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The liberal atmosphere which pervades the procedure in

administrative proceedings does not empower the presiding
officer to make conclusions of fact before hearing all the
parties concerned. (Matuguina Integrated Wood Products,
Inc. vs. Court of Appeals, 263 SCRA 490 [1996])

o0o

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

RAYTHEON INTERNATIONAL, INC., petitioner, vs.
STOCKTON W. ROUZIE, JR., respondent.

Conflict of Laws; Phases in Judicial Resolution of Conflict-of-

Laws Problems.Recently in Hasegawa v. Kitamura, 538 SCRA
261 (2007), the Court outlined three consecutive phases involved in
judicial resolution of conflicts-of-laws problems, namely: jurisdiction,
choice of law, and recognition and enforcement of judgments. Thus,
in the instances where the Court held that the local judicial
machinery was adequate to resolve controversies with a foreign
element, the following requisites had to be proved: (1) that the
Philippine Court is one to which the parties may conveniently
resort; (2) that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the
Philippine Court has or is likely to have the power to enforce its
decision.
Same; Jurisdictions; Pleadings and Practice; Where the case is
filed in a Philippine court and where the court has jurisdiction over
the subject matter, the parties and the res, it may or can proceed to
try the case even if the rules of conflict-of-laws or the convenience of
the parties point to a foreign forum; Jurisdiction over the nature
and subject matter of an action is conferred by the Constitution and
the law and by the material allegations in the complaint,
irrespective of whether or not the plaintiff is entitled to recover all or
some of the claims or reliefs sought therein.On the matter of

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jurisdiction over a

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*SECOND DIV ISION.

556

conflicts-of-laws problem where the case is filed in a Philippine court

and where the court has jurisdiction over the subject matter, the
parties and the res, it may or can proceed to try the case even if the
rules of conflict-of-laws or the convenience of the parties point to a
foreign forum. This is an exercise of sovereign prerogative of the
country where the case is filed. Jurisdiction over the nature and
subject matter of an action is conferred by the Constitution and the
law and by the material allegations in the complaint, irrespective of
whether or not the plaintiff is entitled to recover all or some of the
claims or reliefs sought therein. Civil Case No. 1192-BG is an action
for damages arising from an alleged breach of contract.
Undoubtedly, the nature of the action and the amount of damages
prayed are within the jurisdiction of the RTC.
Same; Same; Choice of Law; Words and Phrases; While
jurisdiction considers whether it is fair to cause a defendant to
travel to this state, choice of law asks the further question whether
the application of a substantive law which will determine the merits
of the case is fair to both partiesthe choice of law stipulation will
become relevant only when the substantive issues develop, that is,
after hearing on the merits proceeds before the trial court.That the
subject contract included a stipulation that the same shall be
governed by the laws of the State of Connecticut does not suggest
that the Philippine courts, or any other foreign tribunal for that
matter, are precluded from hearing the civil action. Jurisdiction and
choice of law are two distinct concepts. Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice
of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to
both parties. The choice of law stipulation will become relevant only
when the substantive issues of the instant case develop, that is,
after hearing on the merits proceeds before the trial court.
Same; Same; Forum Non Conveniens; The propriety of dismissing a
case based on the principle of forum non conveniens requires a
factual determinationit is more properly considered as a matter of
defense.Under the doctrine of forum non conveniens, a court, in

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conflicts-of-laws cases, may refuse impositions on its jurisdiction

where it is not the most convenient or available forum and the
parties are not precluded from seeking remedies elsewhere.
Petitioners averments of the foreign elements in the instant case
are not

557

sufficient to oust the trial court of its jurisdiction over Civil Case No.
No. 1192-BG and the parties involved. Moreover, the propriety of
dismissing a case based on the principle of forum non conveniens
requires a factual determination; hence, it is more properly
considered as a matter of defense. While it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground,
it should do so only after vital facts are established, to determine
whether special circumstances require the courts desistance.
Cause of Action; Pleadings and Practice; Words and Phrases;
Failure to state a cause of action refers to the insufficiency of
allegation in the pleading.Petitioner also contends that the
complaint in Civil Case No. 1192-BG failed to state a cause of action
against petitioner. Failure to state a cause of action refers to the
insufficiency of allegation in the pleading. As a general rule, the
elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief
demanded.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Quisumbing, Torres for petitioner.
Ceferino Padua Law Office for respondent.

TINGA, J.:
Before this Court is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure which
seeks the reversal of the Decision1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 67001 and the dismissal
of the

_______________

1Rollo, pp. 42-46. Dated 28 August 2003; penned by Associate Justice

Arsenio J. Magpale and concurred in by Associate Justices Bienvenido L.
Reyes, Acting Chairperson of the Special Ninth Division, and Rebecca De
Guia-Salvador.
2Id., at p. 47. Dated 10 March 2004.
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558

civil case filed by respondent against petitioner with the

trial court.
As culled from the records of the case, the following
antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a
corporation duly organized and existing under the laws of
the State of Connecticut, United States of America, and
respondent Stockton W. Rouzie, Jr., an American citizen,
entered into a contract whereby BMSI hired respondent as
its representative to negotiate the sale of services in several
government projects in the Philippines for an agreed
remuneration of 10% of the gross receipts. On 11 March
1992, respondent secured a service contract with the
Republic of the Philippines on behalf of BMSI for the
dredging of rivers affected by the Mt. Pinatubo eruption and
mudflows.3
On 16 July 1994, respondent filed before the Arbitration
Branch of the National Labor Relations Commission
(NLRC) a suit against BMSI and Rust International, Inc.
(RUST), Rodney C. Gilbert and Walter G. Browning for
alleged nonpayment of commissions, illegal termination and
breach of employment contract.4 On 28 September 1995,
Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment
ordering BMSI and RUST to pay respondents money
claims.5 Upon appeal by BMSI, the NLRC reversed the
decision of the Labor Arbiter and dismissed respondents
complaint on the ground of lack of jurisdiction.6 Respondent
elevated the case to this Court but it it was dismissed in a
Resolution dated 26 November 1997. The Resolution
became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La
Union, instituted an action for damages before the Regional
Trial

_______________

3Id.
4Id., at pp. 61-62.
5Id., at pp. 63-74.
6Id., at pp. 75-90.

559

Court (RTC) of Bauang, La Union. The Complaint,7

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Court (RTC) of Bauang, La Union. The Complaint,7

docketed as Civil Case No. 1192-BG, named as defendants
herein petitioner Raytheon International, Inc. as well as
BMSI and RUST, the two corporations impleaded in the
earlier labor case. The complaint essentially reiterated the
allegations in the labor case that BMSI verbally employed
respondent to negotiate the sale of services in government
projects and that respondent was not paid the commissions
due him from the Pinatubo dredging project which he
secured on behalf of BMSI. The complaint also averred that
BMSI and RUST as well as petitioner itself had combined
and functioned as one company.
In its Answer,8 petitioner alleged that contrary to
respondents claim, it was a foreign corporation duly
licensed to do business in the Philippines and denied
entering into any arrangement with respondent or paying
the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of
assuming the alleged obligation of the said companies.9
Petitioner also referred to the NLRC decision which
disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as Special
Sales Representative Agreement, the rights and
obligations of the parties shall be governed by the laws of
the State of Connecticut.10 Petitioner sought the dismissal of
the complaint on grounds of failure to state a cause of action
and forum non conveniens and prayed for damages by way
of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for
Preliminary Hearing Based on Affirmative Defenses and for
Summary Judgment12 seeking the dismissal of the
complaint

_______________

7Id., at pp. 48-54.

8 Id., at pp. 91-99.
9 Id., at p. 94.
10Id., at p. 96.
11Id., at pp. 97-98.
12Id., at pp. 100-111.

560

on grounds of forum non conveniens and failure to state a

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cause of action. Respondent opposed the same. Pending the

resolution of the omnibus motion, the deposition of Walter
Browning was taken before the Philippine Consulate
General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied
petitioners omnibus motion. The trial court held that the
factual allegations in the complaint, assuming the same to
be admitted, were sufficient for the trial court to render a
valid judgment thereon. It also ruled that the principle of
forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the
Philippines.15
Petitioner filed a Motion for Reconsideration16 of the
order, which motion was opposed by respondent.17 In an
Order dated 31 July 2001,18 the trial court denied
petitioners motion. Thus, it filed a Rule 65 Petition19 with
the Court of Appeals praying for the issuance of a writ of
certiorari and a writ of injunction to set aside the twin
orders of the trial court dated 13 September 2000 and 31
July 2001 and to enjoin the trial court from conducting
further proceedings.20
On 28 August 2003, the Court of Appeals rendered the
assailed Decision21 denying the petition for certiorari for
lack of merit. It also denied petitioners motion for
reconsideration in the assailed Resolution issued on 10
March 2004.22

_______________

13Records, Vol. I, pp. 180-238.

14Rollo, pp. 127-131.
15Id., at p. 130.
16Id., at pp. 132-149.
17Id., at pp. 150-151.
18Id., at p. 162.
19Id., at pp. 163-192.
20Id., at p. 191.
21Supra note 1.
22Supra note 2.

561

The appellate court held that although the trial court

should not have confined itself to the allegations in the

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complaint and should have also considered evidence aliunde

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

WHETHER OR NOT THE COURT OF APPEALS ERRED IN

REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT ON THE GROUND
OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite

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

_______________

23Id.
24Id., at p. 18.
25Id., at p. 318.

562

dated 20 November 2006, the Court resolved to dispense

with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract
between respondent and BMSI included a valid choice of law
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clause, that is, that the contract shall be governed by the

laws of the State of Connecticut. It also mentions the
presence of foreign elements in the disputenamely, the
parties and witnesses involved are American corporations
and citizens and the evidence to be presented is located
outside the Philippinesthat renders our local courts
inconvenient forums. Petitioner theorizes that the foreign
elements of the dispute necessitate the immediate
application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined
three consecutive phases involved in judicial resolution of
conflicts-of-laws problems, namely: jurisdiction, choice of
law, and recognition and enforcement of judgments. Thus,
in the instances27 where the Court held that the local
judicial machinery was adequate to resolve controversies
with a foreign element, the following requisites had to be
proved: (1) that the Philippine Court is one to which the
parties may conveniently resort; (2) that the Philippine
Court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine Court has
or is likely to have the power to enforce its decision.28

_______________

26G.R. No. 149177, 23 November 2007, 538 SCRA 261.

27Bank of America NT & SA v. Court of Appeals, 448 Phil. 181; 400
SCRA 156 (2003); Puyat v. Zabarte, 405 Phil. 413; 352 SCRA 738 (2001);
Philsec Investment Corporation v. Court of Appeals, G.R. No. 103493, 19
June 1997, 274 SCRA 102.
28The Manila Hotel Corp. v. National Labor Relations Commission,
397 Phil. 1, 16-17; 343 SCRA 1, 13 (2000); Communication Materials and
Design, Inc. v. Court of Appeals, 329 Phil. 487, 510-511; 260 SCRA 673
(1996).

564

On the matter of jurisdiction over a conflicts-of-laws

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

action is conferred by the Constitution and the law30 and by

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action is conferred by the Constitution and the law30 and by

the material allegations in the complaint, irrespective of
whether or not the plaintiff is entitled to recover all or some
of the claims or reliefs sought therein.31 Civil Case No. 1192-
BG is an action for damages arising from an alleged breach
of contract. Undoubtedly, the nature of the action and the
amount of damages prayed are within the jurisdiction of the
RTC.
As regards jurisdiction over the parties, the trial court
acquired jurisdiction over herein respondent (as party
plaintiff) upon the filing of the complaint. On the other
hand, jurisdiction over the person of petitioner (as party
defendant) was acquired by its voluntary appearance in
court.32
That the subject contract included a stipulation that the
same shall be governed by the laws of the State of
Connecticut does not suggest that the Philippine courts, or
any other foreign tribunal for that matter, are precluded
from hearing the civil action. Jurisdiction and choice of law
are two distinct concepts. Jurisdiction considers whether it is
fair to cause a defendant to travel to this state; choice of law
asks the further question whether the application of a
substantive law which

_______________

29 Agpalo, Ruben E. CONFLICT OF LAWS (Private International

Law), 2004 Ed., p. 491.
30 Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto
Cruz, G.R. No. 162890, 22 November 2005, 475 SCRA 743, 756.
31 Laresma v. Abellana, G.R. No. 140973, 11 November 2004, 442
SCRA 156, 168.
32See Arcelona v. Court of Appeals, 345 Phil. 250, 267; 280 SCRA 20
(1997).

564

will determine the merits of the case is fair to both parties.33

The choice of law stipulation will become relevant only when
the substantive issues of the instant case develop, that is,
after hearing on the merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in
conflicts-of-laws cases, may refuse impositions on its
jurisdiction where it is not the most convenient or
available forum and the parties are not precluded from
34
seeking remedies elsewhere. Petitioners averments of the
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seeking remedies elsewhere.34 Petitioners averments of the

foreign elements in the instant case are not sufficient to oust
the trial court of its jurisdiction over Civil Case No. No.
1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the
principle of forum non conveniens requires a factual
determination; hence, it is more properly considered as a
matter of defense. While it is within the discretion of the
trial court to abstain from assuming jurisdiction on this
ground, it should do so only after vital facts are established,
to determine whether special circumstances require the
courts desistance.35
Finding no grave abuse of discretion on the trial court,
the Court of Appeals respected its conclusion that it can
assume jurisdiction over the dispute notwithstanding its
foreign elements. In the same manner, the Court defers to
the sound discretion of the lower courts because their
findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case
No. 1192-BG failed to state a cause of action against
petitioner. Failure to state a cause of action refers to the
insuffi-

_______________

33Hasegawa v. Kitamura, supra note 26.

34Bank of America NT & SA v. Court of Appeals, supra note 27.
35Philsec Investment Corporation v. Court of Appeals, supra note 27
at p. 113.

565

ciency of allegation in the pleading.36 As a general rule, the

elementary test for failure to state a cause of action is
whether the complaint alleges facts which if true would
justify the relief demanded.37
The complaint alleged that petitioner had combined with
BMSI and RUST to function as one company. Petitioner
contends that the deposition of Walter Browning rebutted
this allegation. On this score, the resolution of the Court of
Appeals is instructive, thus:

xxx Our examination of the deposition of Mr. Walter Browning

as well as other documents produced in the hearing shows that
these evidence aliunde are not quite sufficient for us to mete a
ruling that the complaint fails to state a cause of action.
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Annexes A to E by themselves are not substantial, convincing

and conclusive proofs that Raytheon Engineers and Constructors,
Inc. (REC) assumed the warranty obligations of defendant Rust
International in the Makar Port Project in General Santos City,
after Rust International ceased to exist after being absorbed by
REC. Other documents already submitted in evidence are likewise
meager to preponderantly conclude that Raytheon International,
Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have
combined into one company, so much so that Raytheon
International, Inc., the surviving company (if at all) may be held
liable for the obligation of BMSI to respondent Rouzie for unpaid
commissions. Neither these documents clearly speak otherwise.38

As correctly pointed out by the Court of Appeals, the

question of whether petitioner, BMSI and RUST merged
together requires the presentation of further evidence,
which only a full-blown trial on the merits can afford.

_______________

36Bank of America NT & SA v. Court of Appeals, supra note 27 at p.

194; p. 167.
37 Banco Filipino Savings and Mortgage Bank v. Court of Appeals,
G.R. No. 143896, 8 July 2005, 463 SCRA 64, 73.
38Rollo, p. 44.

566

WHEREFORE, the instant petition for review on

certiorari is DENIED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 67001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.

Carpio (Acting Chairperson), Sandoval-Gutierrez,**

Carpio-Morales and Velasco, Jr., JJ., concur.

Petition denied, judgment and resolution affirmed.

Notes.Forum shopping originated as a concept in

private international law, where non-resident litigants are
given the option to choose the forum or place wherein to
bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more
friendly venue. (First Philippine International Bank vs.

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Court of Appeals, 252 SCRA 259 [1996])

Generally, a foreign corporation has no legal existence
within the state in which it is foreign, and this proceeds from
the principle that juridical existence of a corporation is
confined within the territory of the state under whose laws it
was incorporated and organized, and it has no legal status
beyond such territory. (Communications Materials and
Design, Inc. vs. Court of Appeals, 260 SCRA 673 [1996])
o0o

_______________

** As replacement of Justice Leonardo A. Quisubing who inhibited

himself per Administrative Circular No. 84-2007.

Copyright 2016 Central Book Supply, Inc. All rights reserved.

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