantive relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI
contains no express choice of the law that would govern it. In the
United States and Europe, the two rules that now seem to have
emerged as "kings of the hill" are (1) the parties may choose the
governing law; and (2) in the absence of such a choice, the applicable
law is that of the State that "has the most significant relationship to
the transaction and the parties." 49 Another authority proposed that
all matters relating to the time, place, and manner of performance
and valid excuses for non-performance are determined by the law of
the place of performance or lex loci solutionis, which is useful because it
is undoubtedly always connected to the contract in a significant
way.50
In this case, the laws of Iraq bear substantial connection to the
transaction, since one of the parties is the Iraqi Government and the
place of performance is in Iraq. Hence, the issue of whether
respondent VPECI defaulted in its obligations may be determined by
the laws of Iraq. However, since that foreign law was not properly
pleaded or proved, the presumption of identity or similarity,
otherwise known as the processual presumption, comes into play. Where
foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code,
provides: "In reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper
manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the fulfillment
of the prestation by reason of a cause imputable to the former. 52 It is
the non-fulfillment of an obligation with respect to time.53
It is undisputed that only 51.7% of the total work had been
accomplished. The 48.3% unfinished portion consisted in the purchase
and installation of electro-mechanical equipment and materials,
which were available from foreign suppliers, thus requiring US Dollars
for their importation. The monthly billings and payments made by
SOB54 reveal that the agreement between the parties was a periodic
payment by the Project owner to the contractor depending on the
percentage of accomplishment within the period. 55 The payments
were, in turn, to be used by the contractor to finance the subsequent
phase of the work. 56 However, as explained by VPECI in its letter to
the Department of Foreign Affairs (DFA), the payment by SOB purely
in Dinars adversely affected the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying
the accomplishment billings of the Contractor purely in Iraqi
Dinars and which payment came only after some delays.
5. SOB is fully aware of the following:
5.2 That Plaintiff is a foreign contractor in Iraq and as such,

would need foreign currency (US$), to finance the purchase of
various equipment, materials, supplies, tools and to pay for
the cost of project management, supervision and skilled labor
not available in Iraq and therefore have to be imported and or
obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the
Philippines requires the remittance into the Philippines of
70% of the salaries of Filipino workers working abroad in US
Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency

such that the same cannot be used to purchase equipment,
materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the
CONTRACT are not available in Iraq and therefore have to be
imported;
5.7 That the government of Iraq prohibits the bringing of local
currency (Iraqui Dinars) out of Iraq and hence, imported
materials, equipment, etc., cannot be purchased or obtained
using Iraqui Dinars as medium of acquisition.
8. Following the approved construction program of the

CONTRACT, upon completion of the civil works portion of the
installation of equipment for the building, should immediately
follow, however, the CONTRACT specified that these
equipment which are to be installed and to form part of the
PROJECT have to be procured outside Iraq since these are not

being locally manufactured. Copy f the relevant portion of the
Technical Specification is hereto attached as Annex "C" and
made an integral part hereof;
10. Due to the lack of Foreign currency in Iraq for this purpose,
and if only to assist the Iraqi government in completing the
PROJECT, the Contractor without any obligation on its part to
do so but with the knowledge and consent of SOB and the
Ministry of Housing & Construction of Iraq, offered to arrange
on behalf of SOB, a foreign currency loan, through the
facilities of Circle International S.A., the Contractor's Subcontractor and SACE MEDIO CREDITO which will act as the
guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma.
Negotiation started in June 1985. SOB is informed of the
developments of this negotiation, attached is a copy of the
draft of the loan Agreement between SOB as the Borrower and
Agent. The Several Banks, as Lender, and counter-guaranteed
by Istituto Centrale Per II Credito A Medio Termine
(Mediocredito) Sezione Speciale Per L'Assicurazione Del
Credito All'Exportazione (Sace). Negotiations went on and
continued until it suddenly collapsed due to the reported
default by Iraq in the payment of its obligations with Italian
government, copy of the news clipping dated June 18, 1986 is
hereto attached as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information
from Circle International S.A. that because of the news report
that Iraq defaulted in its obligations with European banks, the
approval by Banco di Roma of the loan to SOB shall be
deferred indefinitely, a copy of the letter of Circle
International together with the news clippings are hereto
attached as Annexes "F" and "F-1", respectively.57
As found by both the Court of Appeals and the trial court, the delay or
the non-completion of the Project was caused by factors not
imputable to the respondent contractor. It was rather due mainly to
the persistent violations by SOB of the terms and conditions of the
contract, particularly its failure to pay 75% of the accomplished work
in US Dollars. Indeed, where one of the parties to a contract does not
perform in a proper manner the prestation which he is bound to
perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the
other party fails to perform the obligation incumbent upon him.

The petitioner, however, maintains that the payments by SOB of the
monthly billings in purely Iraqi Dinars did not render impossible the
performance of the Project by VPECI. Such posture is quite contrary to
its previous representations. In his 26 March 1987 letter to the Office
of the Middle Eastern and African Affairs (OMEAA), DFA, Manila,
petitioner's Executive Vice-President Jesus M. Taedo stated that
while VPECI had taken every possible measure to complete the
Project, the war situation in Iraq, particularly the lack of foreign
exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of
the project but the war situation in Iraq particularly the lack
of foreign exchange is proving to be a great obstacle. Our
performance counterguarantee was called last 26 October
1986 when the negotiations for a foreign currency loan with
the Italian government through Banco de Roma bogged down
following news report that Iraq has defaulted in its obligation
with major European banks. Unless the situation in Iraq is
improved as to allay the bank's apprehension, there is no
assurance that the project will ever be completed. 58
In order that the debtor may be in default it is necessary that the
following requisites be present: (1) that the obligation be demandable
and already liquidated; (2) that the debtor delays performance; and (3)
that the creditor requires the performance because it must appear
that the tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance from
VPECI because it has not yet itself performed its obligation in a proper
manner, particularly the payment of the 75% of the cost of the Project
in US Dollars. The VPECI cannot yet be said to have incurred in delay.
Even assuming that there was delay and that the delay was
attributable to VPECI, still the effects of that delay ceased upon the
renunciation by the creditor, SOB, which could be implied when the
latter granted several extensions of time to the former. 60 Besides, no
demand has yet been made by SOB against the respondent contractor.
Demand is generally necessary even if a period has been fixed in the
obligation. And default generally begins from the moment the
creditor demands judicially or extra-judicially the performance of the
obligation. Without such demand, the effects of default will not
arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of
excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all
legal remedies against the said debtor have been resorted to by the
creditor.62 It could also set up compensation as regards what the
creditor SOB may owe the principal debtor VPECI.63 In this case,
however, the petitioner has clearly waived these rights and remedies
by making the payment of an obligation that was yet to be shown to
be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the
joint venture contractor had collectibles from SOB which could be set
off with the amount covered by the performance guarantee. In
February 1987, the OMEAA transmitted to the petitioner a copy of a
telex dated 10 February 1987 of the Philippine Ambassador in
Baghdad, Iraq, informing it of the note verbale sent by the Iraqi
Ministry of Foreign Affairs stating that the past due obligations of the
joint venture contractor from the petitioner would "be deducted from
the dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA
dated 26 March 1987, the petitioner raised as among the arguments to
be presented in support of the cancellation of the counter-guarantee
the fact that the amount of ID281,414/066 retained by SOB from the
Project was more than enough to cover the counter-guarantee of
ID271,808/610; thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
The Iraqi Government does not have the foreign
exchange to fulfill its contractual obligations of paying
75% of progress billings in US dollars.
It could also be argued that the amount of

ID281,414/066 retained by SOB from the proposed
project is more than the amount of the outstanding
counterguarantee.65
In a nutshell, since the petitioner was aware of the contractor's
outstanding receivables from SOB, it should have set up compensation
as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of
the respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA,
Manila, it stated:
VPECI also maintains that the delay in the completion of the
project was mainly due to SOB's violation of contract terms

and as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a
Filipino contractor. It is for this reason that we are
constrained to seek your assistance not only in ascertaining
the veracity of Al Ahli Bank's claim that it has paid Rafidain
Bank but possibly averting such an event. As any payment
effected by the banks will complicate matters, we cannot help
underscore the urgency of VPECI's bid for government
intervention for the amicable termination of the contract and
release of the performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the
service contract and VPECI's outstanding receivables from SOB, as
well as the situation obtaining in the Project site compounded by the
Iran-Iraq war, the petitioner opted to pay the second layer guarantor
not only the full amount of the performance bond counter-guarantee
but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor
secure reimbursement from the respondents for what it has paid
under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by
the latter67 and would be legally subrogated to the rights which the
creditor has against the debtor.68 However, a person who makes
payment without the knowledge or against the will of the debtor has
the right to recover only insofar as the payment has been beneficial to
the debtor.69 If the obligation was subject to defenses on the part of
the debtor, the same defenses which could have been set up against
the creditor can be set up against the paying guarantor.70
From the findings of the Court of Appeals and the trial court, it is clear
that the payment made by the petitioner guarantor did not in any way
benefit the principal debtor, given the project status and the
conditions obtaining at the Project site at that time. Moreover, the
respondent contractor was found to have valid defenses against SOB,
which are fully supported by evidence and which have been
meritoriously set up against the paying guarantor, the petitioner in
this case. And even if the deed of undertaking and the surety bond
secured petitioner's guaranty, the petitioner is precluded from
enforcing the same by reason of the petitioner's undue payment on
the guaranty. Rights under the deed of undertaking and the surety
bond do not arise because these contracts depend on the validity of

the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of
guaranty: the debtor VPECI should have, in the first place, defaulted in
its obligation and that the creditor SOB should have first made a
demand from the principal debtor. It is only when the debtor does not
or cannot pay, in whole or in part, that the guarantor should pay. 71
When the petitioner guarantor in this case paid against the will of the
debtor VPECI, the debtor VPECI may set up against it defenses
available against the creditor SOB at the time of payment. This is the
hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the
necessary support and assistance in order to enable [Filipino
exporters and contractors to operate viably under the prevailing
economic and business conditions,"72 the petitioner should have
exercised prudence and caution under the circumstances. As aptly put
by the Court of Appeals, it would be the height of inequity to allow the
petitioner to pass on its losses to the Filipino contractor VPECI which
had sternly warned against paying the Al Ahli Bank and constantly
apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby DENIED
for lack of merit, and the decision of the Court of appeals in CA-G.R.
CV No. 39302 is AFFIRMED.
No pronouncement as to costs.
7. Bank of America vs. CA, G.R. No. 120135, March 31, 2003
G.R. No. 120135
March 31, 2003
BANK OF AMERICA NT & SA, BANK OF AMERICA

INTERNATIONAL, LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO
LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the November 29, 1994 decision of the Court of
Appeals1 and the April 28, 1995 resolution denying petitioners'
motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua

(Litonjuas, for brevity) filed a 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
General5; (c) El Challenger6; and (d) El Conqueror7; the vessels were
registered in the names of their corporations; the operation and the
funds derived therefrom were placed under the complete and
exclusive control and disposition of the petitioners; 8 and the
possession the vessels was also placed by defendant banks in the
hands of persons selected and designated by them (defendant
banks).9
The Litonjuas claimed that defendant banks as trustees did not fully
render an account of all the income derived from the operation of the
vessels as well as of the proceeds of the subsequent foreclosure sale; 10
because of the breach of their fiduciary duties and/or negligence of
the petitioners and/or the persons designated by them in the
operation of private respondents' six vessels, the revenues derived
from the operation of all the vessels declined drastically; the loans
acquired for the purchase of the four additional vessels then matured
and remained unpaid, prompting defendant banks to have all the six
vessels, including the two vessels originally owned by the private
respondents, foreclosed and sold at public auction to answer for the
obligations incurred for and in behalf of the operation of the vessels;
they (Litonjuas) lost sizeable amounts of their own personal funds
equivalent to ten percent (10%) of the acquisition cost of the four
vessels and were left with the unpaid balance of their loans with
defendant banks.11 The Litonjuas prayed for the accounting of the
revenues derived in the operation of the six vessels and of the
proceeds of the sale thereof at the foreclosure proceedings instituted
by petitioners; damages for breach of trust; exemplary damages and
attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of forum non
conveniens and lack of cause of action against them.13

On December 3, 1993, the trial court issued an Order denying the
Motion to Dismiss, thus:
"WHEREFORE, and in view of the foregoing consideration, the
Motion to Dismiss is hereby DENIED. The defendant is
therefore, given a period of ten (10) days to file its Answer to
the complaint.
"SO ORDERED."14
Instead of filing an answer the defendant banks went to the Court of
Appeals on a "Petition for Review on Certiorari" 15 which was aptly
treated by the appellate court as a petition for certiorari. They
assailed the above-quoted order as well as the subsequent denial of
their Motion for Reconsideration.16 The appellate court dismissed the
petition and denied petitioners' Motion for Reconsideration.17
Hence, herein petition anchored on the following grounds:
"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER
THE FACT THAT THE SEPARATE PERSONALITIES OF THE
PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE
FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY
SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE
PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE
THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS
NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES
TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF
FORUM
SHOULD
BE
DISTURBED.
UNDER
THE
CIRCUMSTANCES SURROUNDING THE INSTANT CASE,
DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM
NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL
JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF
FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE
DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT
OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING." 18
As to the first assigned error: Petitioners argue that the borrowers and
the registered owners of the vessels are the foreign corporations and
not private respondents Litonjuas who are mere stockholders; and
that the revenues derived from the operations of all the vessels are
deposited in the accounts of the corporations. Hence, petitioners
maintain that these foreign corporations are the legal entities that
have the personalities to sue and not herein private respondents; that
private respondents, being mere shareholders, have no claim on the
vessels as owners since they merely have an inchoate right to
whatever may remain upon the dissolution of the said foreign
corporations and after all creditors have been fully paid and
satisfied;19 and that while private respondents may have allegedly
spent amounts equal to 10% of the acquisition costs of the vessels in
question, their 10% however represents their investments as
stockholders in the foreign corporations.20
Anent the second assigned error, petitioners posit that while the
application of the principle of forum non conveniens is discretionary on
the part of the Court, said discretion is limited by the guidelines
pertaining to the private as well as public interest factors in
determining whether plaintiffs' choice of forum should be disturbed,
as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co. vs.
Reyno,22 to wit:
"Private interest factors include: (a) the relative ease of access
to sources of proof; (b) the availability of compulsory process
for the attendance of unwilling witnesses; (c) the cost of
obtaining attendance of willing witnesses; or (d) all other
practical problems that make trial of a case easy, expeditious
and inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court congestion; (b)
the local interest in having localized controversies decided at
home; (c) the avoidance of unnecessary problems in conflict of
laws or in the application of foreign law; or (d) the unfairness
of burdening citizens in an unrelated forum with jury duty." 23
In support of their claim that the local court is not the proper forum,
petitioners allege the following:
"i) The Bank of America Branches involved, as clearly
mentioned in the Complaint, are based in Hongkong and
England. As such, the evidence and the witnesses are not
readily available in the Philippines;
"ii) The loan transactions were obtained, perfected, performed,
consummated and partially paid outside the Philippines;
"iii) The monies were advanced outside the Philippines.
Furthermore, the mortgaged vessels were part of an offshore
fleet, not based in the Philippines;

"iv) All the loans involved were granted to the Private
Respondents' foreign CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the
laws of England;
"vi) The subsequent sales of the mortgaged vessels and the
application of the sales proceeds occurred and transpired outside
the Philippines, and the deliveries of the sold mortgaged vessels
were likewise made outside the Philippines;
"vii) The revenues of the vessels and the proceeds of the sales
of these vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and
"viii) Bank of America International Ltd. is not licensed nor
engaged in trade or business in the Philippines." 24
Petitioners argue further that the loan agreements, security
documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they will be
governed by the laws of England; 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, Queen's
Bench Division Commercial Court (1992-Folio No. 2098)
against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b)
ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d)
ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA;
(f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA &
(h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice, Queen's
Bench Division, Commercial Court (1992-Folio No. 2245)
against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING
COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d)

AURELIO KATIPUNAN LITONJUA.
"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 39hectare piece of real estate located in the Philippines; 28 that while the
complaint was filed only by the stockholders of the corporate
borrowers, the latter are wholly-owned by the private respondents
who are Filipinos and therefore under Philippine laws, aside from the
said corporate borrowers being but their alter-egos, they have
interests of their own in the vessels.29 Private respondents also argue
that the dismissal by the Court of Appeals of the petition for certiorari
was justified because there was neither allegation nor any showing
whatsoever by the petitioners that they had no appeal, nor any plain,
speedy, and adequate remedy in the ordinary course of law from the
Order of the trial judge denying their Motion to Dismiss; that the
remedy available to the petitioners after their Motion to Dismiss was
denied was to file an Answer to the complaint; 30 that as upheld by the
Court of Appeals, the decision of the trial court in not applying the
principle of forum non conveniens is in the lawful exercise of its
discretion.31 Finally, private respondents aver that the statement of
petitioners that the doctrine of res judicata also applies to foreign

judgment is merely an opinion advanced by them and not based on a
categorical ruling of this Court;32 and that herein private respondents
did not actually participate in the proceedings in the foreign courts. 33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss
cannot be the subject of petition for certiorari. Petitioners should
have filed an answer to the complaint, proceed to trial and await
judgment before making an appeal. As repeatedly held by this Court:
"An order denying a motion to dismiss is interlocutory and
cannot be the subject of the extraordinary petition for
certiorari or mandamus. The remedy of the aggrieved party is to
file an answer and to interpose as defenses the objections
raised in his motion to dismiss, proceed to trial, and in case of
an adverse decision, to elevate the entire case by appeal in due
course. xxx Under certain situations, recourse to certiorari or
mandamus is considered appropriate, i.e., (a) when the trial
court issued the order without or in excess of jurisdiction; (b)
where there is patent grave abuse of discretion by the trial
court; or (c) appeal would not prove to be a speedy and
adequate remedy as when an appeal would not promptly
relieve a defendant from the injurious effects of the patently
mistaken order maintaining the plaintiff's baseless action and
compelling the defendant needlessly to go through a
protracted trial and clogging the court dockets by another
futile case."34
Records show that the trial court acted within its jurisdiction when it
issued the assailed Order denying petitioners' motion to dismiss. Does
the denial of the motion to dismiss constitute a patent grave abuse of
discretion? Would appeal, under the circumstances, not prove to be a
speedy and adequate remedy? We will resolve said questions in
conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in
refusing to dismiss the complaint on the ground that plaintiffs have
no cause of action against defendants since plaintiffs are merely
stockholders of the corporations which are the registered owners of
the vessels and the borrowers of petitioners?
No. Petitioners' argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to sue,
and therefore, the complaint should be dismissed, is untenable. A case
is dismissible for lack of personality to sue upon proof that the
plaintiff is not the real party-in-interest. Lack of personality to sue

can be used as a ground for a Motion to Dismiss based on the fact that
the complaint, on the face thereof, evidently states no cause of
action.35 In San Lorenzo Village Association, Inc. vs. Court of Appeals,36 this
Court clarified that a complaint states a cause of action where it
contains three essential elements of a cause of action, namely: (1) the
legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of
said legal right. If these elements are absent, the complaint becomes
vulnerable to a motion to dismiss on the ground of failure to state a
cause of action.37 To emphasize, it is not the lack or absence of cause
of action that is a ground for dismissal of the complaint but rather the
fact that the complaint states no cause of action. 38 "Failure to state a
cause of action" refers to the insufficiency of allegation in the pleading,
unlike "lack of cause of action" which refers to the insufficiency of
factual basis for the action. "Failure to state a cause of action" may be
raised at the earliest stages of an action through a motion to dismiss
the complaint, while "lack of cause of action" may be raised any time
after the questions of fact have been resolved on the basis of
stipulations, admissions or evidence presented.39
In the case at bar, the complaint contains the three elements of a
cause of action. It alleges that: (1) plaintiffs, herein private
respondents, have the right to demand for an accounting from
defendants (herein petitioners), as trustees by reason of the fiduciary
relationship that was created between the parties involving the
vessels in question; (2) petitioners have the obligation, as trustees, to
render such an accounting; and (3) petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that
the corporate entities have juridical personalities separate and
distinct from those of the private respondents. Private respondents
maintain that the corporations are wholly owned by them and prior
to the incorporation of such entities, they were clients of petitioners
which induced them to acquire loans from said petitioners to invest
on the additional ships.
We agree with private respondents. As held in the San Lorenzo case,40
"xxx assuming that the allegation of facts constituting
plaintiffs' cause of action is not as clear and categorical as
would otherwise be desired, any uncertainty thereby arising
should be so resolved as to enable a full inquiry into the
merits of the action."
As this Court has explained in the San Lorenzo case, such a course,
would preclude multiplicity of suits which the law abhors, and
conduce to the definitive determination and termination of the
dispute. To do otherwise, that is, to abort the action on account of the
alleged fatal flaws of the complaint would obviously be indecisive and
would not end the controversy, since the institution of another action
upon a revised complaint would not be foreclosed.41
Second Issue. Should the complaint be dismissed on the ground of
forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning 'the forum
is inconvenient', emerged in private international law to deter the
practice of global forum shopping, 42 that is to prevent non-resident
litigants from choosing the forum or place wherein to bring their suit
for malicious reasons, such as to secure procedural advantages, to
annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. Under this doctrine, a court, in conflicts
of law cases, may refuse impositions on its jurisdiction where it is not
the most "convenient" or available forum and the parties are not
precluded from seeking remedies elsewhere.43
Whether a suit should be entertained or dismissed on the basis of said
doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court. 44 In the case of
Communication Materials and Design, Inc. vs. Court of Appeals,45 this Court
held that "xxx [a Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, (3) that
the Philippine Court has or is likely to have power to enforce its
decision."46 Evidently, all these requisites are present in the instant
case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs.
Court of Appeals,47 that the doctrine of forum non conveniens should not
be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of
the Rules of Court does not include said doctrine as a ground. This
Court further ruled that while it is within the discretion of the trial
court to abstain from assuming jurisdiction on this ground, it should
do so only after vital facts are established, to determine whether
special circumstances require the court's desistance; and that the
propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly
considered a matter of defense.48

Third issue. Are private respondents guilty of forum shopping because
of the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are
present and where a final judgment in one case will amount to res
judicata in the other.49 Parenthetically, for litis pendentia to be a
ground for the dismissal of an action there must be: (a) identity of the
parties or at least such as to represent the same interest in both
actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same acts; and (c) the identity in the two cases
should be such that the judgment which may be rendered in one
would, regardless of which party is successful, amount to res judicata
in the other.50
In case at bar, not all the requirements for litis pendentia are present.
While there may be identity of parties, notwithstanding the presence
of other respondents,51 as well as the reversal in positions of plaintiffs
and defendants52, still the other requirements necessary for litis
pendentia were not shown by petitioner. It merely mentioned that civil
cases were filed in Hongkong and England without however showing
the identity of rights asserted and the reliefs sought for as well as the
presence of the elements of res judicata should one of the cases be
adjudged.
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 abovequoted 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.
8. Paula Llorente vs. CA, G.R. No. 124371, November 23, 2000
FIRST DIVISION
[G.R. No. 124371. November 23, 2000]
PAULA T. LLORENTE, petitioner, vs. COURT OF APPEALS and ALICIA F.
LLORENTE, respondents.
DECISION
PARDO, J.:
The Case
The case raises a conflict of laws issue.
What is before us is an appeal from the decision of the Court of
Appeals[1] modifying that of the Regional Trial Court, Camarines Sur,
Branch 35, Iriga City[2] declaring respondent Alicia F. Llorente
(herinafter referred to as Alicia), as co-owners of whatever property
she and the deceased Lorenzo N. Llorente (hereinafter referred to as
Lorenzo) may have acquired during the twenty-five (25) years that
they lived together as husband and wife.
The Facts
The deceased Lorenzo N. Llorente was an enlisted serviceman of the
United States Navy from March 10, 1927 to September 30, 1957.[3]
On February 22, 1937, Lorenzo and petitioner Paula Llorente
(hereinafter referred to as Paula) were married before a parish priest,
Roman Catholic Church, in Nabua, Camarines Sur.[4]
Before the outbreak of the Pacific War, Lorenzo departed for the
United States and Paula stayed in the conjugal home in barrio
Antipolo, Nabua, Camarines Sur.[5]
On November 30, 1943, Lorenzo was admitted to United States
citizenship and Certificate of Naturalization No. 5579816 was issued in
his favor by the United States District Court, Southern District of New
York.[6]
Upon the liberation of the Philippines by the American Forces in 1945,
Lorenzo was granted an accrued leave by the U. S. Navy, to visit his
wife and he visited the Philippines.[7] He discovered that his wife

Paula was pregnant and was living in and having an adulterous
relationship with his brother, Ceferino Llorente.[8]
On December 4, 1945, Paula gave birth to a boy registered in the Office
of the Registrar of Nabua as Crisologo Llorente, with the certificate
stating that the child was not legitimate and the line for the fathers
name was left blank.[9]
Lorenzo refused to forgive Paula and live with her. In fact, on February
2, 1946, the couple drew a written agreement to the effect that (1) all
the family allowances allotted by the United States Navy as part of
Lorenzos salary and all other obligations for Paulas daily maintenance
and support would be suspended; (2) they would dissolve their marital
union in accordance with judicial proceedings; (3) they would make a
separate agreement regarding their conjugal property acquired
during their marital life; and (4) Lorenzo would not prosecute Paula
for her adulterous act since she voluntarily admitted her fault and
agreed to separate from Lorenzo peacefully. The agreement was
signed by both Lorenzo and Paula and was witnessed by Paulas father
and stepmother. The agreement was notarized by Notary Public Pedro
Osabel.[10]
Lorenzo returned to the United States and on November 16, 1951 filed
for divorce with the Superior Court of the State of California in and
for the County of San Diego. Paula was represented by counsel, John
Riley, and actively participated in the proceedings. On November 27,
1951, the Superior Court of the State of California, for the County of
San Diego found all factual allegations to be true and issued an
interlocutory judgment of divorce.[11]
On December 4, 1952, the divorce decree became final.[12]
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.[13]
Apparently, Alicia had no knowledge of the first marriage even if they
resided in the same town as Paula, who did not oppose the marriage
or cohabitation.[14]
From 1958 to 1985, Lorenzo and Alicia lived together as husband and
wife.[15] Their twenty-five (25) year union produced three children,
Raul, Luz and Beverly, all surnamed Llorente.[16]
On March 13, 1981, Lorenzo executed a Last Will and Testament. The
will was notarized by Notary Public Salvador M. Occiano, duly signed
by Lorenzo with attesting witnesses Francisco Hugo, Francisco
Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his
property to Alicia and their three children, to wit:
(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my

residential house and lot, located at San Francisco, Nabua, Camarines
Sur, Philippines, including ALL the personal properties and other
movables or belongings that may be found or existing therein;
(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to
my children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente,
in equal shares, all my real properties whatsoever and wheresoever
located, specifically my real properties located at Barangay Aro-Aldao,
Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur;
Barangay Baras, Sitio Puga, Nabua, Camarines Sur; and Barangay
Paloyon, Sitio Nalilidong, Nabua, Camarines Sur;
(3) I likewise give and bequeath exclusively unto my wife Alicia R.
Fortuno and unto my children, Raul F. Llorente, Luz F. Llorente and
Beverly F. Llorente, in equal shares, my real properties located in
Quezon City Philippines, and covered by Transfer Certificate of Title
No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by
Transfer Certificate of Title Nos. 124196 and 165188, both of the
Registry of Deeds of the province of Rizal, Philippines;
(4) That their respective shares in the above-mentioned properties,
whether real or personal properties, shall not be disposed of, ceded,
sold and conveyed to any other persons, but could only be sold, ceded,
conveyed and disposed of by and among themselves;
(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of
this my Last Will and Testament, and in her default or incapacity of
the latter to act, any of my children in the order of age, if of age;
(6) I hereby direct that the executor named herein or her lawful
substitute should served (sic) without bond;
(7) I hereby revoke any and all my other wills, codicils, or
testamentary dispositions heretofore executed, signed, or published,
by me;
(8) It is my final wish and desire that if I die, no relatives of mine in
any degree in the Llorentes Side should ever bother and disturb in any
manner whatsoever my wife Alicia R. Fortunato and my children with
respect to any real or personal properties I gave and bequeathed
respectively to each one of them by virtue of this Last Will and
Testament.[17]
On December 14, 1983, Lorenzo filed with the Regional Trial Court,
Iriga, Camarines Sur, a petition for the probate and allowance of his
last will and testament wherein Lorenzo moved that Alicia be
appointed Special Administratrix of his estate.[18]
On January 18, 1984, the trial court denied the motion for the reason
that the testator Lorenzo was still alive.[19]

On January 24, 1984, finding that the will was duly executed, the trial
court admitted the will to probate.[20]
On June 11, 1985, before the proceedings could be terminated, Lorenzo
died.[21]
On September 4, 1985, Paula filed with the same court a petition[22]
for letters of administration over Lorenzos estate in her favor. Paula
contended (1) that she was Lorenzos surviving spouse, (2) that the
various property were acquired during their marriage, (3) that
Lorenzos will disposed of all his property in favor of Alicia and her
children, encroaching on her legitime and 1/2 share in the conjugal
property.[23]
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc.
No. IR-755), a petition for the issuance of letters testamentary.[24]
On October 14, 1985, without terminating the testate proceedings, the
trial court gave due course to Paulas petition in Sp. Proc. No. IR-888.
[25]
On November 6, 13 and 20, 1985, the order was published in the
newspaper Bicol Star.[26]
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:
Wherefore, considering that this court has so found that the divorce
decree granted to the late Lorenzo Llorente is void and inapplicable in
the Philippines, therefore the marriage he contracted with Alicia
Fortunato on January 16, 1958 at Manila is likewise void. This being so
the petition of Alicia F. Llorente for the issuance of letters
testamentary is denied. Likewise, she is not entitled to receive any
share from the estate even if the will especially said so her
relationship with Lorenzo having gained the status of paramour
which is under Art. 739 (1).
On the other hand, the court finds the petition of Paula Titular
Llorente, meritorious, and so declares the intrinsic disposition of the
will of Lorenzo Llorente dated March 13, 1981 as void and declares her
entitled as conjugal partner and entitled to one-half of their conjugal
properties, and as primary compulsory heir, Paula T. Llorente is also
entitled to one-third of the estate and then one-third should go to the
illegitimate children, Raul, Luz and Beverly, all surname (sic) Llorente,
for them to partition in equal shares and also entitled to the
remaining free portion in equal shares.
Petitioner, Paula Llorente is appointed legal administrator of the
estate of the deceased, Lorenzo Llorente. As such let the
corresponding letters of administration issue in her favor upon her

filing a bond in the amount (sic) of P100,000.00 conditioned for her to
make a return to the court within three (3) months a true and
complete inventory of all goods, chattels, rights, and credits, and
estate which shall at any time come to her possession or to the
possession of any other person for her, and from the proceeds to pay
and discharge all debts, legacies and charges on the same, or such
dividends thereon as shall be decreed or required by this court; to
render a true and just account of her administration to the court
within one (1) year, and at any other time when required by the court
and to perform all orders of this court by her to be performed.
On the other matters prayed for in respective petitions for want of
evidence could not be granted.
SO ORDERED.[27]
In time, Alicia filed with the trial court a motion for reconsideration of
the aforequoted decision.[28]
On September 14, 1987, the trial court denied Alicias motion for
reconsideration but modified its earlier decision, stating that Raul and
Luz Llorente are not children legitimate or otherwise of Lorenzo since
they were not legally adopted by him.[29] Amending its decision of
May 18, 1987, the trial court declared Beverly Llorente as the only
illegitimate child of Lorenzo, entitling her to one-third (1/3) of the
estate and one-third (1/3) of the free portion of the estate.[30]
On September 28, 1987, respondent appealed to the Court of Appeals.
[31]
On July 31, 1995, the Court of Appeals promulgated its decision,
affirming with modification the decision of the trial court in this wise:
WHEREFORE, the decision appealed from is hereby AFFIRMED with
the MODIFICATION that Alicia is declared as co-owner of whatever
properties she and the deceased may have acquired during the
twenty-five (25) years of cohabitation.
SO ORDERED.[32]
On August 25, 1995, petitioner filed with the Court of Appeals a
motion for reconsideration of the decision.[33]
On March 21, 1996, the Court of Appeals,[34] denied the motion for
lack of merit.
Hence, this petition.[35]
The Issue
Stripping the petition of its legalese and sorting through the various
arguments raised,[36] the issue is simple. Who are entitled to inherit

from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We remand
the case to the trial court for ruling on the intrinsic validity of the will
of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an American citizen
long before and at the time of: (1) his divorce from Paula; (2) marriage
to Alicia; (3) execution of his will; and (4) death, is duly established,
admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily
governed by foreign law.
The Civil Code clearly provides:
Art. 15. Laws relating to family rights and duties, or to the status,
condition and legal capacity of persons are binding upon citizens of
the Philippines, even though living abroad.
Art. 16. Real property as well as personal property is subject to the law
of the country where it is situated.
However, intestate and testamentary succession, both with respect to
the order of succession and to the amount of successional rights and
to the intrinsic validity of testamentary provisions, shall be regulated
by the national law of the person whose succession is under
consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found.
(emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our
courts are not authorized to take judicial notice of them. Like any
other fact, they must be alleged and proved.[37]
While the substance of the foreign law was pleaded, the Court of
Appeals did not admit the foreign law. The Court of Appeals and the
trial court called to the fore the renvoi doctrine, where the case was
referred back to the law of the decedents domicile, in this case,
Philippine law.
We note that while the trial court stated that the law of New York was
not sufficiently proven, in the same breath it made the categorical,
albeit equally unproven statement that American law follows the
domiciliary theory hence, Philippine law applies when determining
the validity of Lorenzos will.[38]
First, there is no such thing as one American law. The "national law"
indicated in Article 16 of the Civil Code cannot possibly apply to

general American law. There is no such law governing the validity of
testamentary provisions in the United States. Each State of the union
has its own law applicable to its citizens and in force only within the
State. It can therefore refer to no other than the law of the State of
which the decedent was a resident.[39] Second, there is no showing
that the application of the renvoi doctrine is called for or required by
New York State law.
The trial court held that the will was intrinsically invalid since it
contained dispositions in favor of Alice, who in the trial courts
opinion was a mere paramour. The trial court threw the will out,
leaving Alice, and her two children, Raul and Luz, with nothing.
The Court of Appeals also disregarded the will. It declared Alice
entitled to one half (1/2) of whatever property she and Lorenzo
acquired during their cohabitation, applying Article 144 of the Civil
Code of the Philippines.
The hasty application of Philippine law and the complete disregard of
the will, already probated as duly executed in accordance with the
formalities of Philippine law, is fatal, especially in light of the factual
and legal circumstances here obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.[40] we held that owing to the nationality
principle embodied in Article 15 of the Civil Code, only Philippine
nationals are covered by the policy against absolute divorces, the
same being considered contrary to our concept of public policy and
morality. In the same case, the Court ruled that aliens may obtain
divorces abroad, provided they are valid according to their national
law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,
[41] that once proven that respondent was no longer a Filipino citizen
when he obtained the divorce from petitioner, the ruling in Van Dorn
would become applicable and petitioner could very well lose her right
to inherit from him.
In Pilapil v. Ibay-Somera,[42] we recognized the divorce obtained by the
respondent in his country, the Federal Republic of Germany. There, we
stated that divorce and its legal effects may be recognized in the
Philippines insofar as respondent is concerned in view of the
nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of
Appeals must be reversed.[43] We hold that the divorce obtained by
Lorenzo H. Llorente from his first wife Paula was valid and recognized
in this jurisdiction as a matter of comity. Now, the effects of this

divorce (as to the succession to the estate of the decedent) are matters
best left to the determination of the trial court.
Validity of the Will
The Civil Code provides:
Art. 17. The forms and solemnities of contracts, wills, and other public
instruments shall be governed by the laws of the country in which
they are executed.
When the acts referred to are executed before the diplomatic or
consular officials of the Republic of the Philippines in a foreign
country, the solemnities established by Philippine laws shall be
observed in their execution. (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second
wife and children by her is glaringly shown in the will he executed.
We do not wish to frustrate his wishes, since he was a foreigner, not
covered by our laws on family rights and duties, status, condition and
legal capacity.[44]
Whether the will is intrinsically valid and who shall inherit from
Lorenzo are issues best proved by foreign law which must be pleaded
and proved. Whether the will was executed in accordance with the
formalities required is answered by referring to Philippine law. In fact,
the will was duly probated.
As a guide however, the trial court should note that whatever public
policy or good customs may be involved in our system of legitimes,
Congress did not intend to extend the same to the succession of
foreign nationals. Congress specifically left the amount of
successional rights to the decedent's national law.[45]
Having thus ruled, we find it unnecessary to pass upon the other
issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals in CA-G. R. SP No. 17446 promulgated on July 31, 1995 is SET
ASIDE.
In lieu thereof, the Court REVERSES the decision of the Regional Trial
Court and RECOGNIZES as VALID the decree of divorce granted in
favor of the deceased Lorenzo N. Llorente by the Superior Court of the
State of California in and for the County of San Diego, made final on
December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for
determination of the intrinsic validity of Lorenzo N. Llorentes will and

determination of the parties successional rights allowing proof of
foreign law with instructions that the trial court shall proceed with all
deliberate dispatch to settle the estate of the deceased within the
framework of the Rules of Court.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ.,
concur.
[1] In CA-G. R. SP. No. 17446, promulgated on July 31, 1995, LipanaReyes+, J., ponente, Torres, Jr. and Hofilena, JJ., concurring.
[2] In Spec. Proc. No. IR-755 (In the Matter of the Probate and
Allowance of the Last Will and Testament of Lorenzo N. Llorente,
Lorenzo N. Llorente, Petitioner) and Spec. Proc. No. IR-888 (Petition
for the Grant of Letters of Administration for the Estate of Lorenzo N.
Llorente, Paula T. Llorente, Petitioner), dated May 18, 1987, Judge
Esteban B. Abonal, presiding.
[3] Decision, Court of Appeals, Rollo, p. 51.
[4] Exh. B, Trial Court Folder of Exhibits, p. 61.
[5] Ibid.
[6] This was issued pursuant to Lorenzos petition, Petition No.
4708849, filed with the U.S. Court. Exhs. H and H-3 Trial Court Folder
of Exhibits, p. 157, 159.
[7] Decision, Court of Appeals, Rollo, p. 51; Exh. B, Trial Court Folder of
Exhibits, p. 61.
[8] Ibid.
[9] Exh. A, Trial Court Folder of Exhibits, p. 60.
[10] Exh. B-1 Trial Court Folder of Exhibits, p. 62.
[11] Exh. D, Trial Court Folder of Exhibits, pp. 63-64.
[12] Exh. E, Trial Court Folder of Exhibits, p. 69.
[13] Exh. F, Trial Court Folder of Exhibits, p. 148.
[15] Comment, Rollo, p. 147.

[17] Exh. A, Trial Court Folder of Exhibits, pp. 3-4; Decision, Court of
Appeals, Rollo, p. 52.
[18] Docketed as Spec. Proc. No. IR-755.
[19] Decision, RTC, Rollo, p. 37.
[20] Ibid.
[21] Ibid.
[22] Docketed as Spec. Proc. No. IR-888.
[23] Decision, RTC, Rollo, p. 38.
[25] Ibid., pp. 52-53.
[26] Ibid., p. 53.
[27] RTC Decision, Rollo, p. 37.
[28] Order, Regional Trial Court in Spec. Proc. Nos. IR-755 and 888,
Rollo, p. 46.
[29] Citing Article 335 of the Civil Code, which states, The following
cannot adopt: xxx
(3) a married person, without the consent of the other spouse; xxx,
the trial court reasoned that since the divorce obtained by Lorenzo
did not dissolve his first marriage with Paula, then the adoption of
Raul and Luz was void, as Paula did not give her consent to it.
[30] Order, Regional Trial Court, Rollo, p. 47.
[31] Docketed as CA-G. R. SP No. 17446.
[33] On August 31, 1995, petitioner also filed with this Court a verified
complaint against the members of the Special Thirteenth Division,
Court of Appeals, Associate Justices Justo P. Torres, Jr., Celia LipanaReyes + and Hector Hofilena for gross ignorance of the law, manifest
incompetence and extreme bias (Rollo, p. 15).
[34] Again with Associate Justice Celia Lipana-Reyes+, ponente,
concurred in by Associate Justices Justo P. Torres, Jr. and Hector
Hofilena (Former Special Thirteenth Division).
[35] Filed on May 10, 1996, Rollo, pp. 9-36.
[36] Petitioner alleges (1) That the Court of Appeals lost its jurisdiction
over the case when it issued the resolution denying the motion for
reconsideration; (2) That Art. 144 of the Civil Case has been repealed
by Arts. 253 and 147 of the Family Code and (3) That Alicia and her
children not are entitled to any share in the estate of the deceased
(Rollo, p. 19).
[37] Collector of Internal Revenue v. Fisher, 110 Phil. 686 (1961).
[38] Joint Record on Appeal, p. 255; Rollo, p. 40.
[39] In Re: Estate of Edward Christensen, Aznar v. Helen Garcia, 117
Phil. 96 (1963).
[40] 139 SCRA 139 (1985).
[41] 300 SCRA 406 (1998).
[42] 174 SCRA 653 (1989).
[43] The ruling in the case of Tenchavez v. Escano (122 Phil. 752 [1965])
that provides that a foreign divorce between Filipino citizens sought
and decreed after the effectivity of the present civil code is not
entitled to recognition as valid in this jurisdiction is NOT applicable in
the case at bar as Lorenzo was no longer a Filipino citizen when he
obtained the divorce.
[44] Article 15, Civil Code provides Laws relating to family rights and
duties, or to the status, condition and legal capacity of persons are
binding upon citizens of the Philippines, even though living abroad.
(Underscoring ours)
[45] Bellis v. Bellis, 126 Phil. 726 (1967).
9. Bank of America vs. American Realty Corporation, G.R. No. 133876,

December 29, 1999
G.R. No. 133876 December 29, 1999
BANK OF AMERICA, NT and SA, petitioner,
vs.
AMERICAN REALTY CORPORATION and COURT OF APPEALS,
respondents.
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real estate
mortgage constituted over a third party mortgagor's property
situated in the Philippines by filing an action for the collection of the
principal loan before foreign courts?
Sought to be reversed in the instant petition for review on certiorari

under Rule 45 of the Rules of Court are the decision 1 of public
respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on
30 September 1997 and its resolution, 2 dated 22 May 1998, denying
petitioner's motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international
banking and financing institution duly licensed to do business in the
Philippines, organized and existing under and by virtue of the laws of
the State of California, United States of America while private
respondent American Realty Corporation (ARC) is a domestic
corporation.
Bank of America International Limited (BAIL), on the other hand, is a
limited liability company organized and existing under the laws of
England.
As borne by the records, BANTSA and BAIL on several occasions
granted three major multi-million United States (US) Dollar loans to
the following corporate borrowers: (1) Liberian Transport Navigation,
S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as "borrowers"), all of which are
existing under and by virtue of the laws of the Republic of Panama
and
are
foreign
affiliates
of
private
respondent. 3
Due to the default in the payment of the loan amortizations, BANTSA
and the corporate borrowers signed and entered into restructuring
agreements. As additional security for the restructured loans, private
respondent ARC as third party mortgagor executed two real estate
mortgages, 4 dated 17 February 1983 and 20 July 1984, over its parcels
of land including improvements thereon, located at Barrio Sto. Cristo,
San Jose Del Monte, Bulacan, and which are covered by Transfer
Certificate of Title Nos. T-78759, T-78760, T-78761, T-78762 and T78763.
Eventually, the corporate borrowers defaulted in the payment of the
restructured loans prompting petitioner BANTSA to file civil actions 5
before foreign courts for the collection of the principal loan, to wit:
a) In England, in its High Court of
Justice, Queen's Bench Division,
Commercial Court (1992-Folio No 2098)
against Liberian Transport Navigation
S.A., Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping
Company S.A., Eddie Navigation Corp.,
S.A., Eduardo Katipunan Litonjua and

Aurelio Katipunan Litonjua on June 17,
1992.
b) In England, in its High Court of
Justice, Queen's Bench Division,
Commercial Court (1992-Folio No.
2245) against El Challenger S.A.,
Espriona Shipping Company S.A.,
Eduardo Katipuan Litonjua & Aurelio
Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court
of Hongkong High Court (Action No.
4039 of 1992) against Eshley Compania
Naviera S.A., El Challenger S.A.,
Espriona Shipping Company S.A.
Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Inc., Aurelio
Katipunan Litonjua, Jr. and Eduardo
Katipunan Litonjua on November 19,
1992; and
d) In Hongkong, in the Supreme Court
of Hongkong High Court (Action No.
4040 of 1992) against Eshley Compania
Naviera S.A., El Challenger S.A.,
Espriona Shipping Company, S.A.,
Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Jr. and
Eduardo Katipunan Litonjua on
November 21, 1992.
In the civil suits instituted before the foreign courts, private
respondent ARC, being a third party mortgagor, was private not
impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the
Provincial Sheriff of Bulacan, Philippines an application for
extrajudicial foreclosure 6 of real estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged

real properties were sold at public auction in an extrajudicial
foreclosure sale, with Integrated Credit and Corporation Services Co
(ICCS) as the highest bidder for the sum of Twenty four Million Pesos
(P24,000.000.00). 7
On 12 February 1993, private respondent filed before the Pasig
Regional Trial Court, Branch 159, an action for damages 8 against the
petitioner, for the latter's act of foreclosing extrajudicially the real
estate mortgages despite the pendency of civil suits before foreign
courts for the collection of the principal loan.
In its answer 9 petitioner alleged that the rule prohibiting the
mortgagee from foreclosing the mortgage after an ordinary suit for
collection has been filed, is not applicable in the present case,
claiming that:
a) The plaintiff, being a mere third party mortgagor
and not a party to the principal restructuring
agreements, was never made a party defendant in the
civil cases filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed
in the Philippines since the civil actions were filed in
Hongkong and England. As such, any decisions (sic)
which may be rendered in the abovementioned courts
are not (sic) enforceable in the Philippines unless a
separate action to enforce the foreign judgments is
first filed in the Philippines, pursuant to Rule 39,
Section 50 of the Revised Rules of Court.
c) Under English Law, which is the governing law
under the principal agreements, the mortgagee does
not lose its security interest by filing civil actions for
sums of money.
On 14 December 1993, private respondent filed a motion for
suspension 10 of the redemption period on the ground that "it cannot
exercise said right of redemption without at the same time waiving or
contradicting its contentions in the case that the foreclosure of the
mortgage on its properties is legally improper and therefore invalid."
In an order 11 dated 28 January 1994, the trial court granted the
private respondent's motion for suspension after which a copy of said
order was duly received by the Register of Deeds of Meycauayan,
Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties
at the foreclosure sale, consolidated its ownership over the real

properties, resulting to the issuance of Transfer Certificate of Title
Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor,
ICCS sold the real properties to Stateland Investment Corporation for
the amount of Thirty Nine Million Pesos (P39,000,000.00). 12
Accordingly, Transfer Certificate of Title Nos. T-187781(m), T187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued in
the latter's name.
After trial, the lower court rendered a decision 13 in favor of private
respondent ARC dated 12 May 1993, the decretal portion of which
reads:
WHEREFORE, judgment is hereby rendered declaring
that the filing in foreign courts by the defendant of
collection suits against the principal debtors operated
as a waiver of the security of the mortgages.
Consequently, the plaintiff's rights as owner and
possessor of the properties then covered by Transfer
Certificates of Title Nos. T-78759, T-78762, T-78763, T78760 and T-78761, all of the Register of Deeds of
Meycauayan, Bulacan, Philippines, were violated when
the defendant caused the extrajudicial foreclosure of
the mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay
the plaintiff the following sums, all with legal interest
thereon from the date of the filing of the complaint up
to the date of actual payment:
1) Actual or compensatory damages in the amount of
Ninety Nine Million Pesos (P99,000,000.00);
2) Exemplary damages in the amount of Five Million
Pesos (P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the
lower court prompting petitioner to file a motion for reconsideration
which the appellate court denied.
Hence, the instant petition for review 14 on certiorari where herein
petitioner BANTSA ascribes to the Court of Appeals the following
assignment of errors:
1. The Honorable Court of Appeals

disregarded the doctrines laid down by
this Hon. Supreme Court in the cases
of Caltex Philippines, Inc. vs. Intermediate
Appellate Court docketed as G.R. No.
74730 promulgated on August 25, 1989
and Philippine Commercial International
Bank vs. IAC, 196 SCRA 29 (1991 case),
although said cases were duly cited,
extensively discussed and specifically
mentioned, as one of the issues in the
assignment of errors found on page 5
of the decision dated September 30,
1997.
2. The Hon. Court of Appeals acted
with grave abuse of discretion when it
awarded the private respondent actual
and exemplary damages totalling
P171,600,000.00, as of July 12, 1998
although such huge amount was not
asked nor prayed for in private
respondent's complaint, is contrary to
law and is totally unsupported by
evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioner's act
of filing a collection suit against the
principal debtors for the recovery of
the loan before foreign courts
constituted a waiver of the remedy of
foreclosure.
2. Whether or not the award by the
lower court of actual and exemplary
damages in favor of private
respondent ARC, as third-party
mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that
a waiver of the remedy of foreclosure requires the concurrence of two
requisites: an ordinary civil action for collection should be filed and
subsequently a final judgment be correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to collect
the principal loan does not suffice; a final judgment must be secured
and obtained in the personal action so that waiver of the remedy of
foreclosure may be appreciated. To put it differently, absent any of the
two requisites, the mortgagee-creditor is deemed not to have waived
the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioner's arguments untenable and
upholds the jurisprudence laid down in Bachrach 15 and similar cases
adjudicated thereafter, thus:
In the absence of express statutory provisions, a
mortgage creditor may institute against the mortgage
debtor either a personal action or debt or a real action
to foreclose the mortgage. In other words, he may he
may pursue either of the two remedies, but not both.
By such election, his cause of action can by no means
be impaired, for each of the two remedies is complete
in itself. Thus, an election to bring a personal action
will leave open to him all the properties of the debtor
for attachment and execution, even including the
mortgaged property itself. And, if he waives such
personal action and pursues his remedy against the
mortgaged property, an unsatisfied judgment thereon
would still give him the right to sue for a deficiency
judgment, in which case, all the properties of the
defendant, other than the mortgaged property, are
again open to him for the satisfaction of the
deficiency. In either case, his remedy is complete, his
cause of action undiminished, and any advantages
attendant to the pursuit of one or the other remedy
are purely accidental and are all under his right of
election. On the other hand, a rule that would
authorize the plaintiff to bring a personal action
against the debtor and simultaneously or successively
another action against the mortgaged property, would
result not only in multiplicity of suits so offensive to
justice (Soriano vs. Enriques, 24 Phil. 584) and
obnoxious to law and equity (Osorio vs. San Agustin,
25 Phil., 404), but also in subjecting the defendant to
the vexation of being sued in the place of his residence
or of the residence of the plaintiff, and then again in
the place where the property lies.
In Danao vs. Court of Appeals, 16 this Court, reiterating jurisprudence
enunciated in Manila Trading and Supply Co vs. Co Kim 17 and Movido vs.
RFC, 18 invariably held:
. . . The rule is now settled that a mortgage creditor
may elect to waive his security and bring, instead, an
ordinary action to recover the indebtedness with the
right to execute a judgment thereon on all the
properties of the debtor, including the subject matter
of the mortgage . . . , subject to the qualification that if he
fails in the remedy by him elected, he cannot pursue further
the remedy he has waived. (Emphasis Ours)
Anent real properties in particular, the Court has laid down the rule
that a mortgage creditor may institute against the mortgage debtor
either a personal action for debt or a real action to foreclose the
mortgage. 19
In our jurisdiction, the remedies available to the mortgage creditor
are deemed alternative and not cumulative. Notably, an election of
one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or
upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provision of Rule 68 of the of the 1997 Rules
of Civil Procedure. As to extrajudicial foreclosure, such remedy is
deemed elected by the mortgage creditor upon filing of the petition
not with any court of justice but with the Office of the Sheriff of the
province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real estate
mortgages over its properties as security for the debt of the principal
debtors. By doing so, private respondent subjected itself to the
liabilities of a third party mortgagor. Under the law, third persons who
are not parties to a loan may secure the latter by pledging or
mortgaging their own property. 20
Notwithstanding, there is no legal provision nor jurisprudence in our
jurisdiction which makes a third person who secures the fulfillment of
another's obligation by mortgaging his own property, to be solidarily
bound with the principal obligor. The signatory to the principal
contractloanremains to be primarily bound. It is only upon default
of the latter that the creditor may have recourse on the mortgagors
by foreclosing the mortgaged properties in lieu of an action for the
recovery of the amount of the loan. 21
In the instant case, petitioner's contention that the requisites of filing
the action for collection and rendition of final judgment therein

should concur, is untenable.
Thus, in Cerna vs. Court of Appeals, 22 we agreed with the petitioner in
said case, that the filing of a collection suit barred the foreclosure of
the mortgage:
A mortgagee who files a suit for collection abandons
the remedy of foreclosure of the chattel mortgage
constituted over the personal property as security for
the debt or value of the promissory note when he
seeks to recover in the said collection suit.
. . . When the mortgagee elects to file a suit for
collection, not foreclosure, thereby abandoning the
chattel mortgage as basis for relief, he clearly
manifests his lack of desire and interest to go after the
mortgaged property as security for the promissory
note . . . .
Contrary to petitioner's arguments, we therefore reiterate the rule,
for clarity and emphasis, that the mere act of filing of an ordinary
action for collection operates as a waiver of the mortgage-creditor's
remedy to foreclose the mortgage. By the mere filing of the ordinary
action for collection against the principal debtors, the petitioner in
the present case is deemed to have elected a remedy, as a result of
which a waiver of the other necessarily must arise. Corollarily, no final
judgment in the collection suit is required for the rule on waiver to
apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case
relied upon by petitioner, supposedly to buttress its contention, this
Court had occasion to rule that the mere act of filing a collection suit
for the recovery of a debt secured by a mortgage constitutes waiver of
the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action
which is non-payment of the debt. Nevertheless, alternative remedies
are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule
against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co.,
Inc, vs. Icarangal. 24
For non-payment of a note secured by mortgage, the
creditor has a single cause of action against the debtor.
This single cause of action consists in the recovery of
the credit with execution of the security. In other

words, the creditor in his action may make two
demands, the payment of the debt and the foreclosure
of his mortgage. But both demands arise from the
same cause, the non-payment of the debt, and for that
reason, they constitute a single cause of action.
Though the debt and the mortgage constitute separate
agreements, the latter is subsidiary to the former, and
both refer to one and the same obligation.
Consequently, there exists only one cause of action for
a single breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up his
single cause of action by filing a complaint for
payment of the debt, and thereafter another
complaint for foreclosure of the mortgage. If he does
so, the filing of the first complaint will bar the
subsequent complaint. By allowing the creditor to file
two separate complaints simultaneously or
successively, one to recover his credit and another to
foreclose his mortgage, we will, in effect, be
authorizing him plural redress for a single breach of
contract at so much cost to the courts and with so
much vexation and oppression to the debtor.
Petitioner further faults the Court of Appeals for allegedly
disregarding the doctrine enunciated in Caltex wherein this High
Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this
rule to the letter but declare that it is the collection
suit which was waived and/or abandoned. This ruling
is more in harmony with the principles underlying our
judicial system. It is of no moment that the collection
suit was filed ahead, what is determinative is the fact
that the foreclosure proceedings ended even before the
decision in the collection suit was rendered. . . .
Notably, though, petitioner took the Caltex ruling out of context. We
must stress that the Caltex case was never intended to overrule the
well-entrenched doctrine enunciated Bachrach, which to our mind
still finds applicability in cases of this sort. To reiterate, Bachrach is
still good law.
We then quote the decision 25 of the trial court, in the present case,
thus:
The aforequoted ruling in Caltex is the exception
rather than the rule, dictated by the peculiar

circumstances obtaining therein. In the said case, the
Supreme Court chastised Caltex for making ". . . a mockery
of our judicial system when it initially filed a collection
suit then, during the pendency thereof, foreclosed
extrajudicially the mortgaged property which secured
the indebtedness, and still pursued the collection suit
to the end." Thus, to prevent a mockery of our judicial
system", the collection suit had to be nullified because
the foreclosure proceedings have already been pursued to
their end and can no longer be undone.
xxx xxx xxx
In the case at bar, it has not been shown whether the
defendant pursued to the end or are still pursuing the
collection suits filed in foreign courts. There is no occasion,
therefore, for this court to apply the exception laid down by
the Supreme Court in Caltex by nullifying the collection
suits. Quite obviously, too, the aforesaid collection suits are
beyond the reach of this Court. Thus the only way the
court may prevent the spector of a creditor having
"plural redress for a single breach of contract" is by
holding, as the Court hereby holds, that the defendant
has waived the right to foreclose the mortgages
constituted by the plaintiff on its properties originally
covered by Transfer Certificates of Title Nos. T-78759,
T-78762, T-78760 and T-78761. (RTC Decision pp., 1011)
In this light, the actuations of Caltex are deserving of severe criticism,
to say the least. 26
Moreover, petitioner attempts to mislead this Court by citing the case
of PCIB vs. IAC. 27 Again, petitioner tried to fit a square peg in a round
hole. It must be stressed that far from overturning the doctrine laid
down in Bachrach, this Court in PCIB buttressed its firm stand on this
issue by declaring:
While the law allows a mortgage creditor to either
institute a personal action for the debt or a real action
to foreclosure the mortgage, he cannot pursue both
remedies simultaneously or successively as was done
by PCIB in this case.
xxx xxx xxx
Thus, when the PCIB filed Civil Case No. 29392 to
enforce payment of the 1.3 million promissory note

secured by real estate mortgages and subsequently
filed a petition for extrajudicial foreclosure, it violates
the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by
the expediency of filing four civil suits before foreign courts,
necessarily abandoned the remedy to foreclose the real estate
mortgages constituted over the properties of third-party mortgagor
and herein private respondent ARC. Moreover, by filing the four civil
actions and by eventually foreclosing extrajudicially the mortgages,
petitioner in effect transgressed the rules against splitting a cause of
action well-enshrined in jurisprudence and our statute books.
In Bachrach, this Court resolved to deny the creditor the remedy of
foreclosure after the collection suit was filed, considering that the
creditor should not be afforded "plural redress for a single breach of
contract." For cause of action should not be confused with the remedy
created for its enforcement. 28
Notably, it is not the nature of the redress which is crucial but the
efficacy of the remedy chosen in addressing the creditor's cause.
Hence, a suit brought before a foreign court having competence and
jurisdiction to entertain the action is deemed, for this purpose, to be
within the contemplation of the remedy available to the mortgageecreditor. This pronouncement would best serve the interest of justice
and fair play and further discourage the noxious practice of splitting
up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according
to petitioner is the governing law with regard to the principal
agreements, the mortgagee does not lose its security interest by
simply filing civil actions for sums of money. 29
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its
crumbling cause. In the case at bench, Philippine law shall apply
notwithstanding the evidence presented by petitioner to prove the
English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded
principle in our jurisdiction that there is no judicial notice of any
foreign law. A foreign law must be properly pleaded and proved as a
fact. 30 Thus, if the foreign law involved is not properly pleaded and
proved, our courts will presume that the foreign law is the same as
our
local
or
domestic
or
internal
law. 31 This is what we refer to as the doctrine of processual

presumption.
In the instant case, assuming arguendo that the English Law on the
matter were properly pleaded and proved in accordance with Section
24, Rule 132 of the Rules of Court and the jurisprudence laid down in
Yao
Kee,
et
al.
vs.
Sy-Gonzales, 32 said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a
sound and established public policy of the forum, the said foreign law,
judgment or order shall not be applied. 33
Additionally, prohibitive laws concerning persons, their acts or
property, and those which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed
upon in a foreign country. 34
The public policy sought to be protected in the instant case is the
principle imbedded in our jurisdiction proscribing the splitting up of a
single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent
If two or more suits are instituted on the basis of the
same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for
the dismissal of the others.
Moreover, foreign law should not be applied when its application
would work undeniable injustice to the citizens or residents of the
forum. To give justice is the most important function of law; hence, a
law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws. 35
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is
entitled to the award of actual or compensatory damages inasmuch as
the act of petitioner BANTSA in extrajudicially foreclosing the real
estate mortgages constituted a clear violation of the rights of herein
private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of
pecuniary loss in business, trade, property, profession, job or
occupation and the same must be proved, otherwise if the proof is
flimsy and non-substantial, no damages will be given. 36 Indeed, the
question of the value of property is always a difficult one to settle as

valuation of real property is an imprecise process since real estate has
no inherent value readily ascertainable by an appraiser or by the
court. 37 The opinions of men vary so much concerning the real value
of property that the best the courts can do is hear all of the witnesses
which the respective parties desire to present, and then, by carefully
weighing that testimony, arrive at a conclusion which is just and
equitable. 38
In the instant case, petitioner assails the Court of Appeals for relying
heavily on the valuation made by Philippine Appraisal Company. In
effect, BANTSA questions the act of the appellate court in giving due
weight to the appraisal report composed of twenty three pages, signed
by Mr. Lauro Marquez and submitted as evidence by private
respondent. The appraisal report, as the records would readily show,
was corroborated by the testimony of Mr. Reynaldo Flores, witness for
private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee
formally offered as evidence the appraisal report
dated March 29, 1993 (Exhibit J, Records, p. 409),
consisting of twenty three (23) pages which set out in
detail the valuation of the property to determine its
fair market value (TSN, April 22, 1994, p. 4), in the
amount of P99,986,592.00 (TSN, ibid., p. 5), together
with the corroborative testimony of one Mr. Reynaldo
F. Flores, an appraiser and director of Philippine
Appraisal Company, Inc. (TSN, ibid., p. 3). The latter's
testimony was subjected to extensive crossexamination by counsel for defendant-appellant (TSN,
April 22, 1994, pp. 6-22). 39
In the matter of credibility of witnesses, the Court reiterates the
familiar and well-entrenched rule that the factual findings of the trial
court should be respected. 40 The time-tested jurisprudence is that
the findings and conclusions of the trial court on the credibility of
witnesses enjoy a badge of respect for the reason that trial courts have
the advantage of observing the demeanor of witnesses as they testify.
41
This Court will not alter the findings of the trial court on the
credibility of witnesses, principally because they are in a better
position to assess the same than the appellate court. 42 Besides, trial
courts are in a better position to examine real evidence as well as
observe the demeanor of witnesses. 43

Similarly, the appreciation of evidence and the assessment of the
credibility of witnesses rest primarily with the trial court. 44 In the
case at bar, we see no reason that would justify this Court to disturb
the factual findings of the trial court, as affirmed by the Court of
Appeals, with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified
the award by presenting the following ratiocination in its assailed
decision 45 , to wit:
Indeed, the Court has its own mind in the matter of
valuation. The size of the subject real properties are
(sic) set forth in their individuals titles, and the Court
itself has seen the character and nature of said
properties during the ocular inspection it conducted.
Based principally on the foregoing, the Court makes
the following observations:
1. The properties consist of about 39 hectares in Bo.
Sto. Cristo, San Jose del Monte, Bulacan, which is (sic)
not distant from Metro Manila the biggest urban
center in the Philippines and are easily accessible
through well-paved roads;
2. The properties are suitable for development into a
subdivision for low cost housing, as admitted by
defendant's own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property
have already been demolished. Houses of strong
materials are found in the vicinity of the property
(Exhs. 2, 2-1 to 2-7), and the vicinity is a growing
community. It has even been shown that the house of
the Barangay Chairman is located adjacent to the
property in question (Exh. 27), and the only remaining
piggery (named Cherry Farm) in the vicinity is about 2
kilometers away from the western boundary of the
property in question (TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the
property, as indubitably shown by the fact that on
March 18, 1994, ICCS (the buyer during the foreclosure
sale) sold the consolidated real estate properties to
Stateland Investment Corporation, in whose favor new
titles were issued, i.e., TCT Nos. T-187781(m); T187782(m), T-187783(m); T-16653P(m) and T-
166521(m) by the Register of Deeds of Meycauayan

(sic), Bulacan;
5. The fact that ICCS was able to sell the subject
properties to Stateland Investment Corporation for
Thirty Nine Million (P39,000,000.00) Pesos, which is
more than triple defendant's appraisal (Exh. 2) clearly
shows that the Court cannot rely on defendant's
aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the trial
judge on the credibility of witnesses command great respect and
consideration especially when the conclusions are supported by the
evidence on record. 46 Applying the foregoing principle, we therefore
hold that the trial court committed no palpable error in giving
credence to the testimony of Reynaldo Flores, who according to the
records, is a licensed real estate broker, appraiser and director of
Philippine Appraisal Company, Inc. since 1990. 47 As the records show,
Flores had been with the company for 26 years at the time of his
testimony.
Of equal importance is the fact that the trial court did not confine
itself to the appraisal report dated 29 March 1993, and the testimony
given by Mr. Reynaldo Flores, in determining the fair market value of
the real property. Above all these, the record would likewise show that
the trial judge in order to appraise himself of the characteristics and
condition of the property, conducted an ocular inspection where the
opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm
the ruling of the trial court as regards the valuation of the property
. . . a valuation of Ninety Nine Million Pesos
(P99,000,000.00) for the 39-hectare properties (sic)
translates to just about Two Hundred Fifty Four Pesos
(P254.00) per square meter. This appears to be, as the
court so holds, a better approximation of the fair
market value of the subject properties. This is the
amount which should be restituted by the defendant
to the plaintiff by way of actual or compensatory
damages . . . . 48
Further, petitioner ascribes error to the lower court awarding an
amount allegedly not asked nor prayed for in private respondent's
complaint.
Notwithstanding the fact that the award of actual and compensatory
damages by the lower court exceeded that prayed for in the
complaint, the same is nonetheless valid, subject to certain

qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
Sec. 5. Amendment to conform to or authorize presentation
of evidence. When issues not raised by the pleadings
are tried with the express or implied consent of the
parties, they shall be treated in all respects as if they
had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may
be made upon motion of any party at any time, even
after judgement; but failure to amend does not affect
the result of the trial of these issues. If evidence is
objected to at the trial on the ground that it is not
within the issues made by the pleadings, the court
may allow the pleadings to be amended and shall do so
with liberality if the presentation of the merits of the
action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance
to enable the amendment to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs.
Asociacion de Agricultures de Talisay-Silay, Inc. 49 citing Northern Cement
Corporation vs. Intermediate Appellate Court 50 is enlightening:
There have been instances where the Court has held
that even without the necessary amendment, the
amount proved at the trial may be validly awarded, as
in Tuazon v. Bolanos (95 Phil. 106), where we said that if
the facts shown entitled plaintiff to relief other than
that asked for, no amendment to the complaint was
necessary, especially where defendant had himself
raised the point on which recovery was based. The
appellate court could treat the pleading as amended to
conform to the evidence although the pleadings were
actually not amended. Amendment is also
unnecessary when only clerical error or non
substantial matters are involved, as we held in Bank of
the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco
vs. Diaz (75 Phil. 672), we stressed that the rule on
amendment need not be applied rigidly, particularly
where no surprise or prejudice is caused the objecting
party. And in the recent case of National Power
Corporation vs. Court of Appeals (113 SCRA 556), we held
that where there is a variance in the defendant's

pleadings and the evidence adduced by it at the trial,
the Court may treat the pleading as amended to
conform with the evidence.
It is the view of the Court that pursuant to the abovementioned rule and in light of the decisions cited, the
trial court should not be precluded from awarding an
amount higher than that claimed in the pleading
notwithstanding the absence of the required
amendment. But it is upon the condition that the
evidence of such higher amount has been presented
properly, with full opportunity on the part of the
opposing parties to support their respective
contentions and to refute each other's evidence.
The failure of a party to amend a pleading to conform
to the evidence adduced during trial does not preclude
an adjudication by the court on the basis of such
evidence which may embody new issues not raised in
the pleadings, or serve as a basis for a higher award of
damages. Although the pleading may not have been
amended to conform to the evidence submitted
during trial, judgment may nonetheless be rendered,
not simply on the basis of the issues alleged but also
the basis of issues discussed and the assertions of fact
proved in the course of trial. The court may treat the
pleading as if it had been amended to conform to the
evidence, although it had not been actually so
amended. Former Chief Justice Moran put the matter
in this way:
When evidence is presented by one
party, with the expressed or implied
consent of the adverse party, as to
issues not alleged in the pleadings,
judgment may be rendered validly as
regards those issues, which shall be
considered as if they have been raised
in the pleadings. There is implied
consent to the evidence thus
presented when the adverse party fails
to object thereto.
Clearly, a court may rule and render judgment on the
basis of the evidence before it even though the
relevant pleading had not been previously amended,
so long as no surprise or prejudice is thereby caused to

the adverse party. Put a little differently, so long as the
basis requirements of fair play had been met, as where
litigants were given full opportunity to support their
respective contentions and to object to or refute each
other's evidence, the court may validly treat the
pleadings as if they had been amended to conform to
the evidence and proceed to adjudicate on the basis of
all the evidence before it.
In the instant case, inasmuch as the petitioner was afforded the
opportunity to refute and object to the evidence, both documentary
and testimonial, formally offered by private respondent, the
rudiments of fair play are deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during the course of the
cross-examination. Under these circumstances, the court acted within
the bounds of its jurisdiction and committed no reversible error in
awarding actual damages the amount of which is higher than that
prayed for. Verily, the lower court's actuations are sanctioned by the
Rules and supported by jurisprudence.
Similarly, we affirm the grant of exemplary damages although the
amount of Five Million Pesos (P5,000,000.00) awarded, being excessive,
is subject to reduction. Exemplary or corrective damages are imposed,
by way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages. 51
Considering its purpose, it must be fair and reasonable in every case
and should not be awarded to unjustly enrich a prevailing party. 52 In
our view, an award of P50,000.00 as exemplary damages in the present
case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for
lack of merit. The decision of the Court of Appeals is hereby
AFFIRMED with MODIFICATION of the amount awarded as exemplary
damages. According, petitioner is hereby ordered to pay private
respondent the sum of P99,000,000.00 as actual or compensatory
damages; P50,000.00 as exemplary damage and the costs of suit.
SO ORDERED.
10. Asiavest Limited vs. CA, G.R. No. 128803, September 25, 1998
FG.R. No. 128803 September 25, 1998

ASIAVEST LIMITED, petitioner,
vs.
THE COURT OF APPEALS and ANTONIO HERAS, respondents.
DAVIDE, JR., J.:

In issue is the enforceability in the Philippines of a foreign judgment.
The antecedents are summarized in the 24 August 1990 Decision 1 of
Branch 107 of the Regional Trial Court of Quezon City in Civil Case No.
Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on
December 3, 1987 against the defendant Antonio Heras
praying that said defendant be ordered to pay to the
plaintiff the amounts awarded by the Hong Kong
Court Judgment dated December 28, 1984 and
amended on April 13, 1987, to wit:
1) US$1,810,265.40 or
its equivalent in Hong
Kong currency at the
time of payment with
legal interest from
December 28, 1984
until fully paid;
2) interest on the sum
of
US$1,500.00
at
9.875% per annum
from October 31, 1984
to December 28, 1984;
and
3) HK$905.00 at fixed
cost in the action; and
4) at least $80,000.00
representing
attorney's
fees,
litigation expenses and
cost, with interest
thereon from the date
of the judgment until
fully paid.
On March 3, 1988, the defendant filed a Motion to
Dismiss. However, before the court could resolve the
said motion, a fire which partially razed the Quezon
City Hall Building on June 11, 1988 totally destroyed

the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the
plaintiff, through counsel filed a Motion for
Reconstitution of Case Records. The Court, after
allowing the defendant to react thereto, granted the
said Motion and admitted the annexes attached
thereto as the reconstituted records of this case per
Order dated September 6, 1988. Thereafter, the Motion
to Dismiss, the resolution of which had been deferred;
was denied by the Court in its Order of October 4,
1988.
On October 19, 1988, defendant filed his Answer. The
case was then set for pre-trial conference. At the
conference, the parties could not arrive at any
settlement. However, they agreed on the following
stipulations of facts:
1.
The
defendant
admits the existence of
the judgment dated
December 28, 1984 as
well as its amendment
dated April 13, 1987,
but not necessarily the
authenticity or validity
thereof;
2. The plaintiff is not
doing business and is
not licensed to do
business
in
the
Philippines;
3. The residence of
defendant,
Antonio
Heras, is New Manila,
Quezon City.
The only issue for this Court to determine is, whether
or not the judgment of the Hong Kong Court has been
repelled by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud or clear mistake of
law or fact, such as to overcome the presumption
established in Section 50, Rule 39 of the Rules of Court
in favor of foreign judgments.
In view of the admission by the defendant of the

existence of the aforementioned judgment (Pls. See
Stipulations of Facts in the Order dated January 5, 1989
as amended by the Order of January 18, 1989), as well
as the legal presumption in favor of the plaintiff as
provided for in paragraph (b); Sec. 50, (Ibid.), the
plaintiff presented only documentary evidence to
show rendition, existence, and authentication of such
judgment by the proper officials concerned (Pls. See
Exhibits "A" thru "B", with their submarkings). In
addition, the plaintiff presented testimonial and
documentary evidence to show its entitlement to
attorney's fees and other expenses of litigation. . . . .
On the other hand, the defendant presented two
witnesses, namely. Fortunata dela Vega and Russel
Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect
that no writ of summons or copy of a statement of
claim of Asiavest Limited was ever served in the office
of the Navegante Shipping Agency Limited and/or for
Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his
residence in New Manila, Quezon City. Her knowledge
is based on the fact that she was the personal
secretary of Mr. Heras during his JD Transit days up to
the latter part of 1972 when he shifted or diversified
to shipping business in Hong Kong; that she was incharge of all his letters and correspondence, business
commitments, undertakings, conferences and
appointments, until October 1984 when Mr. Heras left
Hong Kong for good; that she was also the Officer-inCharge or Office Manager of Navegante Shipping
Agency LTD, a Hong Kong registered and based
company acting as ships agent, up to and until the
company closed shop sometime in the first quarter of
1985, when shipping business collapsed worldwide;
that the said company held office at 34-35 Connaught
Road, Central Hong Kong and later transferred to
Carton House at Duddel Street, Hong Kong, until the
company closed shop in 1985; and that she was certain
of such facts because she held office at Caxton House
up to the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws of
Hong Kong, and as a representative of the law office of

the defendant's counsel who made a verification of
the record of the case filed by the plaintiff in Hong
Kong against the defendant, as well as the procedure
in serving Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct
testimony, the said witness stated that:
The defendant was sued on the basis of
his personal guarantee of the
obligations of Compania Hermanos de
Navegacion S.A. There is no record
that a writ of summons was served on
the person of the defendant in Hong
Kong, or that any such attempt at
service was made. Likewise, there is no
record that a copy of the judgment of
the High Court was furnished or
served on the defendant; anyway, it is
not a legal requirement to do so under
Hong Kong laws;
a)
The
writ
of
summons or claim can
be served by the
solicitor (lawyer) of
the
claimant
or
plaintiff. In Hong Kong
there are no Court
personnel who serve
writs of summons
and/or most other
processes.
b) If the writ of
summons or claim (or
complaint)
is
not
contested,
the
claimant
or
the
plaintiff is not required
to present proof of his
claim or complaint nor
present
evidence
under oath of the claim
in order to obtain a
Judgment.
c) There is no legal
requirement that such
a Judgment or decision
rendered by the Court
in Hong Kong [to]
make a recitation of
the facts or the law
upon which the claim
is based.
d)
There
is
no
necessity to furnish
the defendant with a
copy of the Judgment
or decision rendered
against him.
e) In an action based
on a guarantee, there
is no established legal
requirement
or
obligation under Hong
Kong laws that the
creditor must first
bring
proceedings
against the principal
debtor. The creditor
can immediately go
against the guarantor.
On cross examination, Mr. Lousich stated that before
he was commissioned by the law firm of the
defendant's counsel as an expert witness and to verify
the records of the Hong Kong case, he had been acting
as counsel for the defendant in a number of
commercial matters; that there was an application for
service of summons upon the defendant outside the
jurisdiction of Hong Kong; that there was an order of
the Court authorizing service upon Heras outside of
Hong Kong, particularly in Manila or any other place
in the Philippines (p. 9, TSN, 2/14/90); that there must
be adequate proof of service of summons, otherwise
the Hong Kong Court will refuse to render judgment
(p. 10, ibid); that the mere fact that the Hong Kong
Court rendered judgment, it can be presumed that
there was service of summons; that in this case, it is
not just a presumption because there was an affidavit

stating that service was effected in [sic] a particular
man here in Manila; that such affidavit was filed by
one Jose R. Fernandez of the firm Sycip Salazar on the
21st of December 1984, and stated in essence that "on
Friday, the 23rd of November 1984 he served the 4th
defendant at No. 6 First Street, Quezon City by leaving
it at that address with Mr. Dionisio Lopez, the son-inlaw of the 4th defendant the copy of the writ and Mr.
Lopez informed me and I barely believed that he
would bring the said writ to the attention of the 4th
defendant" (pp. 11-12, ibid.); that upon filing of that
affidavit, the Court was asked and granted judgment
against the 4th defendant; and that if the summons or
claim is not contested, the claimant of the plaintiff is
not required to present proof of his claim or complaint
or present evidence under oath of the claim in order
to obtain judgment; and that such judgment can be
enforced in the same manner as a judgment rendered
after full hearing.
The trial court held that since the Hong Kong court judgment had
been duly proved, it is a presumptive evidence of a right as between
the parties; hence, the party impugning it had the burden to prove
want of jurisdiction over his person. HERAS failed to discharge that
burden. He did not testify to state categorically and under oath that
he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City residence.
As to De la Vega's testimony regarding non-service of summons, the
same was hearsay and had no probative value.
As to HERAS' contention that the Hong Kong court judgment violated
the Constitution and the procedural laws of the Philippines because it
contained no statements of the facts and the law on which it was
based, the trial court ruled that since the issue relate to procedural
matters, the law of the forum, i.e., Hong Kong laws, should govern. As
testified by the expert witness Lousich, such legalities were not
required under Hong Kong laws. The trial Court also debunked HERAS'
contention that the principle of excussion under Article 2058 of the
Civil Code of the Philippines was violated. It declared that matters of
substance are subject to the law of the place where the transaction
occurred; in this case, Hong Kong laws must govern.
The trial court concluded that the Hong Kong court judgment should
be recognized and given effect in this jurisdiction for failure of HERAS
to overcome the legal presumption in favor of the foreign judgment. It
then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering
defendant to pay to the plaintiff the following sums or
their equivalents in Philippine currency at the time of
payment: US$1,810,265.40 plus interest on the sum of
US$1,500,000.00 at 9.875% per annum from October 31,
1984 to December 28, 1984, and HK$905 as fixed cost,
with legal interests on the aggregate amount from
December 28, 1984, and to pay attorney's fees in the
sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an
award of judicial costs and an increase in attorney's fees in the
amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the motion
and instead appealed the decision to the Court of Appeals, which
docketed the appeal as CA-G.R. CV No. 29513.
In its order 2 of 2 November 1990, the trial court granted ASIAVEST's
motion for reconsideration by increasing the award of attorney's fees
to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE CURRENCY, AND
TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay
the corresponding filing fees for the increase. ASIAVEST appealed the
order requiring prior payment of filing fees. However, it later
withdrew its appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision 3 reversing
the decision of the trial court and dismissing ASIAVEST's complaint
without prejudice. It underscored the fact that a foreign judgment
does not of itself have any extraterritorial application. For it to be
given effect, the foreign tribunal should have acquired jurisdiction
over the person and the subject matter. If such tribunal has not
acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of
remedy and procedure, such as those relating to service of summons
upon the defendant are governed by the lex fori, which was, in this
case, the law of Hong Kong. Relative thereto, it gave weight to
Lousich's testimony that under the Hong Kong law, the substituted
service of summons upon HERAS effected in the Philippines by the
clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid
provided that it was done in accordance with Philippine laws. It then
stressed that where the action is in personam and the defendant is in
the Philippines, the summons should be personally served on the

defendant pursuant to Section 7, Rule 14 of the Rules of Court. 4
Substituted service may only be availed of where the defendant
cannot be promptly served in person, the fact of impossibility of
personal service should be explained in the proof of service. It also
found as persuasive HERAS' argument that instead of directly using
the clerk of the Sycip Salazar Hernandez & Gatmaitan law office, who
was not authorized by the judge of the court issuing the summons,
ASIAVEST should have asked for leave of the local courts to have the
foreign summons served by the sheriff or other court officer of the
place where service was to be made, or for special reasons by any
person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the
state to a non-resident is unavailing to give jurisdiction in an action
against him personally for money recovery." Summons should have
been personally served on HERAS in Hong Kong, for, as claimed by
ASIAVEST, HERAS was physically present in Hong Kong for nearly 14
years. Since there was not even an attempt to serve summons on
HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire
jurisdiction over HERAS. Nonetheless it did not totally foreclose the
claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a
meritorious defense against [ASIAVEST's] claims or
that [HERAS] ought to be absolved of any liability,
nevertheless, in view of the foregoing discussion,
there is a need to deviate front the findings of the
lower court in the interest of justice and fair play. This,
however, is without prejudice to whatever action
[ASIAVEST] might deem proper in order to enforce its
claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was
necessary that evidence supporting the validity of the foreign
judgment be submitted, and that our courts are not bound to give
effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court
of Appeals erred in ruling that
I.
. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT
EVIDENCE "SUPPORTING THE VALIDITY OF THE
JUDGMENT";
II.
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS
DEFECTIVE UNDER PHILIPPINES LAW;
III.
. . . SUMMONS SHOULD HAVE BEEN PERSONALLY
SERVED ON HERAS IN HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN
SERVED WITH LEAVE OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES
PHILIPPINE LAWS, THE PRINCIPLES OF SOUND
MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, 5
which was the governing law at the time this case was decided by the
trial court and respondent Court of Appeals, a foreign judgment
against a person rendered by a court having jurisdiction to pronounce
the judgment is presumptive evidence of a right as between the
parties and their successors in interest by the subsequent title.
However, the judgment may be repelled by evidence of want of
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides
that in the absence of proof to the contrary, a court, or judge acting as
such, whether in the Philippines or elsewhere, is presumed to have
acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the
burden to repel it on grounds provided for in paragraph (b) of Section
50, Rule 39 of the Rules of Court is on the party challenging the
foreign judgment HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong
Kong judgment. On the other hand, ASIAVEST presented evidence to
prove rendition, existence, and authentication of the judgment by the
proper officials. The judgment is thus presumed to be valid and
binding in the country from which it comes, until the contrary is
shown. 6 Consequently, the first ground relied upon by ASIAVEST has
merit. The presumption of validity accorded foreign judgment would
be rendered meaningless were the party seeking to enforce it be

required to first establish its validity.
The main argument raised against the Hong Kong judgment is that
the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of
remedy and procedure such as those relating to the service of process
upon the defendant are governed by the lex fori or the law of the
forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that
according to his witness Mr. Lousich, who was presented as an expert
on Hong Kong laws, there was no valid service of summons on him.
In his counter-affidavit, 8 which served as his direct testimony per
agreement of the parties, 9 Lousich declared that the record of the
Hong Kong case failed to show that a writ of summons was served
upon HERAS in Hong Kong or that any such attempt was made.
Neither did the record show that a copy of the judgment of the court
was served on HERAS. He stated further that under Hong Kong laws
(a) a writ of summons could be served by the solicitor of the claimant
or plaintiff; and (b) where the said writ or claim was not contested,
the claimant or plaintiff was not required to present proof under oath
in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified that
the Hong Kong court authorized service of summons on HERAS
outside of its jurisdiction, particularly in the Philippines. He admitted
also the existence of an affidavit of one Jose R. Fernandez of the Sycip
Salazar Hernandez & Gatmaitan law firm stating that he (Fernandez)
served summons on HERAS on 13 November 1984 at No. 6, 1st St.,
Quezon City, by leaving a copy with HERAS's son-in-law Dionisio
Lopez. 10 On redirect examination, Lousich declared that such service
of summons would be valid under Hong Kong laws provided that it
was in accordance with Philippine laws. 11
We note that there was no objection on the part of ASIAVEST on the
qualification of Mr. Lousich as an expert on the Hong Kong law. Under
Sections 24 and 25, Rule 132 of the New Rules of Evidence, the record
of public documents of a sovereign authority, tribunal, official body, or
public officer may be proved by (1) an official publication thereof or
(2) a copy attested by the officer having the legal custody thereof,
which must be accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. The
certificate may be issued by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent, or any officer in
the foreign service of the Philippines stationed in the foreign country

in which the record is kept, and authenticated by the seal of his office.
The attestation must state, in substance, that the copy is a correct
copy of the original, or a specific part thereof, as the case may be, and
must be under the official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to
prove a foreign law. An authority 12 on private international law thus
noted:
Although it is desirable that foreign law be proved in
accordance with the above rule, however, the Supreme
Court held in the case of Willamette Iron and Steel Works
v. Muzzal, 13 that Section 41, Rule 123 (Section 25, Rule
132 of the Revised Rules of Court) does not exclude the
presentation of other competent evidence to prove
the existence of a foreign law. In that case, the
Supreme Court considered the testimony under oath
of an attorney-at-law of San Francisco, California, who
quoted verbatim a section of California Civil Code and
who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to
establish the existence of said law. Accordingly, in line
with this view, the Supreme Court in the Collector of
Internal Revenue v. Fisher et al., 14 upheld the Tax Court
in considering the pertinent law of California as
proved by the respondents' witness. In that case, the
counsel for respondent "testified that as an active
member of the California Bar since 1951, he is familiar
with the revenue and taxation laws of the State of
California. When asked by the lower court to state the
pertinent California law as regards exemption of
intangible personal properties, the witness cited
Article 4, Sec. 13851 (a) & (b) of the California Internal
and Revenue Code as published in Derring's California
Code, a publication of Bancroft-Whitney Co., Inc. And
as part of his testimony, a full quotation of the cited
section was offered in evidence by respondents."
Likewise, in several naturalization cases, it was held by
the Court that evidence of the law of a foreign country
on reciprocity regarding the acquisition of citizenship,
although not meeting the prescribed rule of practice,
may be allowed and used as basis for favorable action,
if, in the light of all the circumstances, the Court is
"satisfied of the authenticity of the written proof
offered." 15 Thus, in, a number of decisions, mere

authentication of the Chinese Naturalization Law by
the Chinese Consulate General of Manila was held to
be competent proof of that law. 16
There is, however, nothing in the testimony of Mr. Lousich that
touched on the specific law of Hong Kong in respect of service of
summons either in actions in rem or in personam, and where the
defendant is either a resident or nonresident of Hong Kong. In view of
the absence of proof of the Hong Kong law on this particular issue, the
presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the
Hong Kong law on the matter is similar to the Philippine law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to
determine first whether the action is in personam, in rem, or quasi in
rem because the rules on service of summons under Rule 14 of the
Rules of Court of the Philippines apply according to the nature of the
action.
An action in personam is an action against a person on the basis of his
personal liability. An action in rem is an action against the thing itself
instead of against the person. 19 An action quasi in rem is one wherein
an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien
burdening the property. 20
In an action in personam, jurisdiction over the person of the defendant
is necessary for the court to validly try and decide the case.
Jurisdiction over the person of a resident defendant who does not
voluntarily appear in court can be acquired by personal service of
summons as provided under Section 7, Rule 14 of the Rules of Court. If
he cannot be personally served with summons within a reasonable
time, substituted service may be made in accordance with Section 8 of
said Rule. If he is temporarily out of the country, any of the following
modes of service may be resorted to: (1) substituted service set forth
in Section 8; 21 (2) personal service outside the country, with leave of
court; (3) service by publication, also with leave of court; 22 or (4) any
other manner the court may deem sufficient. 23
However, in an action in personam wherein the defendant is a nonresident who does not voluntarily submit himself to the authority of
the court, personal service of summons within the state is essential to
the acquisition of jurisdiction over her person. 24 This method of
service is possible if such defendant is physically present in the
country. If he is not found therein, the court cannot acquire

jurisdiction over his person and therefore cannot validly try and
decide the case against him. 25 An exception was laid down in
Gemperle v. Schenker 26 wherein a non-resident was served with
summons through his wife, who was a resident of the Philippines and
who was his representatives and attorney-in-fact in a prior civil case
filed by him; moreover, the second case was a mere offshoot of the
first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction
over the person of the defendant is not a prerequisite to confer
jurisdiction on the court provided that the court acquires jurisdiction
over the res. Nonetheless summons must be served upon the
defendant not for the purpose of vesting the court with jurisdiction
but merely for satisfying the due process requirements. 27 Thus,
where the defendant is a non-resident who is not found in the
Philippines and (1) the action affects the personal status of the
plaintiff; (2) the action relates to, or the subject matter of which is
property in the Philippines in which the defendant has or claims a lien
or interest; (3) the action seeks the exclusion of the defendant from
any interest in the property located in the Philippines; or (4) the
property of the defendant has been attached in the Philippines
service of summons may be effected by (a) personal service out of the
country, with leave of court; (b) publication, also with leave of court,
or (c) any other manner the court may deem sufficient. 28
In the case at bar, the action filed in Hong Kong against HERAS was in
personam, since it was based on his personal guarantee of the
obligation of the principal debtor. Before we can apply the foregoing
rules, we must determine first whether HERAS was a resident of Hong
Kong.
Fortunata de la Vega, HERAS's personal secretary in Hong Kong since
1972 until 1985, 29 testified that HERAS was the President and part
owner of a shipping company in Hong Kong during all those times
that she served as his secretary. He had in his employ a staff of twelve.
30 He had "business commitments, undertakings, conferences, and
appointments until October 1984 when [he] left Hong Kong for good,"
31 HERAS's other witness, Russel Warren Lousich, testified that he
had acted as counsel for HERAS "for a number of commercial
matters." 32 ASIAVEST then infers that HERAS was a resident of Hong
Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his
Answer 34 to ASIAVEST's complaint for the enforcement of the Hong

Kong court judgment, HERAS maintained that the Hong Kong court
did not have jurisdiction over him because the fundamental rule is
that jurisdiction in personam over non-resident defendants, so as to
sustain a money judgment, must be based upon personal service of
summons within the state which renders the judgment. 35
For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36
contended: "The question of Hong Kong court's 'want of jurisdiction'
is therefore a triable issue if it is to be pleaded by the defendant to
'repel' the foreign judgment. Facts showing jurisdictional lack (e.g.
that the Hong Kong suit was in personam, that defendant was not a
resident of Hong Kong when the suit was filed or that he did not
voluntarily submit to the Hong Kong court's jurisdiction) should be
alleged and proved by the defendant." 37
In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS
argued that the lack of jurisdiction over his person was corroborated
by ASIAVEST's allegation in the complaint that he "has his residence
at No. 6, 1st St., New Manila, Quezon City, Philippines." He then
concluded that such judicial admission amounted to evidence that he
was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with
stipulations of facts, among which was that "the residence of
defendant, Antonio Heras, is New Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the
enforcement of the Hong Kong court judgment is concerned, was
never in issue. He never challenged the service of summons on him
through a security guard in his Quezon City residence and through a
lawyer in his office in that city. In his Motion to Dismiss, he did not
question the jurisdiction of the Philippine court over his person on
the ground of invalid service of summons. What was in issue was his
residence as far as the Hong Kong suit was concerned. We therefore
conclude that the stipulated fact that HERAS "is a resident of New
Manila, Quezon City, Philippines" refers to his residence at the time
jurisdiction over his person was being sought by the Hong Kong court.
With that stipulation of fact, ASIAVEST cannot now claim that HERAS
was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the
action against him was, indisputably, one in personam, summons
should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and
did not confer on the Hong Kong court jurisdiction over his person. It
follows that the Hong Kong court judgment cannot be given force and
effect here in the Philippines for having been rendered without
jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he
was no longer so in November 1984 when the extraterritorial service
of summons was attempted to be made on him. As declared by his
secretary, which statement was not disputed by ASIAVEST, HERAS left
Hong Kong in October 1984 "for good." 40 His absence in Hong Kong
must have been the reason why summons was not served on him
therein; thus, ASIAVEST was constrained to apply for leave to effect
service in the Philippines, and upon obtaining a favorable action on
the matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan
law firm to serve the summons here in the Philippines.
In Brown v. Brown, 41 the defendant was previously a resident of the
Philippines. Several days after a criminal action for concubinage was
filed against him, he abandoned the Philippines. Later, a proceeding
quasi in rem was instituted against him. Summons in the latter case
was served on the defendant's attorney-in-fact at the latter's address.
The Court held that under the facts of the case, it could not be said
that the defendant was "still a resident of the Philippines because he
ha[d] escaped to his country and [was] therefore an absentee in the
Philippines." As such, he should have been "summoned in the same
manner as one who does not reside and is not found in the
Philippines."
Similarly, HERAS, who was also an absentee, should have been served
with summons in the same manner as a non-resident not found in
Hong Kong. Section 17, Rule 14 of the Rules of Court providing for
extraterritorial service will not apply because the suit against him was
in personam. Neither can we apply Section 18, which allows
extraterritorial service on a resident defendant who is temporarily
absent from the country, because even if HERAS be considered as a
resident of Hong Kong, the undisputed fact remains that he left Hong
Kong not only "temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered
DENYING the petition in this case and AFFIRMING the assailed
judgment of the Court of Appeals in CA-G.R. CV No. 29513.
No costs.
or those who would like to improve their grade, submit legibly
handwritten digests of the above cases in yellow paper on November
22. The case digests are optional but everybody has to read the cases.

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CONFLICTS CASES2 Page 1

1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September

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1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September

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Petitioner Norma A. Del Socorro and respondent Ernst Johan

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remarried in Pinamungahan, Cebu, and since then, have been residing

On August 28, 2009, petitioner, through her counsel, sent a letter

Petitioner also filed a Motion/Application of Permanent Protection

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Subsequently, without the RTC-Cebu having resolved the application

Thereafter, petitioner filed her Motion for Reconsideration thereto

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support, it is the considered opinion of the court that no

Hence, the present Petition for Review on Certiorari raising the

At the outset, let it be emphasized that We are taking cognizance of

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on questions of fact, of law, or mixed questions of fact and

Indeed, the issues submitted to us for resolution involve questions of

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On the other hand, respondent contends that there is no sufficient

It cannot be gainsaid, therefore, that the respondent is not obliged to

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national of the Netherlands, he is governed by such laws on the

In view of respondents failure to prove the national law of the

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Law on the matter were properly pleaded and proved in

Applying the foregoing, even if the laws of the Netherlands neither

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Based on the foregoing legal precepts, we find that respondent may be

(e) Attempting to compel or compelling the

(i) Causing mental or emotional anguish, public ridicule

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or humiliation to the woman or her child, including, but

Under the aforesaid special law, the deprivation or denial of financial

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WHEREFORE, the petition is GRANTED. The Orders dated February

Velasco, Jr., (Chairperson), Villarama, Jr., Mendoza,*and Reyes, JJ., concur.

3. LWV Construction Corporation vs. Marcelo Dupo, G.R. No. 172342,

G.R. No. 172342

Petitioner LWV Construction Corporation appeals the Decision[1]

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and Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is

The antecedent facts are as follows:

Petitioner, a domestic corporation which recruits Filipino workers,

On , respondent informed MMG, through the petitioner, that he needs

On , respondent resigned. In his letter to MMG, he also stated:

According to respondent, when he followed up his claim for long

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On , respondent filed a complaint[7] for payment of service award

For its part, petitioner offered payment and prescription as defenses.

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The Labor Arbiter ruled that respondents seven-year employment

Petitioner appealed. However, the NLRC dismissed the appeal and

Aggrieved, petitioner brought the case to the Court of Appeals

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Essentially, the issue is whether the Court of Appeals erred in ruling

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which was already paid by MMG each time respondents contract

Petitioner insists that prescription barred respondents claim for