contracts abroad.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, vs. V.P. EUSEBIO CONSTRUCTION, INC.; Petitioner Philguarantee approved respondents application.
3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO; Subsequently, letters of guarantee were issued by
SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA Philguarantee to the Rafidain Bank of Baghdad covering 100%
SANTOS; AND FIRST INTEGRATED BONDING AND of the performance and advance payment bonds, but they
INSURANCE COMPANY, INC., respondents.; [G.R. No. were not accepted by SOB. What SOB required was a letter-
140047. July 13, 2004]; DAVIDE, JR., C.J.: 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,
This case is an offshoot of a service contract entered into by a
would issue a counter-guarantee to cover its exposure. Al Ahli
Filipino construction firm with the Iraqi Government for the
Bank of Kuwait was, therefore, engaged to provide a counter-
construction of the Institute of Physical Therapy-Medical
guarantee to Rafidain Bank, but it required a similar counter-
Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq
guarantee in its favor from the petitioner. Thus, three layers of
war was ongoing.
guarantees had to be arranged.
As the government arm in pursuing its objective of providing On or about November 4, 1995, Marine Petrobulk
the necessary support and assistance in order to enable delivered the bunker fuels amounting to US$103,544 inclusive
[Filipino exporters and contractors to operate viably under the of barging and demurrage charges to the Vessel at the port of
prevailing economic and business conditions, the petitioner Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer
should have exercised prudence and caution under the of the Vessel duly acknowledged and received the delivery
circumstances. As aptly put by the Court of Appeals, it would receipt. Marine Petrobulk issued an invoice to petitioner
be the height of inequity to allow the petitioner to pass on its Crescent for the US$101,400.00 worth of the bunker fuels.
losses to the Filipino contractor VPECI which had sternly Petitioner Crescent issued a check for the same amount in
warned against paying the Al Ahli Bank and constantly favor of Marine Petrobulk, which check was duly encashed.
apprised it of the developments in the Project implementation.
Having paid Marine Petrobulk, petitioner Crescent
WHEREFORE, the petition for review on certiorari is hereby issued a revised invoice dated November 21, 1995 to Portserv
DENIED for lack of merit, and the decision of the Court of Limited, and/or the Master, and/or Owners, and/or Operators,
appeals in CA-G.R. CV No. 39302 is AFFIRMED. No and/or Charterers of M/V Lok Maheshwari in the amount of
pronouncement as to costs. SO ORDERED. 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
CRESCENT PETROLEUM, LTD. - versus M/V LOK
checks issued to petitioner Crescent as security for the
MAHESHWARI, THE SHIPPING CORPORATION OF INDIA,
payment of the bunker fuels were dishonored for insufficiency
and PORTSERV LIMITED and/or TRANSMAR SHIPPING,
of funds. As a consequence, petitioner Crescent incurred
INC., G.R. No. 155014 . November 11, 2005; PUNO, J.:
additional expenses of US$8,572.61 for interest, tracking fees,
and legal fees.
This petition for review on certiorari under Rule 45 seeks the
(a) reversal of the November 28, 2001 Decision of the Court of
On May 2, 1996, while the Vessel was docked at the
Appeals in CA-G.R. No. CV-54920, which dismissed for want
port of Cebu City, petitioner Crescent instituted before the RTC
of jurisdiction the instant case, and the September 3, 2002
of Cebu City an action for a sum of money with prayer for
Resolution of the same appellate court, which denied
temporary restraining order and writ of preliminary attachment
petitioners motion for reconsideration, and (b) reinstatement of
against respondents Vessel and SCI, Portserv and/or
the July 25, 1996 Decision of the Regional Trial Court (RTC) in
Transmar. The case was raffled to Branch 10 and docketed as
Civil Case No. CEB-18679, which held that respondents were
Civil Case No. CEB-18679.
solidarily liable to pay petitioner the sum prayed for in the
complaint.
On May 3, 1996, the trial court issued a writ of
attachment against the Vessel with bond at P2,710,000.00.
The facts are as follows: Respondent M/V Lok Maheshwari
Petitioner Crescent withdrew its prayer for a temporary
(Vessel) is an oceangoing vessel of Indian registry that is
restraining order and posted the required bond.
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- On May 18, 1996, summonses were served to respondents
chartered by respondent SCI to Halla Merchant Marine Co. Ltd. Vessel and SCI, and Portserv and/or Transmar through the
(Halla), a South Korean company. Halla, in turn, sub-chartered Master of the Vessel. On May 28, 1996, respondents Vessel
the Vessel through a time charter to Transmar Shipping, Inc. and SCI, through Pioneer Insurance and Surety Corporation
(Transmar). Transmar further sub-chartered the Vessel to (Pioneer), filed an urgent ex-parte motion to approve Pioneers
Portserv Limited (Portserv). Both Transmar and Portserv are letter of undertaking, to consider it as counter-bond and to
corporations organized and existing under the laws of Canada. 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.
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 For failing to file their respective answers and upon motion of
engaged in the business of selling petroleum and oil products petitioner Crescent, the trial court declared respondents Vessel
for the use and operation of oceangoing vessels, to deliver and SCI, Portserv and/or Transmar in default. Petitioner
marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent was allowed to present its evidence ex-parte.
Crescent granted and confirmed the request through an advice
via facsimile dated November 2, 1995. As security for the On July 25, 1996, the trial court rendered its decision in favor
payment of the bunker fuels and related services, petitioner of petitioner Crescent, thus:
Crescent received two (2) checks in the amounts of
WHEREFORE, premises considered, REVERSED and SET ASIDE, and a new
judgment is hereby rendered in favor of plaintiff one is entered DISMISSING the instant
[Crescent] and against the defendants [Vessel, SCI, case for want of jurisdiction.
Portserv and/or Transmar].
The appellate court denied petitioner Crescents
motion for reconsideration explaining that it dismissed the
instant action primarily on the ground of forum non conveniens
Consequently, the latter are hereby ordered considering that the parties are foreign corporations which are
to pay plaintiff jointly and solidarily, the not doing business in the Philippines.
following:
Hence, this petition submitting the following issues for
(a) the sum of resolution, viz:
US$103,544.00,
representing the 1. Philippine courts have jurisdiction
outstanding obligation; over a foreign vessel found inside
Philippine waters for the
(b) interest of enforcement of a maritime lien
US$10,978.50 as of against said vessel and/or its
July 3, 1996, plus owners and operators;
additional interest at 2. The principle of forum non
18% per annum for conveniens is inapplicable to the
the period thereafter, instant case;
until the principal 3. The trial court acquired jurisdiction
account is fully paid; over the subject matter of the
instant case, as well as over the
(c) attorneys fees of res and over the persons of the
P300,000.00; and parties;
4. The enforcement of a maritime lien
(d) P200,000.00 as litigation on the subject vessel is expressly
expenses. granted by law. The Ship
Mortgage Acts as well as the
SO ORDERED. Code of Commerce provides for
relief to petitioner for its unpaid
claim;
5. The arbitration clause in the
On August 19, 1996, respondents Vessel and SCI contract was not rigid or inflexible
appealed to the Court of Appeals. They attached copies of the but expressly allowed petitioner to
charter parties between respondent SCI and Halla, between enforce its maritime lien in
Halla and Transmar, and between Transmar and Portserv. Philippine courts provided the
They pointed out that Portserv was a time charterer and that vessel was in the Philippines;
there is a clause in the time charters between respondent SCI 6. The law of the state of New York is
and Halla, and between Halla and Transmar, which states that inapplicable to the present
the Charterers shall provide and pay for all the fuel except as controversy as the same has not
otherwise agreed. They submitted a copy of Part II of the been properly pleaded and
Bunker Fuel Agreement between petitioner Crescent and proved;
Portserv containing a stipulation that New York law governs 7. Petitioner has legal capacity to sue
the construction, validity and performance of the contract. before Philippine courts as it is
They likewise submitted certified copies of the Commercial suing upon an isolated business
Instruments and Maritime Lien Act of the United States (U.S.), transaction;
some U.S. cases, and some Canadian cases to support their 8. Respondents were duly served
defense. summons although service of
summons upon respondents is not
a jurisdictional requirement, the
On November 28, 2001, the Court of Appeals issued
action being a suit quasi in rem;
its assailed Decision, which reversed that of the trial court, viz:
9. The trial courts decision has factual
and legal bases; and,
WHEREFORE, premises 10. The respondents should be held
considered, the Decision dated July 25, jointly and solidarily liable.
1996, issued by the Regional Trial Court of
Cebu City, Branch 10, is hereby
In a nutshell, this case is for the satisfaction of unpaid under Rule 59 [now Rule 57] of the Rules of
supplies furnished by a foreign supplier in a foreign port to a Court.
vessel of foreign registry that is owned, chartered and sub-
chartered by foreign entities. But, is petitioner Crescent entitled to a maritime lien
under our laws? Petitioner Crescent bases its claim of a
Under Batas Pambansa Bilang 129, as amended by maritime lien on Sections 21, 22 and 23 of Presidential
Republic Act No. 7691, RTCs exercise exclusive original Decree No. 1521 (P.D. No. 1521), also known as the Ship
jurisdiction (i)n all actions in admiralty and maritime where the Mortgage Decree of 1978, viz:
demand or claim exceeds two hundred thousand pesos
(P200,000) or in Metro Manila, where such demand or claim Sec. 21. Maritime Lien for
exceeds four hundred thousand pesos (P400,000). Two (2) Necessaries; persons entitled to such lien. -
tests have been used to determine whether a case involving a Any person furnishing repairs, supplies,
contract comes within the admiralty and maritime jurisdiction of towage, use of dry dock or maritime
a court - the locational test and the subject matter test. The railway, or other necessaries, to any vessel,
English rule follows the locational test wherein maritime and whether foreign or domestic, upon the order
admiralty jurisdiction, with a few exceptions, is exercised only of the owner of such vessel, or of a person
on contracts made upon the sea and to be executed thereon. authorized by the owner, shall have a
This is totally rejected under the American rule where the maritime lien on the vessel, which may be
criterion in determining whether a contract is maritime depends enforced by suit in rem, and it shall be
on the nature and subject matter of the contract, having necessary to allege or prove that credit was
reference to maritime service and transactions. In given to the vessel.
International Harvester Company of the Philippines v.
Aragon, we adopted the American rule and held that (w)hether Sec. 22. Persons Authorized to
or not a contract is maritime depends not on the place where Procure Repairs, Supplies and
the contract is made and is to be executed, making the locality Necessaries. - The following persons shall
the test, but on the subject matter of the contract, making the be presumed to have authority from the
true criterion a maritime service or a maritime transaction. owner to procure repairs, supplies, towage,
use of dry dock or marine railway, and other
A contract for furnishing supplies like the one involved necessaries for the vessel: The managing
in this case is maritime and within the jurisdiction of admiralty. owner, ships husband, master or any
It may be invoked before our courts through an action in rem or person to whom the management of the
quasi in rem or an action in personam. Thus: vessel at the port of supply is entrusted. No
person tortuously or unlawfully in
xxx possession or charge of a vessel shall have
authority to bind the vessel.
Articles 579 and 584 [of the Code
of Commerce] provide a method of Sec. 23. Notice to Person
collecting or enforcing not only the liens Furnishing Repairs, Supplies and
created under Section 580 but also for the Necessaries. - The officers and agents of a
collection of any kind of lien whatsoever. In vessel specified in Section 22 of this
the Philippines, we have a complete Decree shall be taken to include such
legislation, both substantive and adjective, officers and agents when appointed by a
under which to bring an action in rem charterer, by an owner pro hac vice, or by
against a vessel for the purpose of an agreed purchaser in possession of the
enforcing liens. The substantive law is found vessel; but nothing in this Decree shall be
in Article 580 of the Code of Commerce. construed to confer a lien when the
The procedural law is to be found in Article furnisher knew, or by exercise of
584 of the same Code. The result is, reasonable diligence could have
therefore, that in the Philippines any vessel ascertained, that because of the terms of a
even though it be a foreign vessel found in charter party, agreement for sale of the
any port of this Archipelago may be vessel, or for any other reason, the person
attached and sold under the substantive law ordering the repairs, supplies, or other
which defines the right, and the procedural necessaries was without authority to bind
law contained in the Code of Commerce by the vessel therefor.
which this right is to be enforced. x x x. But
where neither the law nor the contract Petitioner Crescent submits that these provisions
between the parties creates any lien or apply to both domestic and foreign vessels, as well as
charge upon the vessel, the only way in domestic and foreign suppliers of necessaries. It contends that
which it can be seized before judgment is by the use of the term any person in Section 21 implies that the
pursuing the remedy relating to attachment law is not restricted to domestic suppliers but also includes all
persons who supply provisions and necessaries to a vessel, Supreme Court adopted a multiple-contact test to determine,
whether foreign or domestic. It points out further that the law in the absence of a specific Congressional directive as to the
does not indicate that the supplies or necessaries must be statutes reach, which jurisdictions law should be applied. The
furnished in the Philippines in order to give petitioner the right following factors were considered: (1) place of the wrongful
to seek enforcement of the lien with a Philippine court. act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5)
Respondents Vessel and SCI, on the other hand, place of contract; (6) inaccessibility of foreign forum; and
maintain that Section 21 of the P.D. No. 1521 or the Ship (7) law of the forum.
Mortgage Decree of 1978 does not apply to a foreign supplier
like petitioner Crescent as the provision refers only to a Several years after Lauritzen, the U.S. Supreme Court
situation where the person furnishing the supplies is situated in the case of Romero v. International Terminal Operating
inside the territory of the Philippines and not where the Co. again considered a foreign seamans personal injury claim
necessaries were furnished in a foreign jurisdiction like under both the Jones Act and the general maritime law. The
Canada. Court held that the factors first announced in the case of
Lauritzen were applicable not only to personal injury claims
We find against petitioner Crescent. arising under the Jones Act but to all matters arising
under maritime law in general.
I.
Hellenic Lines, Ltd. v. Rhoditis was also a suit
P.D. No. 1521 or the Ship Mortgage Decree of 1978 under the Jones Act by a Greek seaman injured aboard a ship
was enacted to accelerate the growth and development of the of Greek registry while in American waters. The ship was
shipping industry and to extend the benefits accorded to operated by a Greek corporation which has its largest office in
overseas shipping under Presidential Decree No. 214 to New York and another office in New Orleans and whose stock
domestic shipping. It is patterned closely from the U.S. Ship is more than 95% owned by a U.S. domiciliary who is also a
Mortgage Act of 1920 and the Liberian Maritime Law relating to Greek citizen. The ship was engaged in regularly scheduled
preferred mortgages. Notably, Sections 21, 22 and 23 of P.D. runs between various ports of the U.S. and the Middle East,
No. 1521 or the Ship Mortgage Decree of 1978 are identical to Pakistan, and India, with its entire income coming from either
Subsections P, Q, and R, respectively, of the U.S. Ship originating or terminating in the U.S. The contract of
Mortgage Act of 1920, which is part of the Federal Maritime employment provided that Greek law and a Greek collective
Lien Act. Hence, U.S. jurisprudence finds relevance to bargaining agreement would apply between the employer and
determining whether P.D. No. 1521 or the Ship Mortgage the seaman and that all claims arising out of the employment
Decree of 1978 applies in the present case. 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
The various tests used in the U.S. to determine
against jurisdiction. In arriving at the conclusion that the
whether a maritime lien exists are the following:
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. In a suit to establish and enforce a maritime lien one or more factors must be considered in light of the national
for supplies furnished to a vessel in a foreign port, whether interest served by the assertion of Jones Act jurisdiction.
such lien exists, or whether the court has or will exercise (footnote omitted) Moreover, the list of seven factors in
jurisdiction, depends on the law of the country where the Lauritzen was not intended to be exhaustive. x x x [T]he
supplies were furnished, which must be pleaded and proved. shipowners base of operations is another factor of importance
This principle was laid down in the 1888 case of The Scotia, in determining whether the Jones Act is applicable; and there
reiterated in The Kaiser Wilhelm II (1916), in The well may be others.
Woudrichem (1921) and in The City of Atlanta (1924).
The principles enunciated in these maritime tort cases
Two. The Lauritzen-Romero-Rhoditis trilogy of have been extended to cases involving unpaid supplies and
cases, which replaced such single-factor methodologies as the necessaries such as the cases of Forsythe International
law of the place of supply. U.K., Ltd. v. M/V Ruth Venture, and Comoco Marine
Services v. M/V El Centroamericano.
In Lauritzen v. Larsen, a Danish seaman, while temporarily in
New York, joined the crew of a ship of Danish flag and registry Three. The factors provided in Restatement
that is owned by a Danish citizen. He signed the ships articles (Second) of Conflicts of Law have also been applied,
providing that the rights of the crew members would be especially in resolving cases brought under the Federal
governed by Danish law and by the employers contract with Maritime Lien Act. Their application suggests that in the
the Danish Seamens Union, of which he was a member. While absence of an effective choice of law by the parties, the forum
in Havana and in the course of his employment, he was contacts to be considered include: (a) the place of contracting;
negligently injured. He sued the shipowner in a federal district (b) the place of negotiation of the contract; (c) the place of
court in New York for damages under the Jones Act. In holding performance; (d) the location of the subject matter of the
that Danish law and not the Jones Act was applicable, the
contract; and (e) the domicile, residence, nationality, place of contained in Section 6 of the Restatement (Second) of
incorporation and place of business of the parties. Conflicts of Law. The U.S. Court held that the primary concern
of the Federal Maritime Lien Act is the protection of American
In Gulf Trading and Transportation Co. v. The suppliers of goods and services.
Vessel Hoegh Shield, an admiralty action in rem was brought
by an American supplier against a vessel of Norwegian flag The same factors were applied in the case of Ocean
owned by a Norwegian Company and chartered by a London Ship Supply, Ltd. v. M/V Leah.
time charterer for unpaid fuel oil and marine diesel oil delivered
while the vessel was in U.S. territory. The contract was II.
executed in London. It was held that because the bunker fuel
was delivered to a foreign flag vessel within the jurisdiction of Finding guidance from the foregoing decisions, the
the U.S., and because the invoice specified payment in the Court cannot sustain petitioner Crescents insistence on the
U.S., the admiralty and maritime law of the U.S. applied. The application of P.D. No. 1521 or the Ship Mortgage Decree of
U.S. Court of Appeals recognized the modern approach to 1978 and hold that a maritime lien exists.
maritime conflict of law problems introduced in the Lauritzen
case. However, it observed that Lauritzen involved a torts claim
First. Out of the seven basic factors listed in the case of
under the Jones Act while the present claim involves an
Lauritzen, Philippine law only falls under one the law of the
alleged maritime lien arising from unpaid supplies. It made a
forum. All other elements are foreign Canada is the place of
disclaimer that its conclusion is limited to the unique
the wrongful act, of the allegiance or domicile of the injured and
circumstances surrounding a maritime lien as well as the
the place of contract; India is the law of the flag and the
statutory directives found in the Maritime Lien Statute and that
allegiance of the defendant shipowner. Balancing these basic
the initial choice of law determination is significantly
interests, it is inconceivable that the Philippine court has any
affected by the statutory policies surrounding a maritime
interest in the case that outweighs the interests of Canada or
lien. It ruled that the facts in the case call for the application of
India for that matter.
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 Second. P.D. No. 1521 or the Ship Mortgage Decree
supplier of goods, services or necessaries by making maritime of 1978 is inapplicable following the factors under Restatement
liens available where traditional services are routinely (Second) of Conflict of Laws. Like the Federal Maritime Lien
rendered. It concluded that the Maritime Lien Statute Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of
represents a relevant policy of the forum that serves the needs 1978 was enacted primarily to protect Filipino suppliers and
of the international legal system as well as the basic policies was not intended to create a lien from a contract for supplies
underlying maritime law. The court also gave equal importance between foreign entities delivered in a foreign port.
to the predictability of result and protection of justified
expectations in a particular field of law. In the maritime realm, it Third. Applying P.D. No. 1521 or the Ship Mortgage
is expected that when necessaries are furnished to a vessel in Decree of 1978 and rule that a maritime lien exists would not
an American port by an American supplier, the American Lien promote the public policy behind the enactment of the law to
Statute will apply to protect that supplier regardless of the develop the domestic shipping industry. Opening up our courts
place where the contract was formed or the nationality of the to foreign suppliers by granting them a maritime lien under our
vessel. laws even if they are not entitled to a maritime lien under their
laws will encourage forum shopping.
The same principle was applied in the case of
Swedish Telecom Radio v. M/V Discovery I where the Finally. The submission of petitioner is not in keeping
American court refused to apply the Federal Maritime Lien Act with the reasonable expectation of the parties to the contract.
to create a maritime lien for goods and services supplied by Indeed, when the parties entered into a contract for supplies in
foreign companies in foreign ports. In this case, a Swedish Canada, they could not have intended the laws of a remote
company supplied radio equipment in a Spanish port to country like the Philippines to determine the creation of a lien
refurbish a Panamanian vessel damaged by fire. Some of the by the mere accident of the Vessels being in Philippine
contract negotiations occurred in Spain and the agreement for territory.
supplies between the parties indicated Swedish companys
willingness to submit to Swedish law. The ship was later sold III.
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 But under which law should petitioner Crescent prove the
Appeals also held that while the contacts-based framework set existence of its maritime lien?
forth in Lauritzen was useful in the analysis of all maritime
choice of law situations, the factors were geared towards a
In light of the interests of the various foreign elements involved,
seamans injury claim. As in Gulf Trading, the lien arose by
it is clear that Canada has the most significant interest in this
operation of law because the ships owner was not a party to
dispute. The injured party is a Canadian corporation, the sub-
the contract under which the goods were supplied. As a result,
charterer which placed the orders for the supplies is also
the court found it more appropriate to consider the factors
Canadian, the entity which physically delivered the bunker Second. Petitioner Crescent did not show any proof that the
fuels is in Canada, the place of contracting and negotiation is in marine products were necessary for the continuation of the
Canada, and the supplies were delivered in Canada. vessel.
The arbitration clause contained in the Bunker Fuel Third. It was not established that credit was extended to the
Agreement which states that New York law governs the vessel. It is presumed that in the absence of fraud or collusion,
construction, validity and performance of the contract is only a where advances are made to a captain in a foreign port, upon
factor that may be considered in the choice-of-law analysis but his request, to pay for necessary repairs or supplies to enable
is not conclusive. As in the cases of Gulf Trading and his vessel to prosecute her voyage, or to pay harbor dues, or
Swedish Telecom, the lien that is the subject matter of this for pilotage, towage and like services rendered to the vessel,
case arose by operation of law and not by contract because that they are made upon the credit of the vessel as well as
the shipowner was not a party to the contract under which the upon that of her owners. In this case, it was the sub-charterer
goods were supplied. Portserv which requested for the delivery of the bunker fuels.
The issuance of two checks amounting to US$300,000 in favor
It is worthy to note that petitioner Crescent never of petitioner Crescent prior to the delivery of the bunkers as
alleged and proved Canadian law as basis for the existence of security for the payment of the obligation weakens petitioner
a maritime lien. To the end, it insisted on its theory that Crescents contention that credit was extended to the Vessel.
Philippine law applies. Petitioner contends that even if foreign
law applies, since the same was not properly pleaded and We also note that when copies of the charter parties were
proved, such foreign law must be presumed to be the same as submitted by respondents in the Court of Appeals, the time
Philippine law pursuant to the doctrine of processual charters between respondent SCI and Halla and between
presumption. 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
Thus, we are left with two choices: (1) dismiss the
Crescents position that Portserv is authorized by the
case for petitioners failure to establish a cause of action or (2)
shipowner to contract for supplies upon the credit of the
presume that Canadian law is the same as Philippine law. In
vessel.
either case, the case has to be dismissed.
Fourth. There was no proof of necessity of credit. A necessity
It is well-settled that a party whose cause of action or of credit will be presumed where it appears that the repairs
defense depends upon a foreign law has the burden of proving and supplies were necessary for the ship and that they were
the foreign law. Such foreign law is treated as a question of ordered by the master. This presumption does not arise in this
fact to be properly pleaded and proved. Petitioner Crescents case since the fuels were not ordered by the master and there
insistence on enforcing a maritime lien before our courts was no proof of necessity for the supplies.
depended on the existence of a maritime lien under the proper
law. By erroneously claiming a maritime lien under Philippine Finally. The necessaries were not ordered by persons
law instead of proving that a maritime lien exists under authorized to contract in behalf of the vessel as provided
Canadian law, petitioner Crescent failed to establish a cause of under Section 22 of P.D. No. 1521 or the Ship Mortgage
action. Decree of 1978 - the managing owner, the ships husband,
master or any person with whom the management of the
Even if we apply the doctrine of processual vessel at the port of supply is entrusted. Clearly, Portserv, a
presumption, the result will still be the same. Under P.D. No. sub-charterer under a time charter, is not someone to whom
1521 or the Ship Mortgage Decree of 1978, the following are the management of the vessel has been entrusted. A time
the requisites for maritime liens on necessaries to exist: (1) the charter is a contract for the use of a vessel for a specified
necessaries must have been furnished to and for the benefit of period of time or for the duration of one or more specified
the vessel; (2) the necessaries must have been necessary for voyages wherein the owner of the time-chartered vessel
the continuation of the voyage of the vessel; (3) the credit must retains possession and control through the master and crew
have been extended to the vessel; (4) there must be necessity who remain his employees. Not enjoying the presumption of
for the extension of the credit; and (5) the necessaries must be authority, petitioner Crescent should have proved that Portserv
ordered by persons authorized to contract on behalf of the was authorized by the shipowner to contract for supplies.
vessel. These do not avail in the instant case. Petitioner failed.
First. It was not established that benefit was extended A discussion on the principle of forum non conveniens is
to the vessel. While this is presumed when the master of the unnecessary.
ship is the one who placed the order, it is not disputed that in
this case it was the sub-charterer Portserv which placed the IN VIEW WHEREOF, the Decision of the Court of Appeals in
orders to petitioner Crescent. Hence, the presumption does not CA-G.R. No. CV 54920, dated November 28, 2001, and its
arise and it is incumbent upon petitioner Crescent to prove that subsequent Resolution of September 3, 2002 are AFFIRMED.
benefit was extended to the vessel. Petitioner did not. The instant petition for review on certiorari is DENIED for lack
of merit. Cost against petitioner. SO ORDERED.
LWV CONSTRUCTION CORPORATION - versus - On December 11, 2000, respondent filed a complaint
MARCELO B. DUPO; G.R. No. 172342; July 13, 2009;; for payment of service award against petitioner before the
QUISUMBING, J.: National Labor Relations Commission (NLRC), Regional
Arbitration Branch, Cordillera Administrative Region, Baguio
Petitioner LWV Construction Corporation appeals the City. In support of his claim, respondent averred in his position
Decision dated December 6, 2005 of the Court of Appeals in paper that:
CA-G.R. SP No. 76843 and its Resolution dated April 12, 2006,
denying the motion for reconsideration. The Court of Appeals xxxx
had ruled that under Article 87 of the Saudi Labor and
Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is Under the Law of Saudi Arabia, an
entitled to a service award or longevity pay amounting to employee who rendered at least five (5)
US$12,640.33. years in a company within the jurisdiction of
Saudi Arabia, is entitled to the so-called long
The antecedent facts are as follows: service award which is known to others as
longevity pay of at least one half month pay
Petitioner, a domestic corporation which recruits for every year of service. In excess of five
Filipino workers, hired respondent as Civil Structural years an employee is entitled to one month
Superintendent to work in Saudi Arabia for its principal, pay for every year of service. In both cases
Mohammad Al-Mojil Group/Establishment (MMG). On February inclusive of all benefits and allowances.
26, 1992, respondent signed his first overseas employment
contract, renewable after one year. It was renewed five times on This benefit was offered to
the following dates: May 10, 1993, November 16, 1994, January complainant before he went on vacation,
22, 1996, April 14, 1997, and March 26, 1998. All were fixed- hence, this was engrained in his mind. He
period contracts for one year. The sixth and last contract stated reconstructed the computation of his long
that respondents employment starts upon reporting to work and service award or longevity pay and he
ends when he leaves the work site. Respondent left Saudi arrived at the following computation exactly
Arabia on April 30, 1999 and arrived in the Philippines on May 1, the same with the amount he was previously
1999. offered [which is US$12,640.33]. (Emphasis
supplied.)
I am aware that I still have to do a Petitioner added that under Article 13 of the Saudi
final settlement with the company Labor Law, the action to enforce payment of the service award
and hope that during my more than must be filed within one year from the termination of a labor
seven (7) [years] services, as the contract for a specific period. Respondents six contracts ended
Saudi Law stated, I am entitled for a when he left Saudi Arabia on the following dates: April 15,
long service award. (Emphasis 1993, June 8, 1994, December 18, 1995, March 21, 1997,
supplied.) March 16, 1998 and April 30, 1999. Petitioner concluded that
xxxx the one-year prescriptive period had lapsed because
respondent filed his complaint on December 11, 2000 or one
year and seven months after his sixth contract ended.
According to respondent, when he followed up his
claim for long service award on December 7, 2000, petitioner In his June 18, 2001 Decision, the Labor Arbiter
informed him that MMG did not respond. ordered petitioner to pay respondent longevity pay of
US$12,640.33 or P648,562.69 and attorneys fees of III. WHETHER OR NOT THE
P64,856.27 or a total of P713,418.96. HONORABLE COURT OF
APPEALS ERRED IN APPLYING
The Labor Arbiter ruled that respondents seven-year IN THE CASE AT BAR [ARTICLE
employment with MMG had sufficiently oriented him on the 1155 OF THE CIVIL CODE].
benefits given to workers; that petitioner was unable to IV. WHETHER OR NOT THE
convincingly refute respondents claim that MMG offered him HONORABLE COURT OF
longevity pay before he went on vacation on May 1, 1999; and APPEALS ERRED IN APPLYING
that respondents claim was not barred by prescription since his ARTICLE NO. 7 OF THE SAUDI
claim on July 6, 1999, made a month after his cause of action LABOR AND WORKMEN LAW TO
accrued, interrupted the prescriptive period under the Saudi SUPPORT ITS FINDING THAT
Labor Law until his claim was categorically denied. THE BASIS OF THE SERVICE
AWARD IS LONGEVITY [PAY] OR
LENGTH OF SERVICE
Petitioner appealed. However, the NLRC dismissed
RENDERED BY AN EMPLOYEE.
the appeal and affirmed the Labor Arbiters decision. The NLRC
ruled that respondent is entitled to longevity pay which is
Essentially, the issue is whether the Court of
different from severance pay.
Appeals erred in ruling that respondent is entitled to a
service award or longevity pay of US$12,640.33
Aggrieved, petitioner brought the case to the Court of under the provisions of the Saudi Labor Law. Related
Appeals through a petition for certiorari under Rule 65 of the to this issue are petitioners defenses of payment and
Rules of Court. The Court of Appeals denied the petition and prescription.
affirmed the NLRC. The Court of Appeals ruled that service
award is the same as longevity pay, and that the severance
Petitioner points out that the Labor Arbiter awarded
pay received by respondent cannot be equated with service
longevity pay although the Saudi Labor Law grants no such
award. The dispositive portion of the Court of Appeals decision
benefit, and the NLRC confused longevity pay and service
reads:
award. Petitioner maintains that the benefit granted by Article
87 of the Saudi Labor Law is service award which was already
WHEREFORE, finding no grave paid by MMG each time respondents contract ended.
abuse of discretion amounting to lack or in
(sic) excess of jurisdiction on the part of
Petitioner insists that prescription barred respondents
public respondent NLRC, the petition is
claim for service award as the complaint was filed one year
denied. The NLRC decision dated November
and seven months after the sixth contract ended. Petitioner
29, 2002 as well as and (sic) its January 31,
alleges that the Court of Appeals erred in ruling that
2003 Resolution are hereby AFFIRMED in
respondents July 6, 1999 claim interrupted the running of the
toto.
prescriptive period. Such ruling is contrary to Article 13 of the
Saudi Labor Law which provides that no case or claim relating
SO ORDERED.
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.
After its motion for reconsideration was denied,
petitioner filed the instant petition raising the following issues:
Respondent counters that he is entitled to longevity
I. WHETHER OR NOT THE pay under the provisions of the Saudi Labor Law and quotes
HONORABLE COURT OF extensively the decision of the Court of Appeals. He points out
APPEALS ERRED IN FINDING NO that petitioner has not refuted the Labor Arbiters finding that
MMG offered him longevity pay of US$12,640.33 before his
GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR one-month vacation in the Philippines in 1999. Thus, he
EXCESS OF JURISDICTION ON submits that such offer indeed exists as he sees no reason for
MMG to offer the benefit if no law grants it.
THE PART OF PUBLIC
RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION. After a careful study of the case, we are constrained
II. WHETHER OR NOT THE to reverse the Court of Appeals. We find that respondents
HONORABLE COURT OF service award under Article 87 of the Saudi Labor Law has
APPEALS ERRED IN FINDING already been paid. Our computation will show that the
THAT THE SERVICE AWARD OF severance pay received by respondent was his service award.
THE RESPONDENT [HAS] NOT
PRESCRIBED WHEN HIS Article 87 clearly grants a service award. It reads:
COMPLAINT WAS FILED ON
DECEMBER 11, 2000. Article 87
Where the term of a labor employment contract covering the period April 21, 1998 to April 29,
contract concluded for a specified period 1999. The computation below shows that respondents severance
comes to an end or where the employer pay of SR2,786 was his service award under Article 87.
cancels a contract of unspecified period, the
employer shall pay to the workman an Service Award = (SR5,438) + (9 days/365
award for the period of his service to be days) x (SR5,438)
computed on the basis of half a months pay
for each of the first five years and one Service Award = SR2,786.04
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 Respondents service award for the sixth contract is
fractions of a year, the workman shall be equivalent only to half-months pay plus the proportionate
entitled to an award which is proportionate to amount for the additional nine days of service he rendered
his service period during that year. after one year. Respondents employment contracts expressly
Furthermore, the workman shall be entitled stated that his employment ended upon his departure from
to the service award provided for at the
work. Each year he departed from work and successively new
beginning of this article in the following contracts were executed before he reported for work anew. His
cases: service was not cumulative. Pertinently, in Brent School, Inc. v.
Zamora, we said that a fixed term is an essential and natural
A. If he is called to military appurtenance of overseas employment contracts, as in this
service. case. We also said in that case that under American law,
B. If a workman resigns [w]here a contract specifies the period of its duration, it
because of marriage or terminates on the expiration of such period. A contract of
childbirth. employment for a definite period terminates by its own terms at
C. If the workman is leaving the the end of such period. As it is, Article 72 of the Saudi Labor
work as a result of a force Law is also of similar import. It reads:
majeure beyond his control.
(Emphasis supplied.)
A labor contract concluded for a
specified period shall terminate upon the
expiry of its term. If both parties continue to
Respondent, however, has called the benefit other
enforce the contract, thereafter, it shall be
names such as long service award and longevity pay. On the
considered renewed for an unspecified
other hand, petitioner claimed that the service award is the
period.
same as severance pay. Notably, the Labor Arbiter was unable
to specify any law to support his award of longevity pay. He
anchored the award on his finding that respondents allegations
Regarding respondents claim that he was offered
were more credible because his seven-year employment at
US$12,640.33 as longevity pay before he returned to the
MMG had sufficiently oriented him on the benefits given to
Philippines on May 1, 1999, we find that he was not candid on
workers. To the NLRC, respondent is entitled to service award
this particular point. His categorical assertion about the offer
or longevity pay under Article 87 and that longevity pay is
being engrained in his mind such that he reconstructed the
different from severance pay. The Court of Appeals agreed.
computation and arrived at the computation exactly the same
with the amount he was previously offered is not only beyond
Considering that Article 87 expressly grants a service belief. Such assertion is also a stark departure from his July 6,
award, why is it correct to agree with respondent that service 1999 letter to MMG where he could only express his hope that
award is the same as longevity pay, and wrong to agree with he was entitled to a long service award and where he never
petitioner that service award is the same as severance pay? mentioned the supposed previous offer. Moreover,
And why would it be correct to say that service award is respondents claim that his monthly compensation is
severance pay, and wrong to call service award as longevity SR10,248.92 is belied by the payroll which shows that he
pay? receives SR5,438 per month.
We found the answer in the pleadings and evidence We therefore emphasize that such payroll should
presented. Respondents position paper mentioned how his have prompted the lower tribunals to examine closely
long service award or longevity pay is computed: half-months respondents computation of his supposed longevity pay before
pay per year of service and one-months pay per year after five adopting that computation as their own.
years of service. Article 87 has the same formula to compute
the service award.
On the matter of prescription, however, we cannot
agree with petitioner that respondents action has prescribed
The payroll submitted by petitioner showed that under Article 13 of the Saudi Labor Law. What applies is Article
respondent received severance pay of SR2,786 for his sixth 291 of our Labor Code which reads:
ART. 291. Money claims. All limitations to the pending claims based on a
money claims arising from employer- foreign law (Siegel, Conflicts, 183 [1975]).
employee relations accruing during the While there are several kinds of borrowing
effectivity of this Code shall be filed within statutes, one form provides that an action
three (3) years from the time the cause of barred by the laws of the place where it
action accrued; otherwise they shall be accrued, will not be enforced in the forum
forever barred. even though the local statute has not run
against it (Goodrich and Scoles, Conflict of
xxxx Laws, 152-153 [1938]). Section 48 of our
Code of Civil Procedure is of this kind. Said
Section provides:
In Cadalin v. POEAs Administrator, we held that
Article 291 covers all money claims from employer-employee If by the laws of the state or country
relationship and is broader in scope than claims arising from a where the cause of action arose, the action
specific law. It is not limited to money claims recoverable under is barred, it is also barred in the Philippine
the Labor Code, but applies also to claims of overseas contract Islands.
workers. The following ruling in Cadalin v. POEAs
Administrator is instructive: Section 48 has not been repealed
or amended by the Civil Code of the
First to be determined is whether it Philippines. Article 2270 of said Code
is the Bahrain law on prescription of action repealed only those provisions of the Code
based on the Amiri Decree No. 23 of 1976 or of Civil Procedure as to which were
a Philippine law on prescription that shall be inconsistent with it. There is no provision in
the governing law. the Civil Code of the Philippines, which is
inconsistent with or contradictory to Section
Article 156 of the Amiri Decree No. 48 of the Code of Civil Procedure (Paras,
23 of 1976 provides: Philippine Conflict of Laws, 104 [7th ed.]).
Taken aback, private respondents replied with a Firstly, under the employment
common letter, clarifying that their earlier letter was not contract entered into between complainants
intended as a resignation letter, but one that merely intended to and respondents, specifically Section 10
raise attention to what they perceived as vital issues. thereof, it provides that contract partners
Negotiations ensued between private respondents and Nicolay, agree that his contract shall be subject to the
but for naught. Each of the private respondents received a letter LAWS of the jurisdiction of the locality in
from Nicolay dated 11 July 2000, informing them of the pre- which the service is performed.
termination of their contracts of employment on the grounds of
serious and gross insubordination, among others, resulting to Secondly, respondent having
loss of confidence and trust. entered into contract, they can no longer
invoke the sovereignty of the Federal
On 21 August 2000, the private respondents filed a Republic of Germany.
complaint for illegal dismissal with the NLRC. Named as
respondents therein where GTZ, the Director of its Manila office Lastly, it is imperative to be immune
Hans Peter Paulenz, its Assistant Project Manager Christian from suit, respondents should have secured
Jahn, and Nicolay from the Department of Foreign Affairs a
certification of respondents diplomatic status
On 25 October 2005, GTZ, through counsel, filed a and entitlement to diplomatic privileges
Motion to Dismiss, on the ground that the Labor Arbiter had no including immunity from suits. Having failed in
jurisdiction over the case, as its acts were undertaken in the this regard, respondents cannot escape
liability from the shelter of sovereign of the failure to correctly appeal the decision of the Labor
immunity.[sic] Arbiter to the NLRC, such judgment consequently became final
and executory. GTZ goes as far as to request that the Court re-
Notably, GTZ did not file a motion for reconsideration examine Air Services, a suggestion that is needlessly
to the Labor Arbiters Decision or elevate said decision for improvident under the circumstances. Air Services affirms
appeal to the NLRC. Instead, GTZ opted to assail the decision doctrines grounded in sound procedural rules that have allowed
by way of a special civil action for certiorari filed with the Court for the considered and orderly disposition of labor cases.
of Appeals. On 10 December 2001, the Court of Appeals
promulgated a Resolution dismissing GTZs petition, finding that The OSG points out, citing Heirs of Mayor Nemencio
judicial recourse at this stage of the case is uncalled for[,] [t]he Galvez v. Court of Appeals, that even when appeal is available,
appropriate remedy of the petitioners [being] an appeal to the the Court has nonetheless allowed a writ of certiorari when the
NLRC x x x. A motion for reconsideration to this Resolution orders of the lower court were issued either in excess of or
proved fruitless for GTZ. without jurisdiction. Indeed, the Court has ruled before that the
failure to employ available intermediate recourses, such as a
Thus, the present petition for review under Rule 45, motion for reconsideration, is not a fatal infirmity if the ruling
assailing the decision and resolutions of the Court of Appeals assailed is a patent nullity. This approach suggested by the
and of the Labor Arbiter. GTZs arguments center on whether OSG allows the Court to inquire directly into what is the main
the Court of Appeals could have entertained its petition for issuewhether GTZ enjoys immunity from suit.
certiorari despite its not having undertaken an appeal before
the NLRC; and whether the complaint for illegal dismissal The arguments raised by GTZ and the OSG are
should have been dismissed for lack of jurisdiction on account rooted in several indisputable facts. The SHINE project was
of GTZs insistence that it enjoys immunity from suit. No special implemented pursuant to the bilateral agreements between the
arguments are directed with respect to petitioners Hans Peter Philippine and German governments. GTZ was tasked, under
Paulenz and Anne Nicolay, respectively the then Director and the 1991 agreement, with the implementation of the
the then Project Manager of GTZ in the Philippines; so we have contributions of the German government. The activities
to presume that the arguments raised in behalf of GTZs alleged performed by GTZ pertaining to the SHINE project are
immunity from suit extend to them as well. governmental in nature, related as they are to the promotion of
health insurance in the Philippines. The fact that GTZ entered
The Court required the Office of the Solicitor General into employment contracts with the private respondents did not
(OSG) to file a Comment on the petition. In its Comment dated disqualify it from invoking immunity from suit, as held in cases
7 November 2005, the OSG took the side of GTZ, with the such as Holy See v. Rosario, Jr., which set forth what remains
prayer that the petition be granted on the ground that GTZ was valid doctrine:
immune from suit, citing in particular its assigned functions in
implementing the SHINE programa joint undertaking of the Certainly, the mere entering into a
Philippine and German governments which was neither contract by a foreign state with a private party
proprietary nor commercial in nature. cannot be the ultimate test. Such an act can
only be the start of the inquiry. The logical
The Court of Appeals had premised the dismissal of question is whether the foreign state is
GTZs petition on its procedural misstep in bypassing an appeal engaged in the activity in the regular course of
to NLRC and challenging the Labor Arbiters Decision directly business. If the foreign state is not engaged
with the appellate court by way of a Rule 65 petition. In regularly in a business or trade, the particular
dismissing the petition, the Court of Appeals relied on our ruling act or transaction must then be tested by its
in Air Service Cooperative v. Court of Appeals. The central nature. If the act is in pursuit of a sovereign
issue in that case was whether a decision of a Labor Arbiter activity, or an incident thereof, then it is an act
rendered without jurisdiction over the subject matter may be jure imperii, especially when it is not
annulled in a petition before a Regional Trial Court. That case undertaken for gain or profit.
may be differentiated from the present case, since the Regional
Trial Court does not have original or appellate jurisdiction to Beyond dispute is the tenability of the comment points
review a decision rendered by a Labor Arbiter. In contrast, there raised by GTZ and the OSG that GTZ was not performing
is no doubt, as affirmed by jurisprudence, that the Court of proprietary functions notwithstanding its entry into the particular
Appeals has jurisdiction to review, by way of its original employment contracts. Yet there is an equally fundamental
certiorari jurisdiction, decisions ruling on complaints for illegal premise which GTZ and the OSG fail to address, namely: Is
dismissal. GTZ, by conception, able to enjoy the Federal Republics
immunity from suit?
Nonetheless, the Court of Appeals is correct in
pronouncing the general rule that the proper recourse from the The principle of state immunity from suit, whether a
decision of the Labor Arbiter is to first appeal the same to the local state or a foreign state, is reflected in Section 9, Article
NLRC. Air Services is in fact clearly detrimental to petitioners XVI of the Constitution, which states that the State may not be
position in one regard. The Court therein noted that on account sued without its consent. Who or what consists of the State?
For one, the doctrine is available to foreign States insofar as
they are sought to be sued in the courts of the local State,
necessary as it is to avoid unduly vexing the peace of nations.
If the instant suit had been brought directly against be sued. These include the National Irrigation Administration,
the Federal Republic of Germany, there would be no doubt that the former Central Bank, and the National Power Corporation.
it is a suit brought against a State, and the only necessary In SSS v. Court of Appeals, the Court through Justice Melencio-
inquiry is whether said State had consented to be sued. Herrera explained that by virtue of an express provision in its
However, the present suit was brought against GTZ. It is charter allowing it to sue and be sued, the Social Security
necessary for us to understand what precisely are the System did not enjoy immunity from suit:
parameters of the legal personality of GTZ.
We come now to the amendability of
Counsel for GTZ characterizes GTZ as the the SSS to judicial action and legal
implementing agency of the Government of the Federal responsibility for its acts. To our minds, there
Republic of Germany, a depiction similarly adopted by the should be no question on this score
OSG. Assuming that characterization is correct, it does not considering that the SSS is a juridical entity
automatically invest GTZ with the ability to invoke State with a personality of its own. It has corporate
immunity from suit. The distinction lies in whether the agency is powers separate and distinct from the
incorporated or unincorporated. The following lucid discussion Government. SSS' own organic act
from Justice Isagani Cruz is pertinent: specifically provides that it can sue and be
sued in Court. These words "sue and be
Where suit is filed not against the sued" embrace all civil process incident to a
government itself or its officials but against legal action. So that, even assuming that the
one of its entities, it must be ascertained SSS, as it claims, enjoys immunity from suit
whether or not the State, as the principal that as an entity performing governmental
may ultimately be held liable, has given its functions, by virtue of the explicit provision of
consent to be sued. This ascertainment will the aforecited enabling law, the Government
depend in the first instance on whether the must be deemed to have waived immunity in
government agency impleaded is respect of the SSS, although it does not
incorporated or unincorporated. thereby concede its liability. That statutory law
has given to the private citizen a remedy for
An incorporated agency has a the enforcement and protection of his rights.
charter of its own that invests it with a The SSS thereby has been required to submit
separate juridical personality, like the to the jurisdiction of the Courts, subject to its
Social Security System, the University of the right to interpose any lawful defense. Whether
Philippines, and the City of Manila. By the SSS performs governmental or proprietary
contrast, the unincorporated agency is so functions thus becomes unnecessary to
called because it has no separate juridical belabor. For by that waiver, a private citizen
personality but is merged in the general may bring a suit against it for varied
machinery of the government, like the objectives, such as, in this case, to obtain
Department of Justice, the Bureau of Mines compensation in damages arising from
and the Government Printing Office. contract, and even for tort.
Would the fact that the Solicitor General has endorsed A final note. This decision should not be seen as
GTZs claim of States immunity from suit before this Court deviation from the more common methodology employed in
sufficiently substitute for the DFA certification? Note that the ascertaining whether a party enjoys State immunity from suit,
rule in public international law quoted in Holy See referred to one which focuses on the particular functions exercised by the
endorsement by the Foreign Office of the State where the suit party and determines whether these are proprietary or
is filed, such foreign office in the Philippines being the sovereign in nature. The nature of the acts performed by the
Department of Foreign Affairs. Nowhere in the Comment of the entity invoking immunity remains the most important barometer
OSG is it manifested that the DFA has endorsed GTZs claim, or for testing whether the privilege of State immunity from suit
that the OSG had solicited the DFAs views on the issue. The should apply. At the same time, our Constitution stipulates that
arguments raised by the OSG are virtually the same as the a State immunity from suit is conditional on its withholding of
arguments raised by GTZ without any indication of any special consent; hence, the laws and circumstances pertaining to the
and distinct perspective maintained by the Philippine creation and legal personality of an instrumentality or agency
government on the issue. The Comment filed by the OSG does invoking immunity remain relevant. Consent to be sued, as
not inspire the same degree of confidence as a certification exhibited in this decision, is often conferred by the very same
from the DFA would have elicited. statute or general law creating the instrumentality or agency.
Holy See made reference to Baer v. Tizon, and that in WHEREFORE, the petition is DENIED. No
the said case, the United States Embassy asked the Secretary pronouncement as to costs. SO ORDERED.
of Foreign Affairs to request the Solicitor General to make a
suggestion to the trial court, accomplished by way of a
ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and
Manifestation and Memorandum, that the petitioner therein
MINISTRY OF PUBLIC HEALTH-KUWAIT vs. MA. JOSEFA
enjoyed immunity as the Commander of the Subic Bay Naval
ECHIN; G.R. No. 178551; October 11, 2010; CARPIO
Base. Such circumstance is actually not narrated in the text of
MORALES, J.:
Baer itself and was likely supplied in Holy See because its
author, Justice Camilio Quiason, had appeared as the Solicitor
in behalf of the OSG in Baer. Nonetheless, as narrated in Holy Josefina Echin (respondent) was hired by petitioner ATCI
See, it was the Secretary of Foreign Affairs which directed the Overseas Corporation in behalf of its principal-co-petitioner, the
Ministry of Public Health of Kuwait (the Ministry), for the
OSG to intervene in behalf of the United States government in
the Baer case, and such fact is manifest enough of the position of medical technologist under a two-year contract,
endorsement by the Foreign Office. We do not find a similar denominated as a Memorandum of Agreement (MOA), with a
circumstance that bears here. monthly salary of US$1,200.00.
The Court is thus holds and so rules that GTZ Under the MOA, all newly-hired employees undergo a
consistently has been unable to establish with satisfaction that probationary period of one (1) year and are covered by
Kuwait’s Civil Service Board Employment Contract No. 2.
it enjoys the immunity from suit generally enjoyed by its parent
country, the Federal Republic of Germany. Consequently, both
the Labor Arbiter and the Court of Appeals acted within proper Respondent was deployed on February 17, 2000 but was
bounds when they refused to acknowledge that GTZ is so terminated from employment on February 11, 2001, she not
immune by dismissing the complaint against it. Our finding has having allegedly passed the probationary period.
additional ramifications on the failure of GTZ to properly appeal
the Labor Arbiters decision to the NLRC. As pointed out by the As the Ministry denied respondent’s request for
OSG, the direct recourse to the Court of Appeals while reconsideration, she returned to the Philippines on March 17,
bypassing the NLRC could have been sanctioned had the 2001, shouldering her own air fare.
Labor Arbiters decision been a patent nullity. Since the Labor
Arbiter acted properly in deciding the complaint, On July 27, 2001, respondent filed with the National Labor
notwithstanding GTZs claim of immunity, we cannot see how Relations Commission (NLRC) a complaint for illegal dismissal
the decision could have translated into a patent nullity. against petitioner ATCI as the local recruitment agency,
represented by petitioner, Amalia Ikdal (Ikdal), and the Ministry,
As a result, there was no basis for petitioners in as the foreign principal.
foregoing the appeal to the NLRC by filing directly with the
Court of Appeals the petition for certiorari. It then follows that By Decision of November 29, 2002, the Labor Arbiter, finding
the Court of Appeals acted correctly in dismissing the petition that petitioners neither showed that there was just cause to
on that ground. As a further consequence, since petitioners warrant respondent’s dismissal nor that she failed to qualify as
failed to perfect an appeal from the Labor Arbiters Decision, the a regular employee, held that respondent was illegally
same has long become final and executory. All other questions dismissed and accordingly ordered petitioners to pay her
US$3,600.00, representing her salary for the three months The petition fails.
unexpired portion of her contract.
Petitioner ATCI, as a private recruitment agency, cannot evade
On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the responsibility for the money claims of Overseas Filipino
Labor Arbiter’s decision by Resolution4 of January 26, 2004. workers (OFWs) which it deploys abroad by the mere
Petitioners’ motion for reconsideration having been denied by expediency of claiming that its foreign principal is a
Resolution5 of April 22, 2004, they appealed to the Court of government agency clothed with immunity from suit, or that
Appeals, contending that their principal, the Ministry, being a such foreign principal’s liability must first be established before
foreign government agency, is immune from suit and, as such, it, as agent, can be held jointly and solidarily liable.
the immunity extended to them; and that respondent was
validly dismissed for her failure to meet the performance rating In providing for the joint and solidary liability of private
within the one-year period as required under Kuwait’s Civil recruitment agencies with their foreign principals, Republic Act
Service Laws. Petitioners further contended that Ikdal should No. 8042 precisely affords the OFWs with a recourse and
not be liable as an officer of petitioner ATCI. assures them of immediate and sufficient payment of what is
due them. Skippers United Pacific v. Maguad8 explains:
By Decision of March 30, 2007, the appellate court affirmed the
NLRC Resolution. . . . [T]he obligations covenanted in the recruitment
agreement entered into by and between the local agent
In brushing aside petitioners’ contention that they only acted as and its foreign principal are not coterminous with the term
agent of the Ministry and that they cannot be held jointly and of such agreement so that if either or both of the parties
solidarily liable with it, the appellate court noted that under the decide to end the agreement, the responsibilities of such
law, a private employment agency shall assume all parties towards the contracted employees under the
responsibilities for the implementation of the contract of agreement do not at all end, but the same extends up to and
employment of an overseas worker, hence, it can be sued until the expiration of the employment contracts of the
jointly and severally with the foreign principal for any violation employees recruited and employed pursuant to the said
of the recruitment agreement or contract of employment. recruitment agreement. Otherwise, this will render nugatory
the very purpose for which the law governing the
As to Ikdal’s liability, the appellate court held that under Sec. employment of workers for foreign jobs abroad was
10 of Republic Act No. 8042, the "Migrant and Overseas enacted. (emphasis supplied)
Filipinos’ Act of 1995," corporate officers, directors and
partners of a recruitment agency may themselves be jointly The imposition of joint and solidary liability is in line with the
and solidarily liable with the recruitment agency for money policy of the state to protect and alleviate the plight of the
claims and damages awarded to overseas workers. working class. Verily, to allow petitioners to simply invoke the
immunity from suit of its foreign principal or to wait for the
Petitioners’ motion for reconsideration having been denied by judicial determination of the foreign principal’s liability before
the appellate court by Resolution7 of June 27, 2007, the petitioner can be held liable renders the law on joint and
present petition for review on certiorari was filed. solidary liability inutile.
Petitioners maintain that they should not be held liable because As to petitioners’ contentions that Philippine labor laws on
respondent’s employment contract specifically stipulates that probationary employment are not applicable since it was
her employment shall be governed by the Civil Service Law expressly provided in respondent’s employment contract,
and Regulations of Kuwait. They thus conclude that it was which she voluntarily entered into, that the terms of her
patent error for the labor tribunals and the appellate court to engagement shall be governed by prevailing Kuwaiti Civil
apply the Labor Code provisions governing probationary Service Laws and Regulations as in fact POEA Rules accord
employment in deciding the present case. respect to such rules, customs and practices of the host
country, the same was not substantiated.
Further, petitioners argue that even the Philippine Overseas
Employment Act (POEA) Rules relative to master employment Indeed, a contract freely entered into is considered the law
contracts (Part III, Sec. 2 of the POEA Rules and Regulations) between the parties who can establish stipulations, clauses,
accord respect to the "customs, practices, company policies terms and conditions as they may deem convenient, including
and labor laws and legislation of the host country." the laws which they wish to govern their respective obligations,
as long as they are not contrary to law, morals, good customs,
Finally, petitioners posit that assuming arguendo that Philippine public order or public policy.
labor laws are applicable, given that the foreign principal is a
government agency which is immune from suit, as in fact it did It is hornbook principle, however, that the party invoking the
not sign any document agreeing to be held jointly and solidarily application of a foreign law has the burden of proving the law,
liable, petitioner ATCI cannot likewise be held liable, more so under the doctrine of processual presumption which, in this
since the Ministry’s liability had not been judicially determined case, petitioners failed to discharge. The Court’s ruling in EDI-
as jurisdiction was not acquired over it. Staffbuilders Int’l., v. NLRC illuminates:
In the present case, the employment contract signed by Gran specifying the grounds therefor, and a translated copy of the
specifically states that Saudi Labor Laws will govern matters certificate of termination, both of which documents were
not provided for in the contract (e.g. specific causes for certified by Mr. Mustapha Alawi, Head of the Department of
termination, termination procedures, etc.). Being the law Foreign Affairs-Office of Consular Affairs Inslamic Certification
intended by the parties (lex loci intentiones) to apply to the and Translation Unit; and respondent’s letter of reconsideration
contract, Saudi Labor Laws should govern all matters relating to the Ministry, wherein she noted that in her first eight (8)
to the termination of the employment of Gran. months of employment, she was given a rating of "Excellent"
albeit it changed due to changes in her shift of work schedule.
In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the These documents, whether taken singly or as a whole, do not
foreign law. The foreign law is treated as a question of fact to sufficiently prove that respondent was validly terminated as a
be properly pleaded and proved as the judge or labor arbiter probationary employee under Kuwaiti civil service laws.
cannot take judicial notice of a foreign law. He is presumed to Instead of submitting a copy of the pertinent Kuwaiti labor
know only domestic or forum law. laws duly authenticated and translated by Embassy
officials thereat, as required under the Rules, what
Unfortunately for petitioner, it did not prove the pertinent Saudi petitioners submitted were mere certifications attesting
laws on the matter; thus, the International Law doctrine of only to the correctness of the translations of the MOA and
presumed-identity approach or processual presumption comes the termination letter which does not prove at all that
into play. Where a foreign law is not pleaded or, even if Kuwaiti civil service laws differ from Philippine laws and
pleaded, is not proved, the presumption is that foreign law is that under such Kuwaiti laws, respondent was validly
the same as ours. Thus, we apply Philippine labor laws in terminated. Thus the subject certifications read:
determining the issues presented before us. (emphasis and
underscoring supplied) xxxx
The Philippines does not take judicial notice of foreign laws, This is to certify that the herein attached translation/s from
hence, they must not only be alleged; they must be proven. To Arabic to English/Tagalog and or vice versa was/were
prove a foreign law, the party invoking it must present a copy presented to this Office for review and certification and the
thereof and comply with Sections 24 and 25 of Rule 132 of the same was/were found to be in order. This Office, however,
Revised Rules of Court which reads: assumes no responsibility as to the contents of the
document/s.
SEC. 24. Proof of official record. — The record of public
documents referred to in paragraph (a) of Section 19, when This certification is being issued upon request of the interested
admissible for any purpose, may be evidenced by an official party for whatever legal purpose it may serve. (emphasis
publication thereof or by a copy attested by the officer having supplied)
the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a Respecting Ikdal’s joint and solidary liability as a corporate
certificate that such officer has the custody. If the office in officer, the same is in order too following the express provision
which the record is kept is in a foreign country, the certificate of R.A. 8042 on money claims, viz:
may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by SEC. 10. Money Claims.—Notwithstanding any provision of
any officer in the foreign service of the Philippines stationed in law to the contrary, the Labor Arbiters of the National Labor
the foreign country in which the record is kept, and Relations Commission (NLRC) shall have the original and
authenticated by the seal of his office. (emphasis supplied) exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
SEC. 25. What attestation of copy must state. — Whenever a arising out of an employer-employee relationship or by virtue of
copy of a document or record is attested for the purpose of the any law or contract involving Filipino workers for overseas
evidence, the attestation must state, in substance, that the deployment including claims for actual moral, exemplary and
copy is a correct copy of the original, or a specific part thereof, other forms of damages.
as the case may be. The attestation must be under the official
seal of the attesting officer, if there be any, or if he be the clerk The liability of the principal/employer and the
of a court having a seal, under the seal of such court. recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be
To prove the Kuwaiti law, petitioners submitted the following: incorporated in the contract for overseas employment and shall
MOA between respondent and the Ministry, as represented by be a condition precedent for its approval. The performance
ATCI, which provides that the employee is subject to a bond to be filed by the recruitment/placement agency, as
probationary period of one (1) year and that the host country’s provided by law, shall be answerable for all money claims or
Civil Service Laws and Regulations apply; a translated copy damages that may be awarded to the workers. If the
(Arabic to English) of the termination letter to respondent recruitment/placement agency is a juridical being, the
stating that she did not pass the probation terms, without corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the was incurred; and such liability is not released by any
corporation or partnership for the aforesaid claims and subsequent transfer of stock.
damages. (emphasis and underscoring supplied)
The defendant-appellant makes the following assignments of
WHEREFORE, the petition is DENIED. SO ORDERED. error:
WILLAMETTE IRON & STEEL WORKS vs. A.H. MUZZAL; I. The lower court erred in holding that the defendant
G.R. No. L-42538; May 21, 1935; GODDARD, J.: was the holder of 1,432 shares of the capital stock of
the Meyer-Muzzal Company.
This is an appeal from a decision of the Court of First Instance
of Zamboanga, the dispositive part of which reads: II. The lower court erred in finding that plaintiff has
proven the existence of the foreign law involved in this
action.
In view of the considerations above stated, judgment
is hereby entered in favor of the plaintiff, ordering the
defendant, for the first cause of action, to pay to III. The lower court erred in enforcing the law of
plaintiff the sum of P2,837.34, with interest thereon at California.
the rate of 6 per cent per annum from March 11,
1929, until paid, and to pay also the amount of IV. The lower court erred in rendering judgment
P1,590.63, for the second cause of action, with against the defendant.
interest thereon at 7 per cent per annum from April 8,
1929, until paid. The defendant is further ordered to As to the first assignment of error the witness Stanley H.
pay the amount of P500 as reasonable attorney's fees Hermann, a certified public accountant, testified that he knows
in prosecuting this action, and to pay the costs of that the Meyer-Muzzal Company is a corporation and further
these proceedings. testified as follows:
This case involves the liability of the defendant, a former I became acquainted with the corporation by reason
resident of the State of California, now residing in the of being employed by it in October, November and
Philippine Islands, for obligations contracted by a California December of 1929 as a certified public accountant
corporation of which he was a stockholder at the time said and auditor to personally examine the company's
obligations were contracted with the plaintiff-appellee in this books of account, stock and other records of the
case. company for the purpose of certifying, if possible, to
the correctness of a statement of the financial
The section of the Civil Code of California under which the condition of the company on March 31, 1929.
plaintiff seeks to recover reads:
xxx xxx xxx
SEC. 322. Each stockholder of a corporation is
individually and personally liable for such proportion of 8. Please state, if you know, whether or not one A.H.
all its debts and liabilities contracted or incurred Muzzal was a stockholder of Meyer-Muzzal Company
during the time he was a stockholder as the amount of on November 5, 1928 and December 22, 1928, and if
stock or shares owned by him bears to the whole of he was, please state the number and value of the
the subscribed capital stock or shares of the shares of capital stock of Meyer-Muzzal Company
corporation. Any creditor of the corporation may subscribed and owned by said A.H. Muzzal on
institute joint or several actions against any of its November 5, 1928 and December 22, 1928?
stockholders, for the proportion of his claim payable
by each, and in such action the court must (1) A. Yes, Mr. A.H. Muzzal was a stockholder of the
ascertain the proportion of the claim or debt for which Meyer-Muzzal Company on the dates specified.
each defendant is liable, and (2) a several judgment Fourteen hundred thirty-three shares of the capital
must be rendered against each, in conformity stock of Meyer-Muzzal Company of the par value of
therewith. If any stockholder pays his proportion of $10 each were subscribed and owned by said A.H.
any debt due from the corporation, incurred while he Muzzal on November 5th, 1928 and on December
was such stockholder, he is relieved from any further 22nd, 1928, and said shares were issued to and
personal liability for such debt, and if an action has standing in the name of A. H. Muzzal on the books of
been brought against him upon such debt, it must be said company at said times.
dismissed, as to him, upon his paying the costs, or
such proportion thereof as may be properly
9. If, by reason of the loss, destruction and/or
chargeable against him. The liability of each
disappearance of the stock and other corporate
stockholder is determined by the amount of stock or
records of the Meyer-Muzzal Company since the time
shares owned by him at the time the debt or liability
you had occasion to examine them, you have been
unable to make reference thereto in answering the Volume 4, pages 3148-3152.) Aside from the testimony of
questions asked of you in this deposition, please Attorney Bolton Ragland's Annotated Civil Code of California
answer each and all of said questions by reference to was presented as evidence. This book contains that State's
any documents or working sheets which you may be Civil Code as adopted March 21, 1872, with the subsequent
prepared upon the occasion of your examining and/or official statute amendments to and including the year 1929.
auditing the books of account, stock and other records
of the Meyer-Muzzal Company. In the third and fourth assignments of error the appellant
argues that since the law of California, as to the liability of
A. By reference to my working papers which I made at stockholders of a corporation, is different from and inconsistent
the time I examined the books of account and stock with the Philippine Corporation Law the courts here should not
records of Meyer-Muzzal Company in October, impose liability provided in that law upon a resident of these
November, December, 1929, and which working Islands who is a stockholder of a California corporation. The
papers are in my possession, I find and can state herein defendant is chargeable with notice of the law of
accordingly that these working papers show what the California as to the liability of stockholders for debt of a
stock and other records of said Meyer-Muzzal corporation proportionate to their stock holdings, in view of the
Company recorded in regard to the matters contained fact that he was one of the incorporators of the Meyer-Muzzal
in questions No. 6, No. 7 and No. 8 and I can state Company in the year 1924 and was still a stockholder in that
accordingly from my examination of said records and company in the year 1928. Exhibit 10 of the plaintiff is a
by reference to my working papers that I know who certified company of the articles of incorporation of Meyer-
the stockholders of Meyer-Muzzal company were; that Muzzal Company in which it appears that that company was
the amount of the subscribed capital stock of said incorporated on August 22, 1924, and that the incorporators
Meyer-Muzzal Company on said dates was 5,000 were A.H. Muzzal, Leo W. Meyer and James Rolph, Jr., "all of
shares of the par value of $10 each, and that A.H. whom are residents and citizens of the State of California." The
Muzzal was a stockholder of the Meyer-Muzzal defendant cannot now escape liability by alleging that the
Company on the dates specified and that fourteen California law is unjust and different from the inconsistent with
hundred thirty-three shares of the capital stock of the Philippine Corporation Law.
Meyer-Muzzal Company of the par value of $10 each
were subscribed and owned by A.H. Muzzal on The judgment of the trial court is affirmed with costs in both
November 5, 1928 and on December 22nd, 1928 and instances against the defendant-appellant.
said shares were issued to and standing in the name
of A.H. Muzzal on the books of said company at said
THE COLLECTOR OF INTERNAL REVENUE, vs. DOUGLAS
times.
FISHER AND BETTINA FISHER, and the COURT OF TAX
APPEALS; G.R. No. L-11622; January 28, 1961
The above sufficiently establishes the fact that the defendant
was the owner of 1,433 shares of stock of the corporation
DOUGLAS FISHER AND BETTINA FISHER
Meyer-Muzzal Company when it contracted the obligations
vs. THE COLLECTOR OF INTERNAL REVENUE, and the
alleged in the complaint.
COURT OF TAX APPEALS; G.R. No. L-11668; January 28,
1961; BARRERA, J.:
As to the second assignment of error Mr. Arthur W. Bolton, an
attorney-at-law of San Francisco, California, since the year
1918, under oath, quoted verbatim section 322 of the California This case relates to the determination and settlement of the
Civil Code and stated that said section was in force at the time hereditary estate left by the deceased Walter G. Stevenson,
the obligations of the defendant to the plaintiff were incurred, i. and the laws applicable thereto. Walter G. Stevenson (born in
e., on November 5, 1928 and December 22, 1928. This the Philippines on August 9, 1874 of British parents and
evidence sufficiently established the fact that the section in married in the City of Manila on January 23, 1909 to Beatrice
Mauricia Stevenson another British subject) died on February
question was the law of the State of California on the above
dates. A reading of sections 300 and 301 of our Code of Civil 22, 1951 in San Francisco, California, U.S.A. whereto he and
Procedure will convince one that these sections do not exclude his wife moved and established their permanent residence
the presentation of other competent evidence to prove the since May 10, 1945. In his will executed in San Francisco on
existence of a foreign law. May 22, 1947, and which was duly probated in the Superior
Court of California on April 11, 1951, Stevenson instituted his
wife Beatrice as his sole heiress to the following real and
"The foreign law is a matter of fact ... You ask the witness what
personal properties acquired by the spouses while residing in
the law is; he may from his recollection, or on producing and
the Philippines, described and preliminary assessed as follows:
referring to books, say what it is." (Lord Campbell concurring in
an opinion of Lord Chief Justice Denman in a well known
English case where a witness was called upon to prove the Gross Estate
Roman laws of marriage and was permitted to testify, though Real Property — 2 parcels of
he referred to a book containing the decrees of the Council of land in Baguio, covered by
Trent as controlling, Jones on Evidence, Second Edition, T.C.T. Nos. 378 and 379 P43,500.00
Personal Property (b) Attorney's Fee 6.000.00
(1) 177 shares of stock of (c) Judicial and 1,400.05
Canacao Estate at P10.00 each 1,770.00 Administration expenses as
of August 9, 1952
(2) 210,000 shares of stock of
8,604.39
Mindanao Mother Lode Mines,
Real Estate Tax for 1951 on 652.50
Inc. at P0.38 per share 79,800.00
Baguio real properties (O.R.
(3) Cash credit with Canacao No. B-1 686836)
Estate Inc. 4,870.88 Claims against the estate: P10,000.00
(4) Cash, with the Chartered ($5,000.00) P10,000.00
Bank of India, Australia & China 851.97 Plus: 4% int. p.a. from Feb. 22.47 10,022.47
Total Gross Assets P130,792.85 2 to 22, 1951
Sub-Total P21,365.88
On May 22, 1951, ancillary administration proceedings were
instituted in the Court of First Instance of Manila for the In the meantime, on December 1, 1952, Beatrice Mauricia
settlement of the estate in the Philippines. In due time Stevenson assigned all her rights and interests in the estate to
Stevenson's will was duly admitted to probate by our court and the spouses, Douglas and Bettina Fisher, respondents herein.
Ian Murray Statt was appointed ancillary administrator of the
estate, who on July 11, 1951, filed a preliminary estate and On September 7, 1953, the ancillary administrator filed a
inheritance tax return with the reservation of having the second amended estate and inheritance tax return (Exh. "M-
properties declared therein finally appraised at their values six N"). This return declared the same assets of the estate stated
months after the death of Stevenson. Preliminary return was in the amended return of September 22, 1952, except that it
made by the ancillary administrator in order to secure the contained new claims for additional exemption and deduction
waiver of the Collector of Internal Revenue on the inheritance to wit: (1) deduction in the amount of P4,000.00 from the gross
tax due on the 210,000 shares of stock in the Mindanao Mother estate of the decedent as provided for in Section 861 (4) of the
Lode Mines Inc. which the estate then desired to dispose in the U.S. Federal Internal Revenue Code which the ancillary
United States. Acting upon said return, the Collector of Internal administrator averred was allowable by way of the reciprocity
Revenue accepted the valuation of the personal properties granted by Section 122 of the National Internal Revenue Code,
declared therein, but increased the appraisal of the two parcels as then held by the Board of Tax Appeals in case No. 71
of land located in Baguio City by fixing their fair market value in entitled "Housman vs. Collector," August 14, 1952; and (2)
the amount of P52.200.00, instead of P43, 500.00. After exemption from the imposition of estate and inheritance taxes
allowing the deductions claimed by the ancillary administrator on the 210,000 shares of stock in the Mindanao Mother Lode
for funeral expenses in the amount of P2,000.00 and for Mines, Inc. also pursuant to the reciprocity proviso of Section
judicial and administration expenses in the sum of P5,500.00, 122 of the National Internal Revenue Code. In this last return,
the Collector assessed the state the amount of P5,147.98 for the estate claimed that it was liable only for the amount of
estate tax and P10,875,26 or inheritance tax, or a total of P525.34 for estate tax and P238.06 for inheritance tax and
P16,023.23. Both of these assessments were paid by the that, as a consequence, it had overpaid the government. The
estate on June 6, 1952. refund of the amount of P15,259.83, allegedly overpaid, was
accordingly requested by the estate. The Collector denied the
On September 27, 1952, the ancillary administrator filed in claim. For this reason, action was commenced in the Court of
amended estate and inheritance tax return in pursuance f his First Instance of Manila by respondents, as assignees of
reservation made at the time of filing of the preliminary return Beatrice Mauricia Stevenson, for the recovery of said amount.
and for the purpose of availing of the right granted by section Pursuant to Republic Act No. 1125, the case was forwarded to
91 of the National Internal Revenue Code. the Court of Tax Appeals which court, after hearing, rendered
decision the dispositive portion of which reads as follows:
In this amended return the valuation of the 210,000 shares of
stock in the Mindanao Mother Lode Mines, Inc. was reduced In fine, we are of the opinion and so hold that: (a) the
from 0.38 per share, as originally declared, to P0.20 per share, one-half (½) share of the surviving spouse in the
or from a total valuation of P79,800.00 to P42,000.00. This conjugal partnership property as diminished by the
change in price per share of stock was based by the ancillary obligations properly chargeable to such property
administrator on the market notation of the stock obtaining at should be deducted from the net estate of the
the San Francisco California) Stock Exchange six months from deceased Walter G. Stevenson, pursuant to Section
the death of Stevenson, that is, As of August 22, 1931. In 89-C of the National Internal Revenue Code; (b) the
addition, the ancillary administrator made claim for the intangible personal property belonging to the estate of
following deductions: said Stevenson is exempt from inheritance tax,
pursuant to the provision of section 122 of the
National Internal Revenue Code in relation to the
Funeral expenses ($1,04326) P2,086.52
California Inheritance Tax Law but decedent's estate
Judicial Expenses:
is not entitled to an exemption of P4,000.00 in the
(a) Administrator's Fee P1,204.34
computation of the estate tax; (c) for purposes of Philippine law, but by the national law of the decedent
estate and inheritance taxation the Baguio real estate husband, in this case, the law of England. It is alleged by
of the spouses should be valued at P52,200.00, and petitioner that English laws do not recognize legal partnership
210,000 shares of stock in the Mindanao Mother Lode between spouses, and that what obtains in that jurisdiction is
Mines, Inc. should be appraised at P0.38 per share; another regime of property relation, wherein all properties
and (d) the estate shall be entitled to a deduction of acquired during the marriage pertain and belong Exclusively to
P2,000.00 for funeral expenses and judicial expenses the husband. In further support of his stand, petitioner cites
of P8,604.39. Article 16 of the New Civil Code (Art. 10 of the old) to the effect
that in testate and intestate proceedings, the amount of
From this decision, both parties appealed. successional rights, among others, is to be determined by the
national law of the decedent.
The Collector of Internal Revenue, hereinafter called petitioner
assigned four errors allegedly committed by the trial court, In this connection, let it be noted that since the mariage of the
while the assignees, Douglas and Bettina Fisher hereinafter Stevensons in the Philippines took place in 1909, the
called respondents, made six assignments of error. Together, applicable law is Article 1325 of the old Civil Code and not
the assigned errors raise the following main issues for Article 124 of the New Civil Code which became effective only
resolution by this Court: in 1950. It is true that both articles adhere to the so-called
nationality theory of determining the property relation of
(1) Whether or not, in determining the taxable net estate of the spouses where one of them is a foreigner and they have made
decedent, one-half (½) of the net estate should be deducted no prior agreement as to the administration disposition, and
therefrom as the share of tile surviving spouse in accordance ownership of their conjugal properties. In such a case, the
with our law on conjugal partnership and in relation to section national law of the husband becomes the dominant law in
89 (c) of the National Internal revenue Code; determining the property relation of the spouses. There is,
however, a difference between the two articles in that Article
1241 of the new Civil Code expressly provides that it shall be
(2) Whether or not the estate can avail itself of the reciprocity
applicable regardless of whether the marriage was celebrated
proviso embodied in Section 122 of the National Internal
in the Philippines or abroad while Article 13252 of the old Civil
Revenue Code granting exemption from the payment of estate
Code is limited to marriages contracted in a foreign land.
and inheritance taxes on the 210,000 shares of stock in the
Mindanao Mother Lode Mines Inc.;
It must be noted, however, that what has just been said refers
to mixed marriages between a Filipino citizen and a foreigner.
(3) Whether or not the estate is entitled to the deduction of
In the instant case, both spouses are foreigners who married in
P4,000.00 allowed by Section 861, U.S. Internal Revenue
the Philippines. Manresa,3 in his Commentaries, has this to say
Code in relation to section 122 of the National Internal
on this point:
Revenue Code;
(6) Whether or not the estate is entitled to the payment of If we adopt the view of Manresa, the law determinative of the
interest on the amount it claims to have overpaid the property relation of the Stevensons, married in 1909, would be
government and to be refundable to it. the English law even if the marriage was celebrated in the
Philippines, both of them being foreigners. But, as correctly
In deciding the first issue, the lower court applied a well-known observed by the Tax Court, the pertinent English law that
doctrine in our civil law that in the absence of any ante-nuptial allegedly vests in the decedent husband full ownership of the
agreement, the contracting parties are presumed to have properties acquired during the marriage has not been proven
adopted the system of conjugal partnership as to the properties by petitioner. Except for a mere allegation in his answer, which
acquired during their marriage. The application of this doctrine is not sufficient, the record is bereft of any evidence as to what
to the instant case is being disputed, however, by petitioner English law says on the matter. In the absence of proof, the
Collector of Internal Revenue, who contends that pursuant to Court is justified, therefore, in indulging in what Wharton calls
Article 124 of the New Civil Code, the property relation of the
spouses Stevensons ought not to be determined by the
"processual presumption," in presuming that the law of accordance with said rule, we held in the case of Willamette
England on this matter is the same as our law.4 Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of
sections 300 and 301 of our Code of Civil Procedure (now
Nor do we believe petitioner can make use of Article 16 of the section 41, Rule 123) will convince one that these sections do
New Civil Code (art. 10, old Civil Code) to bolster his stand. A not exclude the presentation of other competent evidence to
reading of Article 10 of the old Civil Code, which incidentally is prove the existence of a foreign law." In that case, we
the one applicable, shows that it does not encompass or considered the testimony of an attorney-at-law of San
contemplate to govern the question of property relation Francisco, California who quoted verbatim a section of
between spouses. Said article distinctly speaks of amount of California Civil Code and who stated that the same was in
successional rights and this term, in speaks in our opinion, force at the time the obligations were contracted, as sufficient
properly refers to the extent or amount of property that each evidence to establish the existence of said law. In line with this
heir is legally entitled to inherit from the estate available for view, we find no error, therefore, on the part of the Tax Court in
distribution. It needs to be pointed out that the property relation considering the pertinent California law as proved by
of spouses, as distinguished from their successional rights, is respondents' witness.
governed differently by the specific and express provisions of
Title VI, Chapter I of our new Civil Code (Title III, Chapter I of We now take up the question of reciprocity in exemption from
the old Civil Code.) We, therefore, find that the lower court transfer or death taxes, between the State of California and the
correctly deducted the half of the conjugal property in Philippines.F
determining the hereditary estate left by the deceased
Stevenson. Section 122 of our National Internal Revenue Code, in
pertinent part, provides:
On the second issue, petitioner disputes the action of the Tax
Court in the exempting the respondents from paying ... And, provided, further, That no tax shall be
inheritance tax on the 210,000 shares of stock in the Mindanao collected under this Title in respect of intangible
Mother Lode Mines, Inc. in virtue of the reciprocity proviso of personal property (a) if the decedent at the time of his
Section 122 of the National Internal Revenue Code, in relation death was a resident of a foreign country which at the
to Section 13851 of the California Revenue and Taxation time of his death did not impose a transfer of tax or
Code, on the ground that: (1) the said proviso of the California death tax of any character in respect of intangible
Revenue and Taxation Code has not been duly proven by the personal property of citizens of the Philippines not
respondents; (2) the reciprocity exemptions granted by section residing in that foreign country, or (b) if the laws of the
122 of the National Internal Revenue Code can only be availed foreign country of which the decedent was a resident
of by residents of foreign countries and not of residents of a at the time of his death allow a similar exemption from
state in the United States; and (3) there is no "total" reciprocity transfer taxes or death taxes of every character in
between the Philippines and the state of California in that while respect of intangible personal property owned by
the former exempts payment of both estate and inheritance citizens of the Philippines not residing in that foreign
taxes on intangible personal properties, the latter only exempts country." (Emphasis supplied).
the payment of inheritance tax..
On the other hand, Section 13851 of the California Inheritance
To prove the pertinent California law, Attorney Allison Gibbs, Tax Law, insofar as pertinent, reads:
counsel for herein respondents, testified that as an active
member of the California Bar since 1931, he is familiar with the "SEC. 13851, Intangibles of nonresident: Conditions.
revenue and taxation laws of the State of California. When Intangible personal property is exempt from the tax
asked by the lower court to state the pertinent California law as imposed by this part if the decedent at the time of his
regards exemption of intangible personal properties, the death was a resident of a territory or another State of
witness cited article 4, section 13851 (a) and (b) of the the United States or of a foreign state or country
California Internal and Revenue Code as published in Derring's which then imposed a legacy, succession, or death
California Code, a publication of the Bancroft-Whitney tax in respect to intangible personal property of its
Company inc. And as part of his testimony, a full quotation of own residents, but either:.
the cited section was offered in evidence as Exhibits "V-2" by
the respondents.
(a) Did not impose a legacy, succession, or death tax
of any character in respect to intangible personal
It is well-settled that foreign laws do not prove themselves in property of residents of this State, or
our jurisdiction and our courts are not authorized to take
judicial notice of them.5 Like any other fact, they must be
(b) Had in its laws a reciprocal provision under which
alleged and proved.6
intangible personal property of a non-resident was
exempt from legacy, succession, or death taxes of
Section 41, Rule 123 of our Rules of Court prescribes the every character if the Territory or other State of the
manner of proving foreign laws before our tribunals. However, United States or foreign state or country in which the
although we believe it desirable that these laws be proved in nonresident resided allowed a similar exemption in
respect to intangible personal property of residents of With respect to the question of deduction or reduction in the
the Territory or State of the United States or foreign amount of P4,000.00 based on the U.S. Federal Estate Tax
state or country of residence of the decedent." (Id.) Law which is also being claimed by respondents, we uphold
and adhere to our ruling in the Lara case (supra) that the
It is clear from both these quoted provisions that the reciprocity amount of $2,000.00 allowed under the Federal Estate Tax
must be total, that is, with respect to transfer or death taxes of Law is in the nature of a deduction and not of an exemption
any and every character, in the case of the Philippine law, and regarding which reciprocity cannot be claimed under the
to legacy, succession, or death taxes of any and every provision of Section 122 of our National Internal Revenue
character, in the case of the California law. Therefore, if any of Code. Nor is reciprocity authorized under the Federal Law. .
the two states collects or imposes and does not exempt any
transfer, death, legacy, or succession tax of any character, the On the issue of the correctness of the appraisal of the two
reciprocity does not work. This is the underlying principle of the parcels of land situated in Baguio City, it is contended that their
reciprocity clauses in both laws. assessed values, as appearing in the tax rolls 6 months after
the death of Stevenson, ought to have been considered by
In the Philippines, upon the death of any citizen or resident, or petitioner as their fair market value, pursuant to section 91 of
non-resident with properties therein, there are imposed upon the National Internal Revenue Code. It should be pointed out,
his estate and its settlement, both an estate and an inheritance however, that in accordance with said proviso the properties
tax. Under the laws of California, only inheritance tax is are required to be appraised at their fair market value and the
imposed. On the other hand, the Federal Internal Revenue assessed value thereof shall be considered as the fair market
Code imposes an estate tax on non-residents not citizens of value only when evidence to the contrary has not been shown.
the United States,7 but does not provide for any exemption on After all review of the record, we are satisfied that such
the basis of reciprocity. Applying these laws in the manner the evidence exists to justify the valuation made by petitioner
Court of Tax Appeals did in the instant case, we will have a which was sustained by the tax court, for as the tax court aptly
situation where a Californian, who is non-resident in the observed:
Philippines but has intangible personal properties here, will the
subject to the payment of an estate tax, although exempt from "The two parcels of land containing 36,264 square
the payment of the inheritance tax. This being the case, will a meters were valued by the administrator of the estate
Filipino, non-resident of California, but with intangible personal in the Estate and Inheritance tax returns filed by him
properties there, be entitled to the exemption clause of the at P43,500.00 which is the assessed value of said
California law, since the Californian has not been exempted properties. On the other hand, defendant appraised
from every character of legacy, succession, or death tax the same at P52,200.00. It is of common knowledge,
because he is, under our law, under obligation to pay an estate and this Court can take judicial notice of it, that
tax? Upon the other hand, if we exempt the Californian from assessments for real estate taxation purposes are
paying the estate tax, we do not thereby entitle a Filipino to be very much lower than the true and fair market value of
exempt from a similar estate tax in California because under the properties at a given time and place. In fact one
the Federal Law, which is equally enforceable in California he year after decedent's death or in 1952 the said
is bound to pay the same, there being no reciprocity properties were sold for a price of P72,000.00 and
recognized in respect thereto. In both instances, the Filipino there is no showing that special or extraordinary
citizen is always at a disadvantage. We do not believe that our circumstances caused the sudden increase from the
legislature has intended such an unfair situation to the price of P43,500.00, if we were to accept this value as
detriment of our own government and people. We, therefore, a fair and reasonable one as of 1951. Even more, the
find and declare that the lower court erred in exempting the counsel for plaintiffs himself admitted in open court
estate in question from payment of the inheritance tax. that he was willing to purchase the said properties at
P2.00 per square meter. In the light of these facts we
We are not unaware of our ruling in the case of Collector of believe and therefore hold that the valuation of
Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. P52,200.00 of the real estate in Baguio made by
January 6, 1958, 54 O.G. 2881) exempting the estate of the defendant is fair, reasonable and justified in the
deceased Hugo H. Miller from payment of the inheritance tax premises." (Decision, p. 19).
imposed by the Collector of Internal Revenue. It will be noted,
however, that the issue of reciprocity between the pertinent In respect to the valuation of the 210,000 shares of stock in the
provisions of our tax law and that of the State of California was Mindanao Mother Lode Mines, Inc., (a domestic corporation),
not there squarely raised, and the ruling therein cannot control respondents contend that their value should be fixed on the
the determination of the case at bar. Be that as it may, we now basis of the market quotation obtaining at the San Francisco
declare that in view of the express provisions of both the (California) Stock Exchange, on the theory that the certificates
Philippine and California laws that the exemption would apply of stocks were then held in that place and registered with the
only if the law of the other grants an exemption from legacy, said stock exchange. We cannot agree with respondents'
succession, or death taxes of every character, there could not argument. The situs of the shares of stock, for purposes of
be partial reciprocity. It would have to be total or none at all. taxation, being located here in the Philippines, as respondents
themselves concede and considering that they are sought to
be taxed in this jurisdiction, consistent with the exercise of our
government's taxing authority, their fair market value should be expenses which was disapproved by the court a quo for lack of
taxed on the basis of the price prevailing in our country. evidence.
Upon the other hand, we find merit in respondents' other In connection with the deduction of P652.50 representing the
contention that the said shares of stock commanded a lesser amount of realty taxes paid in 1951 on the decedent's two
value at the Manila Stock Exchange six months after the death parcels of land in Baguio City, which respondents claim was
of Stevenson. Through Atty. Allison Gibbs, respondents have disallowed by the Tax Court, we find that this claim has in fact
shown that at that time a share of said stock was bid for at only been allowed. What happened here, which a careful review of
P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs the record will reveal, was that the Tax Court, in itemizing the
in this respect has never been questioned nor refuted by liabilities of the estate, viz:
petitioner either before this court or in the court below. In the
absence of evidence to the contrary, we are, therefore, 1) Administrator's fee P1,204.34
constrained to reverse the Tax Court on this point and to hold
2) Attorney's fee 6,000.00
that the value of a share in the said mining company on August
22, 1951 in the Philippine market was P.325 as claimed by 3) Judicial and Administration
respondents.. expenses as of August 9, 1952 2,052.55
Total P9,256.89
It should be noted that the petitioner and the Tax Court valued
each share of stock of P.38 on the basis of the declaration added the P652.50 for realty taxes as a liability of the estate, to
made by the estate in its preliminary return. Patently, this the P1,400.05 for judicial and administration expenses
should not have been the case, in view of the fact that the approved by the court, making a total of P2,052.55, exactly the
ancillary administrator had reserved and availed of his legal same figure which was arrived at by the Tax Court for judicial
right to have the properties of the estate declared at their fair and administration expenses. Hence, the difference between
market value as of six months from the time the decedent the total of P9,256.98 allowed by the Tax Court as deductions,
died.. and the P8,604.39 as found by the probate court, which is
P652.50, the same amount allowed for realty taxes. An evident
On the fifth issue, we shall consider the various deductions, oversight has involuntarily been made in omitting the
from the allowance or disallowance of which by the Tax Court, P2,000.00 for funeral expenses in the final computation. This
both petitioner and respondents have appealed.. amount has been expressly allowed by the lower court and
there is no reason why it should not be. .
Petitioner, in this regard, contends that no evidence of record
exists to support the allowance of the sum of P8,604.39 for the We come now to the other claim of respondents that pursuant
following expenses:. to section 89(b) (1) in relation to section 89(a) (1) (E) and
section 89(d), National Internal Revenue Code, the amount of
1) Administrator's fee P1,204.34 P10,022.47 should have been allowed the estate as a
2) Attorney's fee 6,000.00 deduction, because it represented an indebtedness of the
3) Judicial and Administrative 2,052.55 decedent incurred during his lifetime. In support thereof, they
expenses offered in evidence a duly certified claim, presented to the
Total Deductions P8,604.39 probate court in California by the Bank of California National
Association, which it would appear, that while still living, Walter
G. Stevenson obtained a loan of $5,000.00 secured by pledge
An examination of the record discloses, however, that the
on 140,000 of his shares of stock in the Mindanao Mother Lode
foregoing items were considered deductible by the Tax Court
Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court
on the basis of their approval by the probate court to which
disallowed this item on the ground that the local probate court
said expenses, we may presume, had also been presented for
had not approved the same as a valid claim against the estate
consideration. It is to be supposed that the probate court would
and because it constituted an indebtedness in respect to
not have approved said items were they not supported by
intangible personal property which the Tax Court held to be
evidence presented by the estate. In allowing the items in
exempt from inheritance tax.
question, the Tax Court had before it the pertinent order of the
probate court which was submitted in evidence by
For two reasons, we uphold the action of the lower court in
respondents. (Exh. "AA-2", p. 100, record). As the Tax Court
disallowing the deduction.
said, it found no basis for departing from the findings of the
probate court, as it must have been satisfied that those
expenses were actually incurred. Under the circumstances, we Firstly, we believe that the approval of the Philippine probate
see no ground to reverse this finding of fact which, under court of this particular indebtedness of the decedent is
Republic Act of California National Association, which it would necessary. This is so although the same, it is averred has been
appear, that while still living, Walter G. Stevenson obtained we already admitted and approved by the corresponding probate
are not inclined to pass upon the claim of respondents in court in California, situs of the principal or domiciliary
respect to the additional amount of P86.52 for funeral administration. It is true that we have here in the Philippines
only an ancillary administration in this case, but, it has been
held, the distinction between domiciliary or principal In other words, the allowable deduction is only to the extent of
administration and ancillary administration serves only to the portion of the indebtedness which is equivalent to the
distinguish one administration from the other, for the two proportion that the estate in the Philippines bears to the total
proceedings are separate and independent. 8 The reason for estate wherever situated. Stated differently, if the properties in
the ancillary administration is that, a grant of administration the Philippines constitute but 1/5 of the entire assets wherever
does not ex proprio vigore, have any effect beyond the limits of situated, then only 1/5 of the indebtedness may be deducted.
the country in which it was granted. Hence, we have the But since, as heretofore adverted to, there is no statement of
requirement that before a will duly probated outside of the the value of the estate situated outside the Philippines, no part
Philippines can have effect here, it must first be proved and of the indebtedness can be allowed to be deducted, pursuant
allowed before our courts, in much the same manner as wills to Section 89, letter (d), number (1) of the Internal Revenue
originally presented for allowance therein.9 And the estate shall Code.
be administered under letters testamentary, or letters of
administration granted by the court, and disposed of according For the reasons thus stated, we affirm the ruling of the lower
to the will as probated, after payment of just debts and court disallowing the deduction of the alleged indebtedness in
expenses of administration.10 In other words, there is a regular the sum of P10,022.47.
administration under the control of the court, where claims
must be presented and approved, and expenses of In recapitulation, we hold and declare that:
administration allowed before deductions from the estate can
be authorized. Otherwise, we would have the actuations of our
(a) only the one-half (1/2) share of the decedent
own probate court, in the settlement and distribution of the
Stevenson in the conjugal partnership property
estate situated here, subject to the proceedings before the
constitutes his hereditary estate subject to the estate
foreign court over which our courts have no control. We do not
and inheritance taxes;
believe such a procedure is countenanced or contemplated in
the Rules of Court.
(b) the intangible personal property is not exempt from
inheritance tax, there existing no complete total
Another reason for the disallowance of this indebtedness as a
reciprocity as required in section 122 of the National
deduction, springs from the provisions of Section 89, letter (d),
Internal Revenue Code, nor is the decedent's estate
number (1), of the National Internal Revenue Code which
entitled to an exemption of P4,000.00 in the
reads:
computation of the estate tax;
G.R. Nos. L-27936 & L-27937 March 29, 1974 SECOND: I give, devise and bequeath all of
the rest, residue and remainder of my estate,
TESTATE ESTATE OF THE LATE LINNIE JANE HODGES both personal and real, wherever situated, or
(Sp. Proc. No. 1307). TESTATE ESTATE OF THE LATE located, to my beloved husband, Charles
CHARLES NEWTON HODGES (Sp. Proc. No. 1672). Newton Hodges, to have and to hold unto
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, him, my said husband, during his natural
administrator-appellant, lifetime.
vs.
LORENZO CARLES, JOSE PABLICO, ALFREDO THIRD: I desire, direct and provide that my
CATEDRAL, SALVADOR GUZMAN, BELCESAR CAUSING, husband, Charles Newton Hodges, shall
FLORENIA BARRIDO, PURIFICACION CORONADO, have the right to manage, control, use and
GRACIANO LUCERO, ARITEO THOMAS JAMIR, enjoy said estate during his lifetime, and he
MELQUIADES BATISANAN, PEPITO IYULORES, is hereby given the right to make any
ESPERIDION PARTISALA, WINIFREDO ESPADA, changes in the physical properties of said
ROSARIO ALINGASA, ADELFA PREMAYLON, SANTIAGO estate, by sale or any part thereof which he
PACAONSIS, and AVELINA A. MAGNO, the last as may think best, and the purchase of any
Administratrix in Sp. Proc. No. 1307, appellees, WESTERN other or additional property as he may think
INSTITUTE OF TECHNOLOGY, INC., movant-appellee. best; to execute conveyances with or without
general or special warranty, conveying in fee
BARREDO, J.:p simple or for any other term or time, any
property which he may deem proper to
Certiorari and prohibition with preliminary injunction; certiorari dispose of; to lease any of the real property
to "declare all acts of the respondent court in the Testate for oil, gas and/or other minerals, and all
Estate of Linnie Jane Hodges (Sp. Proc. No. 1307 of the Court such deeds or leases shall pass the absolute
of First Instance of Iloilo) subsequent to the order of December fee simple title to the interest so conveyed in
14, 1957 as null and void for having been issued without such property as he may elect to sell. All
jurisdiction"; prohibition to enjoin the respondent court from rents, emoluments and income from said
allowing, tolerating, sanctioning, or abetting private respondent estate shall belong to him, and he is further
Avelina A. Magno to perform or do any acts of administration, authorized to use any part of the principal of
such as those enumerated in the petition, and from exercising said estate as he may need or desire. It is
any authority or power as Regular Administratrix of above- provided herein, however, that he shall not
named Testate Estate, by entertaining manifestations, motion sell or otherwise dispose of any of the
and pleadings filed by her and acting on them, and also to improved property now owned by us located
enjoin said court from allowing said private respondent to at, in or near the City of Lubbock, Texas, but
interfere, meddle or take part in any manner in the he shall have the full right to lease, manage
administration of the Testate Estate of Charles Newton Hodges and enjoy the same during his lifetime,
(Sp. Proc. No. 1672 of the same court and branch); with prayer above provided. He shall have the right to
for preliminary injunction, which was issued by this Court on subdivide any farm land and sell lots therein.
August 8, 1967 upon a bond of P5,000; the petition being and may sell unimproved town lots.
particularly directed against the orders of the respondent court
of October 12, 1966 denying petitioner's motion of April 22, FOURTH: At the death of my said husband,
1966 and its order of July 18, 1967 denying the motion for Charles Newton Hodges, I give, devise and
reconsideration of said order. bequeath all of the rest, residue and
remainder of my estate, both real and
Related to and involving basically the same main issue as the personal, wherever situated or located, to be
foregoing petition, thirty-three (33) appeals from different equally divided among my brothers and
orders of the same respondent court approving or otherwise sisters, share and share alike, namely:
sanctioning the acts of administration of the respondent Magno
on behalf of the testate Estate of Mrs. Hodges. Esta Higdon, Emma Howell, Leonard
Higdon, Roy Higdon, Saddie Rascoe, Era
THE FACTS Roman and Nimroy Higdon.
FIFTH: In case of the death of any of my to have and (to) hold unto him, my said
brothers and/or sisters named in item Fourth, husband, during his natural lifetime."
above, prior to the death of my husband,
Charles Newton Hodges, then it is my will 3. — That during the lifetime of Linnie Jane
and bequest that the heirs of such deceased Hodges, herein petitioner was engaged in
brother or sister shall take jointly the share the business of buying and selling personal
which would have gone to such brother or and real properties, and do such acts which
sister had she or he survived. petitioner may think best.
SIXTH: I nominate and appoint my said 4. — That deceased Linnie Jane Hodges
husband, Charles Newton Hodges, to be died leaving no descendants or ascendants,
executor of this, my last will and testament, except brothers and sisters and herein
and direct that no bond or other security be petitioner as executor surviving spouse, to
required of him as such executor. inherit the properties of the decedent.
SEVENTH: It is my will and bequest that no 5. — That the present motion is submitted in
action be had in the probate court, in the order not to paralyze the business of
administration of my estate, other than that petitioner and the deceased, especially in the
necessary to prove and record this will and purchase and sale of properties. That proper
to return an inventory and appraisement of accounting will be had also in all these
my estate and list of claims. (Pp. 2-4, transactions.
Petition.)
WHEREFORE, it is most respectfully prayed
This will was subsequently probated in aforementioned Special that, petitioner C. N. Hodges (Charles
Proceedings No. 1307 of respondent court on June 28, 1957, Newton Hodges) be allowed or authorized to
with the widower Charles Newton Hodges being appointed as continue the business in which he was
Executor, pursuant to the provisions thereof. engaged and to perform acts which he had
been doing while deceased Linnie Jane
Previously, on May 27, 1957, the said widower (hereafter to be Hodges was living.
referred to as Hodges) had been appointed Special
Administrator, in which capacity he filed a motion on the same City of Iloilo, May 27, 1957. (Annex "D",
date as follows: Petition.)
URGENT EX-PARTE MOTION TO ALLOW which the respondent court immediately granted in the
OR AUTHORIZE PETITIONER TO following order:
CONTINUE THE BUSINESS IN WHICH HE
WAS ENGAGED AND TO PERFORM ACTS It appearing in the urgent ex-parte motion
WHICH HE HAD BEEN DOING WHILE filed by petitioner C. N. Hodges, that the
DECEASED WAS LIVING business in which said petitioner and the
deceased were engaged will be paralyzed,
Come petitioner in the above-entitled special proceedings, thru unless and until the Executor is named and
his undersigned attorneys, to the Hon. Court, most respectfully appointed by the Court, the said petitioner is
states: allowed or authorized to continue the
business in which he was engaged and to
1. — That Linnie Jane Hodges died leaving perform acts which he had been doing while
her last will and testament, a copy of which is the deceased was living.
attached to the petition for probate of the
same. SO ORDERED.
2. — That in said last will and testament City of Iloilo May 27, 1957. (Annex "E",
herein petitioner Charles Newton Hodges is Petition.)
directed to have the right to manage, control
use and enjoy the estate of deceased Linnie Under date of December 11, 1957, Hodges filed as such
Jane Hodges, in the same way, a provision Executor another motion thus:
was placed in paragraph two, the following: "I
give, devise and bequeath all of the rest,
MOTION TO APPROVE ALL SALES,
residue and remainder of my estate, to my
CONVEYANCES, LEASES, MORTGAGES
beloved husband, Charles Newton Hodges,
THAT THE EXECUTOR HAD MADE
FURTHER AND SUBSEQUENT death of Linnie Jane Hodges, a motion to
TRANSACTIONS WHICH THE EXECUTOR authorize said C.N. Hodges was filed in
MAY DO IN ACCORDANCE WITH THE Court, to allow him to continue in the
LAST WISH OF THE DECEASED LINNIE business of buy and sell, which motion was
JANE HODGES. favorably granted by the Honorable Court.
Comes the Executor in the above-entitled 3. — That since the death of Linnie Jane
proceedings, thru his undersigned attorney, Hodges, Mr. C.N. Hodges had been buying
to the Hon. Court, most respectfully states: and selling real and personal properties, in
accordance with the wishes of the late Linnie
1. — That according to the last will and Jane Hodges.
testament of the deceased Linnie Jane
Hodges, the executor as the surviving 4. — That the Register of Deeds for Iloilo,
spouse and legatee named in the will of the had required of late the herein Executor to
deceased; has the right to dispose of all the have all the sales, leases, conveyances or
properties left by the deceased, portion of mortgages made by him, approved by the
which is quoted as follows: Hon. Court.
Second: I give, devise and bequeath all of 5. — That it is respectfully requested, all the
the rest, residue and remainder of my estate, sales, conveyances leases and mortgages
both personal and real, wherever situated, or executed by the Executor, be approved by
located, to my beloved husband, Charles the Hon. Court. and subsequent sales
Newton Hodges, to have and to hold unto conveyances, leases and mortgages in
him, my said husband, during his natural compliances with the wishes of the late
lifetime. Linnie Jane Hodges, and within the scope of
the terms of the last will and testament, also
Third: I desire, direct and provide that my be approved;
husband, Charles Newton Hodges, shall
have the right to manage, control, use and 6. — That the Executor is under obligation to
enjoy said estate during his lifetime, and he submit his yearly accounts, and the
is hereby given the right to make any properties conveyed can also be accounted
changes in the physical properties of said for, especially the amounts received.
estate, by sale or any part thereof which he
may think best, and the purchase of any WHEREFORE, it is most respectfully prayed
other or additional property as he may think that, all the sales, conveyances, leases, and
best; to execute conveyances with or without mortgages executed by the Executor, be
general or special warranty, conveying in fee approved by the Hon. Court, and also the
simple or for any other term or time, any subsequent sales, conveyances, leases, and
property which he may deem proper to mortgages in consonance with the wishes of
dispose of; to lease any of the real property the deceased contained in her last will and
for oil, gas and/or other minerals, and all testament, be with authorization and
such deeds or leases shall pass the absolute approval of the Hon. Court.
fee simple title to the interest so conveyed in
such property as he may elect to sell. All City of Iloilo, December 11, 1967.
rents, emoluments and income from said
estate shall belong to him, and he is further
(Annex "G", Petition.)
authorized to use any part of the principal of
said estate as he may need or desire. ...
which again was promptly granted by the respondent court on
December 14, 1957 as follows:
2. — That herein Executor, is not only part
owner of the properties left as conjugal, but
also, the successor to all the properties left ORDER
by the deceased Linnie Jane Hodges. That
during the lifetime of herein Executor, as As prayed for by Attorney Gellada, counsel
Legatee has the right to sell, convey, lease for the Executor for the reasons stated in his
or dispose of the properties in the motion dated December 11, 1957, which the
Philippines. That inasmuch as C.N. Hodges Court considers well taken all the sales,
was and is engaged in the buy and sell of conveyances, leases and mortgages of all
real and personal properties, even before the properties left by the deceased Linnie Jane
Hodges executed by the Executor Charles N. The respondent court approved this statement of account on
Hodges are hereby APPROVED. The said April 21, 1959 in its order worded thus:
Executor is further authorized to execute
subsequent sales, conveyances, leases and Upon petition of Atty. Gellada, in
mortgages of the properties left by the said representation of the Executor, the statement
deceased Linnie Jane Hodges in of net worth of the estate of Linnie Jane
consonance with the wishes conveyed in the Hodges, assets and liabilities, income and
last will and testament of the latter. expenses as shown in the individual income
tax return for the estate of the deceased and
So ordered. marked as Annex "A" is approved.
On April 14, 1959, in submitting his first statement of account (Annex "J", Petition.)
as Executor for approval, Hodges alleged:
His accounts for the periods January 1, 1959 to December 31,
Pursuant to the provisions of the Rules of 1959 and January 1, 1960 to December 31, 1960 were
Court, herein executor of the deceased, submitted likewise accompanied by allegations identical
renders the following account of his mutatis mutandis to those of April 14, 1959, quoted above; and
administration covering the period from the respective orders approving the same, dated July 30, 1960
January 1, 1958 to December 31, 1958, and May 2, 1961, were substantially identical to the above-
which account may be found in detail in the quoted order of April 21, 1959. In connection with the
individual income tax return filed for the statements of account just mentioned, the following assertions
estate of deceased Linnie Jane Hodges, to related thereto made by respondent-appellee Magno in her
wit: brief do not appear from all indications discernible in the record
to be disputable:
That a certified public accountant has
examined the statement of net worth of the Under date of April 14, 1959, C.N. Hodges
estate of Linnie Jane Hodges, the assets and filed his first "Account by the Executor" of the
liabilities, as well as the income and estate of Linnie Jane Hodges. In the
expenses, copy of which is hereto attached "Statement of Networth of Mr. C.N. Hodges
and made integral part of this statement of and the Estate of Linnie Jane Hodges" as of
account as Annex "A". December 31, 1958 annexed thereto, C.N.
Hodges reported that the combined conjugal
IN VIEW OF THE FOREGOING, it is most estate earned a net income of P328,402.62,
respectfully prayed that, the statement of net divided evenly between him and the estate of
worth of the estate of Linnie Jane Hodges, Linnie Jane Hodges. Pursuant to this, he
the assets and liabilities, income and filed an "individual income tax return" for
expenses as shown in the individual income calendar year 1958 on the estate of Linnie
tax return for the estate of the deceased and Jane Hodges reporting, under oath, the said
marked as Annex "A", be approved by the estate as having earned income of
Honorable Court, as substantial compliance P164,201.31, exactly one-half of the net
with the requirements of the Rules of Court. income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (p.
That no person interested in the Philippines 91, Appellee's Brief.)
of the time and place of examining the herein
accounts be given notice, as herein executor xxx xxx xxx
is the only devisee or legatee of the
deceased, in accordance with the last will Under date of July 21, 1960, C.N. Hodges
and testament already probated by the filed his second "Annual Statement of
Honorable court. Account by the Executor" of the estate of
Linnie Jane Hodges. In the "Statement of
City of Iloilo April 14, 1959. Networth of Mr. C.N. Hodges and the Estate
of Linnie Jane Hodges" as of December 31,
(Annex "I", Petition.) 1959 annexed thereto, C.N. Hodges reported
that the combined conjugal estate earned a
net income of P270,623.32, divided evenly
between him and the estate of Linnie Jane passed to him as the surviving spouse, he
Hodges. Pursuant to this, he filed an answered:
"individual income tax return" for calendar
year 1959 on the estate of Linnie Jane "None, except for purposes of
Hodges reporting, under oath, the said administering the Estate, paying
estate as having earned income of debts, taxes and other legal
P135,311.66, exactly one-half of the net charges. It is the intention of the
income of his combined personal assets and surviving husband of deceased to
that of the estate of Linnie Jane Hodges. (pp. distribute the remaining property
91-92. Appellee's Brief.) and interests of the deceased in
their Community estate to the
xxx xxx xxx devisees and legatees named in
the will when the debts, liabilities,
Under date of April 20, 1961, C.N. Hodges taxes and expenses of
filed his third "Annual Statement of Account administration are finally
by the Executor for the Year 1960" of the determined and paid."
estate of Linnie Jane Hodges. In the
"Statement of Net Worth of Mr. C.N. Hodges Again, on August 9, 1962, barely four
and the Estate of Linnie Jane Hodges" as of months before his death, he executed an
December 31, 1960 annexed thereto, C.N. "affidavit" wherein he ratified and confirmed
Hodges reported that the combined conjugal all that he stated in Schedule "M" of his
estate earned a net income of P314,857.94, estate tax returns as to his having renounced
divided evenly between him and the estate of what was given him by his wife's will.1
Linnie Jane Hodges. Pursuant to this, he
filed an "individual income tax return" for As appointed executor, C.N. Hodges filed an
calendar year 1960 on the estate of Linnie "Inventory" dated May 12, 1958. He listed all
Jane Hodges reporting, under oath, the said the assets of his conjugal partnership with
estate as having earned income of Linnie Jane Hodges on a separate balance
P157,428.97, exactly one-half of the net sheet and then stated expressly that her
income of his combined personal assets and estate which has come into his possession
that of the estate of Linnie Jane Hodges. as executor was "one-half of all the items"
(Pp. 92-93, Appellee's Brief.) listed in said balance sheet. (Pp. 89-90,
Appellee's Brief.)
Likewise the following:
Parenthetically, it may be stated, at this juncture, that We are
In the petition for probate that he (Hodges) taking pains to quote wholly or at least, extensively from some
filed, he listed the seven brothers and sisters of the pleadings and orders whenever We feel that it is
of Linnie Jane as her "heirs" (see p. 2, Green necessary to do so for a more comprehensive and clearer view
ROA). The order of the court admitting the of the important and decisive issues raised by the parties and a
will to probate unfortunately omitted one of more accurate appraisal of their respective positions in regard
the heirs, Roy Higdon (see p. 14, Green thereto.
ROA). Immediately, C.N. Hodges filed a
verified motion to have Roy Higdon's name The records of these cases do not show that anything else was
included as an heir, stating that he wanted to done in the above-mentioned Special Proceedings No. 1307
straighten the records "in order the heirs of until December 26, 1962, when on account of the death of
deceased Roy Higdon may not think or Hodges the day before, the same lawyer, Atty. Leon P.
believe they were omitted, and that they Gellada, who had been previously acting as counsel for
were really and are interested in the estate of Hodges in his capacity as Executor of his wife's estate, and as
deceased Linnie Jane Hodges. . such had filed the aforequoted motions and manifestations,
filed the following:
As an executor, he was bound to file tax
returns for the estate he was administering URGENT EX-PARTE MOTION FOR THE
under American law. He did file such as APPOINTMENT OF A
estate tax return on August 8, 1958. In SPECIAL ADMINISTRATRIX
Schedule "M" of such return, he answered
"Yes" to the question as to whether he was COMES the undersigned attorney for the
contemplating "renouncing the will". On the Executor in the above-entitled proceedings,
question as to what property interests to the Honorable Court, most respectfully
states:
1. That in accordance with the Last Will and administer, collect, and take charge of the
Testament of Linnie Jane Hodges goods, chattels, rights, credits, and estate of
(deceased), her husband, Charles Newton both spouses, Charles Newton Hodges and
Hodges was to act as Executor, and in fact, Linnie Jane Hodges, as provided for in
in an order issued by this Hon. Court dated Section 1 and 2, Rule 81 of the Rules of
June 28, 1957, the said Charles Newton Court.
Hodges was appointed Executor and had
performed the duties as such. 7. That there is delay in granting letters
testamentary or of administration, because
2. That last December 22, 1962, the said the last will and testament of deceased,
Charles Newton Hodges was stricken ill, and Charles Newton Hodges, is still kept in his
brought to the Iloilo Mission Hospital for safe or vault, and in the meantime, unless an
treatment, but unfortunately, he died on administratrix (and,) at the same time, a
December 25, 1962, as shown by a copy of Special Administratrix is appointed, the
the death certificate hereto attached and estate of both spouses are in danger of
marked as Annex "A". being lost, damaged or go to waste.
3. That in accordance with the provisions of 8. That the most trusted employee of both
the last will and testament of Linnie Jane spouses Linnie Jane Hodges and C.N.
Hodges, whatever real and personal Hodges, who had been employed for around
properties that may remain at the death of thirty (30) years, in the person of Miss
her husband Charles Newton Hodges, the Avelina Magno, (should) be appointed
said properties shall be equally divided Administratrix of the estate of Linnie Jane
among their heirs. That there are real and Hodges and at the same time Special
personal properties left by Charles Newton Administratrix of the estate of Charles
Hodges, which need to be administered and Newton Hodges. That the said Miss Avelina
taken care of. Magno is of legal age, a resident of the
Philippines, the most fit, competent,
4. That the estate of deceased Linnie Jane trustworthy and well-qualified person to
Hodges, as well as that of Charles Newton serve the duties of Administratrix and Special
Hodges, have not as yet been determined or Administratrix and is willing to act as such.
ascertained, and there is necessity for the
appointment of a general administrator to 9. That Miss Avelina Magno is also willing to
liquidate and distribute the residue of the file bond in such sum which the Hon. Court
estate to the heirs and legatees of both believes reasonable.
spouses. That in accordance with the
provisions of Section 2 of Rule 75 of the WHEREFORE, in view of all the foregoing, it
Rules of Court, the conjugal partnership of is most respectfully prayed that, Miss
Linnie Jane Hodges and Charles Newton AVELINA A. MAGNO be immediately
Hodges shall be liquidated in the testate appointed Administratrix of the estate of
proceedings of the wife. Linnie Jane Hodges and as Special
Administratrix of the estate of Charles
5. That the undersigned counsel, has perfect Newton Hodges, with powers and duties
personal knowledge of the existence of the provided for by law. That the Honorable
last will and testament of Charles Newton Court fix the reasonable bond of P1,000.00
Hodges, with similar provisions as that to be filed by Avelina A. Magno.
contained in the last will and testament of
Linnie Jane Hodges. However, said last will (Annex "O", Petition.)
and testament of Charles Newton Hodges is
kept inside the vault or iron safe in his office, which respondent court readily acted on in its order of even
and will be presented in due time before this date thus: .
honorable Court.
Atty. Manglapus filed a manifestation dated 1. Attorneys retained must render services to
December 18, 1964 stating therein that the estate not to the personal heir;
Judge Bellosillo issued an order requiring the
parties to submit memorandum in support of 2. If services are rendered to both, fees
their respective contentions. It is prayed in should be pro-rated between them;
this manifestation that the Manifestation and
Urgent Motion dated June 10, 1964 be 3. Attorneys retained should not represent
resolved (pp. 6435-6439, Vol. VII, Sp. 1307). conflicting interests; to the prejudice of the
other heirs not represented by said
Atty. Roman Mabanta, Jr. for the PCIB filed a attorneys;
counter- manifestation dated January 5,
1965 asking that after the consideration by 4. Fees must be commensurate to the actual
the court of all allegations and arguments services rendered to the estate;
and pleadings of the PCIB in connection
therewith (1) said manifestation and urgent
5. There must be assets in the estate to pay
motion of Attys. Manglapus and Quimpo be
for said fees (Pp. 6625-6636, Vol. VIII, Sp.
denied (pp. 6442-6453, Vol. VII, Sp. 1307).
1307).
Judge Querubin issued an order dated
January 4, 1965 approving the motion dated
June 10, 1964 of the attorneys for the Atty. Quimpo for Administratrix Magno of the
administratrix of the estate of Linnie Jane estate of Linnie Jane Hodges filed a motion
Hodges and agreement annexed to said to submit dated July 15, 1965 asking that the
motion. The said order further states: "The manifestation and urgent motion dated June
Administratrix of the estate of Linnie Jane 10, 1964 filed by Attys. Manglapus and
Hodges is authorized to issue or sign Quimpo and other incidents directly
whatever check or checks may be necessary appertaining thereto be considered
for the above purpose and the administrator submitted for consideration and approval
of the estate of C. N. Hodges is ordered to (pp. 6759-6765, Vol. VIII, Sp. 1307).
countersign the same. (pp. 6518-6523, Vol
VII, Sp. 1307).
Considering the arguments and reasons in Acting upon the motion for approval of deeds
support to the pleadings of both the of sale for registered land of the PCIB,
Administratrix and the PCIB, and of Atty. Administrator of the Testate Estate of C. N.
Gellada, hereinbefore mentioned, the Court Hodges in Sp. Proc. 1672 (Vol. VII, pp. 2244-
believes that the order of January 4, 1965 is 2245), dated July 16, 1965, filed by Atty.
null and void for the reason that the said Cesar T. Tirol in representation of the law
order has not been filed with deputy clerk firms of Ozaeta, Gibbs and Ozaeta and Tirol
Albis of this court (Branch V) during the and Tirol and the opposition thereto of Atty.
lifetime of Judge Querubin who signed the Rizal R. Quimpo (Vol. VIII, pp. 6811-6813)
said order. However, the said manifestation dated July 22, 1965 and considering the
and urgent motion dated June 10, 1964 is allegations and reasons therein stated, the
being treated and considered in this instant court believes that the deeds of sale should
order. It is worthy to note that in the motion be signed jointly by the PCIB, Administrator
dated January 24, 1964 (Pp. 1149- 1163, of the Testate Estate of C. N. Hodges and
Vol. V, Sp. 1307) which has been filed by Avelina A. Magno, Administratrix of the
Atty. Gellada and his associates and Atty. Testate Estate of Linnie Jane Hodges and to
Gibbs and other lawyers in addition to the this effect the PCIB should take the
stipulated fees for actual services rendered. necessary steps so that Administratrix
However, the fee agreement dated February Avelina A. Magno could sign the deeds of
27, 1964, between the Administrator of the sale.
estate of C. N. Hodges and Atty. Gibbs
which provides for retainer fee of P4,000 SO ORDERED. (p. 248, Green Record on
monthly in addition to specific fees for actual Appeal.)
appearances, reimbursement for
expenditures and contingent fees has also Notably this order required that even the deeds executed by
been approved by the Court and said petitioner, as administrator of the Estate of Hodges, involving
lawyers have already been paid. (pp. 1273- properties registered in his name, should be co-signed by
1279, Vol. V, Sp. Proc. 1307 pp. 1372-1373, respondent Magno.3 And this was not an isolated instance.
Vol. V, Sp. Proc. 1307).
(pp. 77-78, Rec. Sp. Proc. "Administratrix of the estate of Linnie Jane
1307; emphasis supplied.). Hodges and as Special Administratrix of the
estate of Charles Newton Hodges, in the
(6) On July 30, 1960 this Honorable Court latter case, because the last will of said
approved the "Annual Statement of Account" Charles Newton Hodges is still kept in his
submitted by C. N. Hodges through his vault or iron safe and that the real and
counsel Leon P. Gellada on July 21, 1960 personal properties of both spouses may be
wherein he alleged among other things:
lost, damaged or go to waste, unless a vida, por el finado Charles
Special Administratrix is appointed." Newton Hodges, cada vez
que el precio estipulado en
(p. 100. Rec. Sp. Proc. 1307) cada contrato este
totalmente pagado. Se
(10) On December 26, 1962 Letters of autoriza igualmente a la
Administration were issued to Avelina Magno misma a firmar escrituras
pursuant to this Honorable Court's aforesaid de cancelacion de
Order of December 25, 1962 hipoteca tanto de bienes
reales como personales
cada vez que la
"With full authority to take
consideracion de cada
possession of all the
hipoteca este totalmente
property of said deceased
pagada.
in any province or
provinces in which it may
be situated and to perform "Cada una de dichas
all other acts necessary for escrituras que se otorguen
the preservation of said debe ser sometida para la
property, said aprobacion de este
Administratrix and/or Juzgado."
Special Administratrix
having filed a bond (p. 117, Sp. Proc. 1307).
satisfactory to the Court."
[Par 1 (c), Reply to Motion
(p. 102, Rec. Sp. Proc. For Removal of Joe
1307) Hodges]
(11) On January 22, 1963 this Honorable (13) On September l6, 1963 Leon P.
Court on petition of Leon P. Gellada of Gellada, acting as attorney for Avelina A.
January 21, 1963 issued Letters of Magno as Administratrix of the estate of
Administration to: Linnie Jane Hodges, alleges:
(17) Joe Hodges through the undersigned (a) Advertising the sale and the sale of the
attorneys manifested during the hearings properties of the estates:
before this Honorable Court on September 5
and 6, 1963 that the estate of C. N. Hodges
(b) Employing personnel and paying them
was claiming all of the assets belonging to
any compensation.
the deceased spouses Linnie Jane Hodges
and C. N. Hodges situated in Philippines
because of the aforesaid election by C. N. (4) Such other relief as this Honorable Court
Hodges wherein he claimed and took may deem just and equitable in the
possession as sole owner of all of said premises. (Annex "T", Petition.)
assets during the administration of the estate
of Linnie Jane Hodges on the ground that he Almost a year thereafter, or on September 14, 1964, after the
was the sole devisee and legatee under her co-administrators Joe Hodges and Fernando P. Mirasol were
Last Will and Testament. replaced by herein petitioner Philippine Commercial and
Industrial Bank as sole administrator, pursuant to an
(18) Avelina A. Magno has submitted no agreement of all the heirs of Hodges approved by the court,
inventory and accounting of her and because the above motion of October 5, 1963 had not yet
administration as Administratrix of the estate been heard due to the absence from the country of Atty. Gibbs,
of Linnie Jane Hodges and Special petitioner filed the following:
Administratrix of the estate of C. N. Hodges.
However, from manifestations made by MANIFESTATION AND MOTION,
Avelina A. Magno and her legal counsel, INCLUDING MOTION TO SET FOR
Leon P. Gellada, there is no question she will HEARING AND RESOLVE "URGENT
claim that at least fifty per cent (50%) of the MOTION FOR AN ACCOUNTING AND
conjugal assets of the deceased spouses DELIVERY TO ADMINISTRATORS OF
and the rents, emoluments and income THE ESTATE OF C. N. HODGES OF ALL
therefrom belong to the Higdon family who THE ASSETS OF THE CONJUGAL
are named in paragraphs Fourth and Fifth of PARTNERSHIP OF THE DECEASED
the Will of Linnie Jane Hodges (p. 5, Rec. LINNIE JANE HODGES AND C. N.
Sp. Proc. 1307). HODGES EXISTING AS OF MAY 23,
1957 PLUS ALL OF THE RENTS,
EMOLUMENTS AND INCOME however, to the aforesaid October 5, 1963
THEREFROM OF OCTOBER 5, 1963. Motion, namely, the PCIB's claim to
exclusive possession and ownership of one-
COMES NOW Philippine Commercial and hundred percent (10017,) (or, in the
Industrial Bank (hereinafter referred to as alternative, seventy-five percent [75%] of all
PCIB), the administrator of the estate of C. assets owned by C. N. Hodges or Linnie
N. Hodges, deceased, in Special Jane Hodges situated in the Philippines. On
Proceedings No. 1672, through its February 1, 1964 (pp. 934-935, CFI Rec., S.
undersigned counsel, and to this Honorable P. No. 1672) this Honorable Court amended
Court respectfully alleges that: its order of January 24, 1964 but in no way
changes its recognition of the aforedescribed
1. On October 5, 1963, Joe Hodges acting basic demand by the PCIB as administrator
as the co-administrator of the estate of C. N. of the estate of C. N. Hodges to one hundred
Hodges filed, through the undersigned percent (100%) of the assets claimed by
attorneys, an "Urgent Motion For An both estates.
Accounting and Delivery To Administrator of
the Estate of C. N. Hodges of all Of The 4. On February 15, 1964 the PCIB filed a
Assets Of The Conjugal Partnership of The "Motion to Resolve" the aforesaid Motion of
Deceased Linnie Jane Hodges and C. N. October 5, 1963. This Honorable Court set
Hodges Existing as Of May, 23, 1957 Plus for hearing on June 11, 1964 the Motion of
All Of The Rents, Emoluments and Income October 5, 1963.
Therefrom" (pp. 536-542, CFI Rec. S. P. No.
1672). 5. On June 11, 1964, because the
undersigned Allison J. Gibbs was absent in
2. On January 24, 1964 this Honorable the United States, this Honorable Court
Court, on the basis of an amicable ordered the indefinite postponement of the
agreement entered into on January 23, 1964 hearing of the Motion of October 5, 1963.
by the two co-administrators of the estate of
C. N. Hodges and virtually all of the heirs of 6. Since its appointment as administrator of
C. N. Hodges (p. 912, CFI Rec., S. P. No. the estate of C. N. Hodges the PCIB has not
1672), resolved the dispute over who should been able to properly carry out its duties and
act as administrator of the estate of C. N. obligations as administrator of the estate of
Hodges by appointing the PCIB as C. N. Hodges because of the following acts,
administrator of the estate of C. N. Hodges among others, of Avelina A. Magno and
(pp. 905-906, CFI Rec. S. P. No. 1672) and those who claim to act for her as
issuing letters of administration to the PCIB. administratrix of the estate of Linnie Jane
Hodges:
3. On January 24, 1964 virtually all of the
heirs of C. N. Hodges, Joe Hodges and (a) Avelina A. Magno
Fernando P. Mirasol acting as the two co- illegally acts as if she is in
administrators of the estate of C. N. Hodges, exclusive control of all of
Avelina A. Magno acting as the administratrix the assets in the
of the estate of Linnie Jane Hodges, and Philippines of both estates
Messrs. William Brown and Ardel Young including those claimed by
Acting for all of the Higdon family who claim the estate of C. N. Hodges
to be the sole beneficiaries of the estate of as evidenced in part by her
Linnie Jane Hodges and various legal locking the premises at
counsel representing the aforenamed parties 206-208 Guanco Street,
entered into an amicable agreement, which Iloilo City on August 31,
was approved by this Honorable Court, 1964 and refusing to
wherein the parties thereto agreed that reopen same until ordered
certain sums of money were to be paid in to do so by this Honorable
settlement of different claims against the two Court on September 7,
estates and that the assets (to the extent 1964.
they existed)of both estates would be
administrated jointly by the PCIB as (b) Avelina A. Magno
administrator of the estate of C. N. Hodges illegally acts as though she
and Avelina A. Magno as administratrix of alone may decide how the
the estate of Linnie Jane Hodges, subject, assets of the estate of
C.N. Hodges should be 8. As administrator of the estate of C. N.
administered, who the Hodges, the PCIB claims the right to the
PCIB shall employ and immediate exclusive possession and control
how much they may be of all of the properties, accounts receivables,
paid as evidenced in party court cases, bank accounts and other
by her refusal to sign assets, including the documentary records
checks issued by the PCIB evidencing same, which existed in the
payable to the Philippines on the date of C. N. Hodges'
undersigned counsel death, December 25, 1962, and were in his
pursuant to their fee possession and registered in his name
agreement approved by alone. The PCIB knows of no assets in the
this Honorable Court in its Philippines registered in the name of Linnie
order dated March 31, Jane Hodges, the estate of Linnie Jane
1964. Hodges, or, C. N. Hodges, Executor of the
Estate of Linnie Jane Hodges on December
(c) Avelina A. Magno 25, 1962. All of the assets of which the PCIB
illegally gives access to has knowledge are either registered in the
and turns over possession name of C. N. Hodges, alone or were
of the records and assets derived therefrom since his death on
of the estate of C.N. December 25, 1962.
Hodges to the attorney-in-
fact of the Higdon Family, 9. The PCIB as the current administrator of
Mr. James L. Sullivan, as the estate of C. N. Hodges, deceased,
evidenced in part by the succeeded to all of the rights of the
cashing of his personal previously duly appointed administrators of
checks. the estate of C. N. Hodges, to wit:
(3) Order Avelina A. Magno to turn over and 3. On November 22, 1952, Linnie Jane
deliver to the PCIB as administrator of the Hodges executed in the City of Iloilo her Last
estate of C. N. Hodges all of the funds, Will and Testament, a copy of which is
properties and assets of any character hereto attached as Annex "A". The bequests
remaining in her possession; in said will pertinent to the present issue are
the second, third, and fourth provisions,
(4) Pending this Honorable Court's which we quote in full hereunder.
adjudication of the aforesaid issues, order
Avelina A. Magno and her representatives to SECOND: I give, devise
stop interferring with the administration of the and bequeath all of the
estate of C. N. Hodges by the PCIB and its rest, residue and
duly authorized representatives; remainder of my estate,
both personal and real,
(5) Enjoin Avelina A. Magno from working in wherever situated, or
the premises at 206-208 Guanco Street, located, to my husband,
Iloilo City as an employee of the estate of C. Charles Newton Hodges,
N. Hodges and approve her dismissal as to have and to hold unto
such by the PCIB effective August 31, 1964; him, my said husband
during his natural lifetime.
(6) Enjoin James L. Sullivan, Attorneys
Manglapus and Quimpo and others allegedly THIRD: I desire, direct and
representing Miss Magno from entering the provide that my husband,
premises at 206-208 Guanco Street, Iloilo Charles Newton Hodges,
City or any other properties of C. N. Hodges shall have the right to
without the express permission of the PCIB; manage, control, use and
enjoy said estate during
(7) Order such other relief as this Honorable his lifetime, and he is
Court finds just and equitable in the hereby given the right to
premises. (Annex "U" Petition.) make any changes in the
physical properties of said
estate by sale of any part
On January 8, 1965, petitioner also filed a motion for "Official
thereof which he think
Declaration of Heirs of Linnie Jane Hodges Estate" alleging:
best, and the purchase of
any other or additional
COMES NOW Philippine Commercial and Industrial Bank property as he may think
(hereinafter referred to as PCIB), as administrator of the estate best; to execute
of the late C. N. Hodges, through the undersigned counsel, and conveyances with or
to this Honorable Court respectfully alleges that: without general or special
warranty, conveying in fee
1. During their marriage, spouses Charles simple or for any other
Newton Hodges and Linnie Jane Hodges, term or time, any property
American citizens originally from the State of which he may deem
Texas, U.S.A., acquired and accumulated proper to dispose of; to
considerable assets and properties in the lease any of the real
Philippines and in the States of Texas and property for oil, gas and/or
Oklahoma, United States of America. All said other minerals, and all
properties constituted their conjugal estate. such deeds or leases shall
pass the absolute fee
2. Although Texas was the domicile of origin simple title to the interest
of the Hodges spouses, this Honorable so conveyed in such
Court, in its orders dated March 31 and property as he may elect
December 12, 1964 (CFI Record, Sp. Proc. to sell. All rents,
No. 1307, pp. ----; Sp. Proc. No. 1672, p. ---- emoluments and income
), conclusively found and categorically ruled from said estate shall
that said spouses had lived and worked for belong to him, and he is
further authorized to use 6. On June 28, 1957, this Honorable Court
any part of the principal of admitted to probate the Last Will and
said estate as he may Testament of the deceased Linnie Jane
need or desire. It is Hodges (Annex "A"), and appointed C. N.
provided herein, however, Hodges as executor of her estate without
that he shall not sell or bond. (CFI Record, Sp. Proc. No. 1307, pp.
otherwise dispose of any 24-25). On July 1, 1957, this Honorable
of the improved property Court issued letters testamentary to C. N.
now owned by us located Hodges in the estate of Linnie Jane Hodges.
at, in or near the City of (CFI Record, Sp. Proc. No. 1307, p. 30.)
Lubbock, Texas, but he
shall have the full right to 7. The Will of Linnie Jane Hodges, with
lease, manage and enjoy respect to the order of succession, the
the same during his amount of successional rights, and the
lifetime, as above intrinsic of its testamentary provisions,
provided. He shall have should be governed by Philippine laws
the right to sub-divide any because:
farmland and sell lots
therein, and may sell (a) The testatrix, Linnie
unimproved town lots. Jane Hodges, intended
Philippine laws to govern
FOURTH: At the death of her Will;
my said husband, Charles
Newton Hodges, I give, (b) Article 16 of the Civil
devise and bequeath all of Code provides that "the
the rest, residue and national law of the person
remainder of my estate whose succession is under
both real and personal, consideration, whatever
wherever situated or may be the nature of the
located, to be equally property and regardless of
divided among my the country wherein said
brothers and sisters, share property may be found",
and share alike, namely: shall prevail. However, the
Conflict of Law of Texas,
"Esta Higdon, Emma which is the "national law"
Howell, Leonard Higdon, of the testatrix, Linnie Jane
Roy Higdon, Sadie Hodges, provide that the
Rascoe, Era Boman and domiciliary law (Philippine
Nimray Higdon." law — see paragraph 2,
supra) should govern the
4. On November 14, 1953, C. N. Hodges testamentary dispositions
executed in the City of Iloilo his Last Will and and successional rights
Testament, a copy of which is hereto over movables (personal
attached as Annex "B ". In said Will, C. N. properties), and the law of
Hodges designated his wife, Linnie Jane the situs of the property
Hodges, as his beneficiary using the identical (also Philippine law as to
language she used in the second and third properties located in the
provisos of her Will, supra. Philippines) with regards
immovable (real
5. On May 23, 1957 Linnie Jane Hodges properties). Thus applying
died in Iloilo City, predeceasing her husband the "Renvoi Doctrine", as
by more than five (5) years. At the time of approved and applied by
her death, she had no forced or compulsory our Supreme Court in the
heir, except her husband, C. N. Hodges. She case of "In The Matter Of
was survived also by various brothers and The Testate Estate of
sisters mentioned in her Will (supra), which, Eduard E. Christensen",
for convenience, we shall refer to as the G.R. No.
HIGDONS. L-16749, promulgated
January 31, 1963,
Philippine law should apply
to the Will of Linnie Jane of a deceased leaving no ascendants or
Hodges and to the descendants is entitled, as a matter of right
successional rights to her and by way of irrevocable legitime, to at least
estate insofar as her one-half (1/2) of the estate of the deceased,
movable and immovable and no testamentary disposition by the
assets in the Philippines deceased can legally and validly affect this
are concerned. We shall right of the surviving spouse. In fact, her
not, at this stage, discuss husband is entitled to said one-half (1/2)
what law should govern portion of her estate by way of legitime.
the assets of Linnie Jane (Article 886, Civil Code.) Clearly, therefore,
Hodges located in immediately upon the death of Linnie Jane
Oklahoma and Texas, Hodges, C. N. Hodges was the owner of at
because the only assets in least three-fourths (3/4) or seventy-five
issue in this motion are (75%) percent of all of the conjugal assets of
those within the jurisdiction the spouses, (1/2 or 50% by way of conjugal
of this motion Court in the partnership share and 1/4 or 25% by way of
two above-captioned inheritance and legitime) plus all "rents,
Special Proceedings. emoluments and income" accruing to said
conjugal estate from the moment of Linnie
8. Under Philippine and Texas law, the Jane Hodges' death (see paragraph 9,
conjugal or community estate of spouses supra).
shall, upon dissolution, be divided equally
between them. Thus, upon the death of 11. The late Linnie Jane Hodges designated
Linnie Jane Hodges on May 23, 1957, one- her husband C.N. Hodges as her sole and
half (1/2) of the entirety of the assets of the exclusive heir with full authority to do what
Hodges spouses constituting their conjugal he pleased, as exclusive heir and owner of
estate pertained automatically to Charles all the assets constituting her estate, except
Newton Hodges, not by way of inheritance, only with regards certain properties "owned
but in his own right as partner in the conjugal by us, located at, in or near the City of
partnership. The other one-half (1/2) portion Lubbock, Texas". Thus, even without relying
of the conjugal estate constituted the estate on our laws of succession and legitime,
of Linnie Jane Hodges. This is the only which we have cited above, C. N. Hodges,
portion of the conjugal estate capable of by specific testamentary designation of his
inheritance by her heirs. wife, was entitled to the entirely to his wife's
estate in the Philippines.
9. This one-half (1/2) portion of the conjugal
assets pertaining to Linnie Jane Hodges 12. Article 777 of the New Civil Code
cannot, under a clear and specific provision provides that "the rights of the successor are
of her Will, be enhanced or increased by transmitted from the death of the decedent".
income, earnings, rents, or emoluments Thus, title to the estate of Linnie Jane
accruing after her death on May 23, 1957. Hodges was transmitted to C. N. Hodges
Linnie Jane Hodges' Will provides that "all immediately upon her death on May 23,
rents, emoluments and income from said 1957. For the convenience of this Honorable
estate shall belong to him (C. N. Hodges) Court, we attached hereto as Annex "C" a
and he is further authorized to use any part graph of how the conjugal estate of the
of the principal of said estate as he may spouses Hodges should be divided in
need or desire." (Paragraph 3, Annex "A".) accordance with Philippine law and the Will
Thus, by specific provision of Linnie Jane of Linnie Jane Hodges.
Hodges' Will, "all rents, emoluments and
income" must be credited to the one-half 13. In his capacity as sole heir and
(1/2) portion of the conjugal estate pertaining successor to the estate of Linnie Jane
to C. N. Hodges. Clearly, therefore, the Hodges as above-stated, C. N. Hodges,
estate of Linnie Jane Hodges, capable of shortly after the death of Linnie Jane
inheritance by her heirs, consisted Hodges, appropriated to himself the entirety
exclusively of no more than one-half (1/2) of of her estate. He operated all the assets,
the conjugal estate, computed as of the time engaged in business and performed all acts
of her death on May 23, 1957. in connection with the entirety of the conjugal
estate, in his own name alone, just as he had
10. Articles 900, 995 and 1001 of the New been operating, engaging and doing while
Civil Code provide that the surviving spouse the late Linnie Jane Hodges was still alive.
Upon his death on December 25, 1962, "That no person interested
therefore, all said conjugal assets were in his in the Philippines of the
sole possession and control, and registered time and place of
in his name alone, not as executor, but as examining the herein
exclusive owner of all said assets. account, be given notice,
as herein executor is the
14. All these acts of C. N. Hodges were only devisee or legatee of
authorized and sanctioned expressly and the deceased, in
impliedly by various orders of this Honorable accordance with the last
Court, as follows: will and testament already
probated by the Honorable
(a) In an Order dated May 27, 1957, this Court." (CFI Record, Sp.
Honorable Court ruled that C. N. Hodges "is Proc. No. 1307, pp. 77-78;
allowed or authorized to continue the emphasis supplied.)
business in which he was engaged, and to
perform acts which he had been doing while (d) On July 20, 1960, this Honorable Court
the deceased was living." (CFI Record, Sp. approved the verified "Annual Statement of
Proc. No. 1307, p. 11.) Account" submitted by C. N. Hodges through
his counsel Leon P. Gellada on July 21,
(b) On December 14, 1957, this Honorable 1960 wherein he alleged, among other
Court, on the basis of the following fact, things.
alleged in the verified Motion dated
December 11, 1957 filed by Leon P. Gellada "That no person interested
as attorney for the executor C. N. Hodges: in the Philippines of the
time and place of
That herein Executor, (is) not only part owner examining the herein
of the properties left as conjugal, but also, account, be given notice
the successor to all the properties left by the as herein executor is the
deceased Linnie Jane Hodges.' (CFI Record, only devisee or legatee of
Sp. Proc. No. 1307, p. 44; emphasis the deceased Linnie Jane
supplied.) Hodges, in accordance
with the last will and
testament ofthe deceased,
issued the following order:
already probated by this
Honorable Court." (CFI
"As prayed for by Attorney Gellada, counsel Record, Sp. Proc. No.
for the Executor, for the reasons stated in his 1307, pp. 81-82; emphasis
motion dated December 11, 1957, which the supplied.)
Court considers well taken, all the sales,
conveyances, leases and mortgages of all
(e) On May 2, 1961, this Honorable Court
the properties left by the deceased Linnie
approved the verified "Annual Statement of
Jane Hodges executed by the Executor,
Account By The Executor For the Year 1960"
Charles Newton Hodges are hereby
submitted through Leon P. Gellada on April
APPROVED. The said Executor is further
20, 1961 wherein he alleged:
authorized to execute subsequent sales,
conveyances, leases and mortgages of the
properties left by the said deceased Linnie "That no person interested in the Philippines
Jane Hodges in consonance with the wishes be given notice, ofthe time and place of
contained in the last will and testament of the examining the herein account, as herein
latter." (CFI Record. Sp. Proc. No. 1307, p. executor is the only devisee or legatee of the
46; emphasis supplied.) deceased Linnie Jane Hodges, in
accordance with the last will and testament
ofthe deceased, already probated by this
24 ems
Honorable Court." (CFI Record, Sp. Proc.
No. 1307, pp. 90-91; emphasis supplied.)
(c) On April 21, 1959, this Honorable Court
approved the verified inventory and
15. Since C. N. Hodges was the sole and
accounting submitted by C. N. Hodges
exclusive heir of Linnie Jane Hodges, not
through his counsel Leon P. Gellada on April
only by law, but in accordance with the
14, 1959 wherein he alleged among other
dispositions of her will, there was, in fact, no
things,
need to liquidate the conjugal estate of the Hodges acquired by way of inheritance from
spouses. The entirely of said conjugal estate his wife Linnie Jane Hodges upon her death.
pertained to him exclusively, therefore this
Honorable Court sanctioned and authorized, (a) In spite of the above-
as above-stated, C. N. Hodges to manage, mentioned provision in the
operate and control all the conjugal assets Will of Linnie Jane
as owner. Hodges, C. N. Hodges
acquired, not merely a
16. By expressly authorizing C. N. Hodges to usufructuary right, but
act as he did in connection with the estate of absolute title and
his wife, this Honorable Court has (1) ownership to her estate. In
declared C. N. Hodges as the sole heir of the a recent case involving a
estate of Linnie Jane Hodges, and (2) very similar testamentary
delivered and distributed her estate to C. N. provision, the Supreme
Hodges as sole heir in accordance with the Court held that the heir
terms and conditions of her Will. Thus, first designated acquired
although the "estate of Linnie Jane Hodges" full ownership of the
still exists as a legal and juridical personality, property bequeathed by
it had no assets or properties located in the the will, not mere
Philippines registered in its name usufructuary rights.
whatsoever at the time of the death of C. N. (Consolacion Florentino de
Hodges on December 25, 1962. Crisologo, et al., vs.
Manuel Singson, G. R. No.
17. The Will of Linnie Jane Hodges (Annex L-13876, February 28,
"A"), fourth paragraph, provides as follows: 1962.)
4. That C. N. Hodges was the sole and 4. That on June 28, 1957, a petition therefor
exclusive heir of the estate of Linnie Jane having been priorly filed and duly heard, this
Hodges; Honorable Court issued an order admitting to
probate the last will and testament of Linnie
5. That, therefore, the entire conjugal estate Jane Hodges (Sp. Proc. No. 1307, Folio I,
of the spouses located in the Philippines, pp. 24-25, 26-28);
plus all the "rents, emoluments and income"
above-mentioned, now constitutes the estate 5. That the required notice to creditors and to
of C. N. Hodges, capable of distribution to all others who may have any claims against
his heirs upon termination of Special the decedent, Linnie Jane Hodges has
Proceedings No. 1672; already been printed, published and posted
(Sp. Proc. No. 1307, Folio I. pp. 34-40) and
6. That PCIB, as administrator of the estate the reglamentary period for filing such claims
of C. N. Hodges, is entitled to full and has long ago lapsed and expired without any
exclusive custody, control and management claims having been asserted against the
of all said properties; and estate of Linnie Jane Hodges, approved by
the Administrator/Administratrix of the said
7. That Avelina A. Magno, as administratrix estate, nor ratified by this Honorable Court;
of the estate of Linnie Jane Hodges, as well
as the HIGDONS, has no right to intervene 6. That the last will and testament of Linnie
or participate in the administration of the C. Jane Hodges already admitted to probate
N. Hodges estate. contains an institution of heirs in the
following words:
PCIB further prays for such and other relief
as may be deemed just and equitable in the "SECOND: I give, devise
premises." and bequeath all of the
rest, residue and
(Record, pp. 265-277) remainder of my estate,
both personal and real,
wherever situated or
Before all of these motions of petitioner could be resolved,
located, to my beloved
however, on December 21, 1965, private respondent Magno
husband, Charles Newton
filed her own "Motion for the Official Declaration of Heirs of the
Hodges to have and to
Estate of Linnie Jane Hodges" as follows:
hold unto him, my said
husband, during his
COMES NOW the Administratrix of the natural lifetime.
Estate of Linnie Jane Hodges and, through
undersigned counsel, unto this Honorable
THIRD: I desire, direct and
Court most respectfully states and manifests:
provide that my husband,
Charles Newton Hodges,
1. That the spouses Charles Newton Hodges shall have the right to
and Linnie Jane Hodges were American manage, control, use and
citizens who died at the City of Iloilo after enjoy said estate during
having amassed and accumulated extensive his lifetime, and, he is
properties in the Philippines; hereby given the right to
make any changes in the
2. That on November 22, 1952, Linnie Jane physical properties of said
Hodges executed a last will and testament estate, by sale of any part
(the original of this will now forms part of the thereof which he may think
records of these proceedings as Exhibit "C" best, and the purchase of
any other or additional FIFTH: In case of the
property as he may think death of any of my
best; to execute brothers and/or sisters
conveyances with or named in item Fourth,
without general or special above, prior to the death of
warranty, conveying in fee my husband, Charles
simple or for any other Newton Hodges, then it is
term or time, any property my will and bequest that
which he may deem the heirs of such deceased
proper to dispose of; to brother or sister shall take
lease any of the real jointly the share which
property for oil, gas and/or would have gone to such
other minerals, and all brother or sister had she or
such deeds or leases shall he survived."
pass the absolute fee
simple title to the interest 7. That under the provisions of the last will
so conveyed in such and testament already above-quoted, Linnie
property as he elect to sell. Jane Hodges gave a life-estate or a usufruct
All rents, emoluments and over all her estate to her husband, Charles
income from said estate Newton Hodges, and a vested remainder-
shall belong to him, and he estate or the naked title over the same estate
is further authorized to use to her relatives named therein;
any part of the principal of
said estate as he may 8. That after the death of Linnie Jane
need or desire. It is Hodges and after the admission to probate of
provided herein, however, her last will and testament, but during the
that he shall not sell or lifetime of Charles Newton Hodges, the said
otherwise dispose of any Charles Newton Hodges with full and
of the improved property complete knowledge of the life-estate or
now owned by us located usufruct conferred upon him by the will since
at, in or near the City of he was then acting as Administrator of the
Lubbock Texas, but he estate and later as Executor of the will of
shall have the full right to Linnie Jane Hodges, unequivocably and
lease, manage and enjoy clearly through oral and written declarations
the same during his and sworn public statements, renounced,
lifetime, above provided. disclaimed and repudiated his life-estate and
He shall have the right to usufruct over the estate of Linnie Jane
subdivide any farm land Hodges;
and sell lots therein, and
may sell unimproved town
9. That, accordingly, the only heirs left to
lots.
receive the estate of Linnie Jane Hodges
pursuant to her last will and testament, are
FOURTH: At the death of her named brothers and sisters, or their
my said husband, Charles heirs, to wit: Esta Higdon, Emma Howell,
Newton Hodges, I give, Leonard Higdon, Aline Higdon and David
devise and bequeath all of Higdon, the latter two being the wife and son
the rest, residue and respectively of the deceased Roy Higdon,
remainder of my estate, Sadie Rascoe Era Boman and Nimroy
both real and personal, Higdon, all of legal ages, American citizens,
wherever situated or with residence at the State of Texas, United
located, to be equally States of America;
divided among my
brothers and sisters, share
10. That at the time of the death of Linnie
and share alike, namely:
Jane Hodges on May 23, 1957, she was the
co-owner (together with her husband Charles
Esta Higdon, Emma Newton Hodges) of an undivided one-half
Howell, Leonard Higdon, interest in their conjugal properties existing
Roy Higdon, Sadie as of that date, May 23, 1957, which
Rascoe, Era Boman and properties are now being administered
Nimroy Higdon.
sometimes jointly and sometimes separately death of Linnie Jane
by the Administratrix of the estate of Linnie Hodges on May 23, 1957
Jane Hodges and/or the Administrator of the — one-half of these assets
estate of C. N. Hodges but all of which are belong to the estate of
under the control and supervision of this Linnie Jane Hodges;
Honorable Court;
b. An accounting must be
11. That because there was no separation or made of the "rents,
segregation of the interests of husband and emoluments and income"
wife in the combined conjugal estate, as of all these assets — again
there has been no such separation or one-half of these belong to
segregation up to the present, both interests the estate of Linnie Jane
have continually earned exactly the same Hodges;
amount of "rents, emoluments and income",
the entire estate having been continually c. Adjustments must be
devoted to the business of the spouses as if made, after making a
they were alive; deduction of charges,
disbursements and other
12. That the one-half interest of Linnie Jane dispositions made by
Hodges in the combined conjugal estate was Charles Newton Hodges
earning "rents, emoluments and income" personally and for his own
until her death on May 23, 1957, when it personal account from
ceased to be saddled with any more charges May 23, 1957 up to
or expenditures which are purely personal to December 25, 1962, as
her in nature, and her estate kept on earning well as other charges,
such "rents, emoluments and income" by disbursements and other
virtue of their having been expressly dispositions made for him
renounced, disclaimed and repudiated by and in his behalf since
Charles Newton Hodges to whom they were December 25, 1962 up to
bequeathed for life under the last will and the present;
testament of Linnie Jane Hodges;
15. That there remains no other matter for
13. That, on the other hand, the one-half disposition now insofar as the estate of
interest of Charles Newton Hodges in the Linnie Jane Hodges is concerned but to
combined conjugal estate existing as of May complete the liquidation of her estate,
23, 1957, while it may have earned exactly segregate them from the conjugal estate,
the same amount of "rents, emoluments and and distribute them to her heirs pursuant to
income" as that of the share pertaining to her last will and testament.
Linnie Jane Hodges, continued to be
burdened by charges, expenditures, and WHEREFORE, premises considered, it is
other dispositions which are purely personal most respectfully moved and prayed that this
to him in nature, until the death of Charles Honorable Court, after a hearing on the
Newton Hodges himself on December 25, factual matters raised by this motion, issue
1962; an order:
14. That of all the assets of the combined a. Declaring the following persons, to wit:
conjugal estate of Linnie Jane Hodges and Esta Higdon, Emma Howell, Leonard
Charles Newton Hodges as they exist today, Higdon, Aline Higdon, David Higdon, Sadie
the estate of Linnie Jane Hodges is clearly Rascoe, Era Boman and Nimroy Higdon, as
entitled to a portion more than fifty percent the sole heirs under the last will and
(50%) as compared to the portion to which testament of Linnie Jane Hodges and as the
the estate of Charles Newton Hodges may only persons entitled to her estate;
be entitled, which portions can be exactly
determined by the following manner: b. Determining the exact value of the estate
of Linnie Jane Hodges in accordance with
a. An inventory must be the system enunciated in paragraph 14 of
made of the assets of the this motion;
combined conjugal estate
as they existed on the
c. After such determination ordering its interference of Avelina
segregation from the combined conjugal Magno under color of title
estate and its delivery to the Administratrix of as administratrix of the
the estate of Linnie Jane Hodges for Estate of Linnie Jane
distribution to the heirs to whom they Hodges;
properly belong and appertain.
which are all prejudicial, and which involve
(Green Record on Appeal, pp. 382-391) no issues of fact, all facts involved therein
being matters of record, and therefore
whereupon, instead of further pressing on its motion of January require only the resolution of questions of
8, 1965 aforequoted, as it had been doing before, petitioner law;
withdrew the said motion and in addition to opposing the above
motion of respondent Magno, filed a motion on April 22, 1966 3. That whatever claims any alleged heirs or
alleging in part that: other persons may have could be very easily
threshed out in the Testate Estate of Charles
1. That it has received from the counsel for Newton Hodges;
the administratrix of the supposed estate of
Linnie Jane Hodges a notice to set her 4. That the maintenance of two separate
"Motion for Official Declaration of Heirs of the estate proceedings and two administrators
Estate of Linnie Jane Hodges"; only results in confusion and is unduly
burdensome upon the Testate Estate of
2. That before the aforesaid motion could be Charles Newton Hodges, particularly
heard, there are matters pending before this because the bond filed by Avelina Magno is
Honorable Court, such as: grossly insufficient to answer for the funds
and property which she has inofficiously
a. The examination collected and held, as well as those which
already ordered by this she continues to inofficiously collect and
Honorable Court of hold;
documents relating to the
allegation of Avelina 5. That it is a matter of record that such state
Magno that Charles of affairs affects and inconveniences not only
Newton Hodges "through the estate but also third-parties dealing with
... written declarations and it;" (Annex "V", Petition.)
sworn public statements,
renounced, disclaimed and and then, after further reminding the court, by quoting them, of
repudiated life-estate and the relevant allegations of its earlier motion of September 14,
usufruct over the estate of 1964, Annex U, prayed that:
Linnie Jane Hodges';
1. Immediately order Avelina Magno to
b. That "Urgent Motion for account for and deliver to the administrator
An Accounting and of the Estate of C. N. Hodges all the assets
Delivery to the Estate of C. of the conjugal partnership of the deceased
N. Hodges of All the Linnie Jane Hodges and C. N. Hodges, plus
Assets of the Conjugal all the rents, emoluments and income
Partnership of the therefrom;
Deceased Linnie Jane
Hodges and C. N. Hodges 2. Pending the consideration of this motion,
Existing as of May 23, immediately order Avelina Magno to turn
1957 Plus All the Rents, over all her collections to the administrator
Emoluments and Income Philippine Commercial & Industrial Bank;
Therefrom";
3. Declare the Testate Estate of Linnie Jane
c. Various motions to Hodges (Sp. Proc. No. 1307) closed;
resolve the aforesaid
motion; 4. Defer the hearing and consideration of the
motion for declaration of heirs in the Testate
d. Manifestation of Estate of Linnie Jane Hodges until the
September 14, 1964, matters hereinabove set forth are resolved.
detailing acts of (Prayer, Annex "V" of Petition.)
On October 12, 1966, as already indicated at the outset of this successor to all the properties left by the
opinion, the respondent court denied the foregoing motion, deceased Linnie Jane Hodges.
holding thus:
Said motion of December 11, 1957 was
ORDER approved by the Court in consonance with
the wishes contained in the last will and
On record is a motion (Vol. X, Sp. 1672, pp. testament of Linnie Jane Hodges.
4379-4390) dated April 22, 1966 of
administrator PCIB praying that (1) That on April 21, 1959 this Court approved
Immediately order Avelina Magno to account the inventory and accounting submitted by C.
for and deliver to the administrator of the N. Hodges thru counsel Atty. Leon Gellada in
estate of C. N. Hodges all assets of the a motion filed on April 14, 1959 stating
conjugal partnership of the deceased Linnie therein that executor C. N. Hodges is the
Jane Hodges and C. N. Hodges, plus all the only devisee or legatee of Linnie Jane
rents, emoluments and income therefrom; (2) Hodges in accordance with the last will and
Pending the consideration of this motion, testament already probated by the Court.
immediately order Avelina Magno to turn
over all her collections to the administrator That on July 13, 1960 the Court approved
PCIB; (3) Declare the Testate Estate of the annual statement of accounts submitted
Linnie Jane Hodges (Sp. Proc. No. 1307) by the executor C. N. Hodges thru his
closed; and (4) Defer the hearing and counsel Atty. Gellada on July 21, 1960
consideration of the motion for declaration of wherein it is stated that the executor, C. N.
heirs in the Testate Estate of Linnie Jane Hodges is the only devisee or legatee of the
Hodges until the matters hereinabove set deceased Linnie Jane Hodges; that on May
forth are resolved. 2, 1961 the Court approved the annual
statement of accounts submitted by
This motion is predicated on the fact that executor, C. N. Hodges for the year 1960
there are matters pending before this court which was submitted by Atty. Gellada on
such as (a) the examination already ordered April 20, 1961 wherein it is stated that
by this Honorable Court of documents executor Hodges is the only devisee or
relating to the allegation of Avelina Magno legatee of the deceased Linnie Jane
that Charles Newton Hodges thru written Hodges;
declaration and sworn public statements
renounced, disclaimed and repudiated his That during the hearing on September 5 and
life-estate and usufruct over the estate of 6, 1963 the estate of C. N. Hodges claimed
Linnie Jane Hodges (b) the urgent motion for all the assets belonging to the deceased
accounting and delivery to the estate of C. N. spouses Linnie Jane Hodges and C. N.
Hodges of all the assets of the conjugal Hodges situated in the Philippines; that
partnership of the deceased Linnie Jane administratrix Magno has executed illegal
Hodges and C. N. Hodges existing as of May acts to the prejudice of the testate estate of
23, 1957 plus all the rents, emoluments and C. N. Hodges.
income therefrom; (c) various motions to
resolve the aforesaid motion; and (d) An opposition (Sp. 1672, Vol. X, pp. 4415-
manifestation of September 14, 1964, 4421) dated April 27, 1966 of administratrix
detailing acts of interference of Avelina Magno has been filed asking that the motion
Magno under color of title as administratrix of be denied for lack of merit and that the
the estate of Linnie Jane Hodges. motion for the official declaration of heirs of
the estate of Linnie Jane Hodges be set for
These matters, according to the instant presentation and reception of evidence.
motion, are all pre-judicial involving no
issues of facts and only require the It is alleged in the aforesaid opposition that
resolution of question of law; that in the the examination of documents which are in
motion of October 5, 1963 it is alleged that in the possession of administratrix Magno can
a motion dated December 11, 1957 filed by be made prior to the hearing of the motion
Atty. Leon Gellada as attorney for the for the official declaration of heirs of the
executor C. N. Hodges, the said executor C. estate of Linnie Jane Hodges, during said
N. Hodges is not only part owner of the hearing.
properties left as conjugal but also the
That the matters raised in the PCIB's motion Hodges and never filed a motion to declare
of October 5, 1963 (as well as the other himself as the heir of the said Linnie Jane
motion) dated September 14, 1964 have Hodges despite the lapse of more than five
been consolidated for the purpose of (5) years after the death of Linnie Jane
presentation and reception of evidence with Hodges; that it is further alleged in the
the hearing on the determination of the heirs rejoinder that there can be no order of
of the estate of Linnie Jane Hodges. It is adjudication of the estate unless there has
further alleged in the opposition that the been a prior express declaration of heirs and
motion for the official declaration of heirs of so far no declaration of heirs in the estate of
the estate of Linnie Jane Hodges is the one Linnie Jane Hodges (Sp. 1307) has been
that constitutes a prejudicial question to the made.
motions dated October 5 and September 14,
1964 because if said motion is found Considering the allegations and arguments
meritorious and granted by the Court, the in the motion and of the PCIB as well as
PCIB's motions of October 5, 1963 and those in the opposition and rejoinder of
September 14, 1964 will become moot and administratrix Magno, the Court finds the
academic since they are premised on the opposition and rejoinder to be well taken for
assumption and claim that the only heir of the reason that so far there has been no
Linnie Jane Hodges was C. N. Hodges. official declaration of heirs in the testate
estate of Linnie Jane Hodges and therefore
That the PCIB and counsel are estopped no disposition of her estate.
from further questioning the determination of
heirs in the estate of Linnie Jane Hodges at WHEREFORE, the motion of the PCIB dated
this stage since it was PCIB as early as April 22, 1966 is hereby DENIED.
January 8, 1965 which filed a motion for (Annex "W", Petition)
official declaration of heirs of Linnie Jane
Hodges that the claim of any heirs of Linnie In its motion dated November 24, 1966 for the reconsideration
Jane Hodges can be determined only in the of this order, petitioner alleged inter alia that:
administration proceedings over the estate of
Linnie Jane Hodges and not that of C. N.
It cannot be over-stressed that the motion of
Hodges, since the heirs of Linnie Jane
December 11, 1957 was based on the fact
Hodges are claiming her estate and not the
that:
estate of C. N. Hodges.
and reiterated its fundamental pose that the Testate Estate of 6. The various orders hereinabove earlier
Linnie Jane Hodges had already been factually, although not enumerated approving deeds of sale
legally, closed with the virtual declaration of Hodges and executed by respondent Magno in favor of
adjudication to him, as sole universal heir of all the properties appellees Carles, Catedral, Pablito, Guzman,
of the estate of his wife, in the order of December 14, 1957, Coronado, Barrido, Causing, Javier, Lucero
Annex G. Still unpersuaded, on July 18, 1967, respondent and Batisanan, (see pp. 35 to 37 of this
court denied said motion for reconsideration and held that "the opinion), together with the two separate
court believes that there is no justification why the order of orders both dated December 2, 1966 (pp.
October 12, 1966 should be considered or modified", and, on 306-308, and pp. 308-309, Yellow Record on
July 19, 1967, the motion of respondent Magno "for official Appeal) denying reconsideration of said
declaration of heirs of the estate of Linnie Jane Hodges", approval.
already referred to above, was set for hearing.
XLI to XLIII LI
Again, Philippine law, or more specifically, b. That under Philippine law, Texas law, and
Article 900 of the Civil Code provides: the renvoi doctrine, Philippine law governs
the successional rights over the properties
If the only survivor is the left by the deceased, Linnie Jane Hodges
widow or widower, she or (pp. 20-21, petition).
he shall be entitled to one-
half of the hereditary c. That under Philippine as well as Texas
estate of the deceased law, one-half of the Hodges properties
spouse, and the testator pertains to the deceased, Charles Newton
may freely dispose of the Hodges (p. 21, petition). This is not
other half. questioned by the respondents.
Assignments of error I to IV, Anent those deeds of sale based on promises or contracts to
XIII to XV, XXII to XXV, XXXV sell executed by Hodges after the death of his wife, those
to XXX VI, XLI to XLIII and L. enumerated in the quotation in the immediately preceding
paragraph, it is quite obvious that PCIB's contention cannot be
sustained. As already explained earlier, 11* all proceeds of
These assignments of error deal with the approval by the trial
remunerative transfers or dispositions made by Hodges after
court of various deeds of sale of real properties registered in
the death of his wife should be deemed as continuing to be
the name of Hodges but executed by appellee Magno, as
parts of her estate and, therefore, subject to the terms of her
Administratrix of the Estate of Mrs. Hodges, purportedly in
will in favor of her brothers and sisters, in the sense that should
implementation of corresponding supposed written "Contracts
there be no showing that such proceeds, whether in cash or
to Sell" previously executed by Hodges during the interim
property have been subsequently conveyed or assigned
subsequently by Hodges to any third party by acts inter vivos have been actually under her control and administration had
with the result that they could not thereby belong to him Hodges complied with his duty to liquidate the conjugal
anymore at the time of his death, they automatically became partnership. Viewing the situation in that manner, the only ones
part of the inheritance of said brothers and sisters. The deeds who could stand to be prejudiced by the appealed orders
here in question involve transactions which are exactly of this referred to in the assignment of errors under discussion and
nature. Consequently, the payments made by the appellees who could, therefore, have the requisite interest to question
should be considered as payments to the estate of Mrs. them would be only the heirs of Mrs. Hodges, definitely not
Hodges which is to be distributed and partitioned among her PCIB.
heirs specified in the will.
It is of no moment in what capacity Hodges made the
The five deeds of sale predicated on contracts to sell executed "contracts to sell' after the death of his wife. Even if he had
Hodges during the lifetime of his wife, present a different acted as executor of the will of his wife, he did not have to
situation. At first blush, it would appear that as to them, PCIB's submit those contracts to the court nor follow the provisions of
position has some degree of plausibility. Considering, however, the rules, (Sections 2, 4, 5, 6, 8 and 9 of Rule 89 quoted by
that the adoption of PCIB's theory would necessarily have appellant on pp. 125 to 127 of its brief) for the simple reason
tremendous repercussions and would bring about considerable that by the very orders, much relied upon by appellant for other
disturbance of property rights that have somehow accrued purposes, of May 27, 1957 and December 14, 1957, Hodges
already in favor of innocent third parties, the five purchasers was "allowed or authorized" by the trial court "to continue the
aforenamed, the Court is inclined to take a pragmatic and business in which he was engaged and to perform acts which
practical view of the legal situation involving them by he had been doing while the deceased was living", (Order of
overlooking the possible technicalities in the way, the non- May 27) which according to the motion on which the court
observance of which would not, after all, detract materially from acted was "of buying and selling personal and real properties",
what should substantially correspond to each and all of the and "to execute subsequent sales, conveyances, leases and
parties concerned. mortgages of the properties left by the said deceased Linnie
Jane Hodges in consonance with the wishes conveyed in the
To start with, these contracts can hardly be ignored. Bona fide last will and testament of the latter." (Order of December 14) In
third parties are involved; as much as possible, they should not other words, if Hodges acted then as executor, it can be said
be made to suffer any prejudice on account of judicial that he had authority to do so by virtue of these blanket orders,
controversies not of their own making. What is more, the and PCIB does not question the legality of such grant of
transactions they rely on were submitted by them to the authority; on the contrary, it is relying on the terms of the order
probate court for approval, and from already known and itself for its main contention in these cases. On the other hand,
recorded actuations of said court then, they had reason to if, as PCIB contends, he acted as heir-adjudicatee, the
believe that it had authority to act on their motions, since authority given to him by the aforementioned orders would still
appellee Magno had, from time to time prior to their suffice.
transactions with her, been allowed to act in her capacity as
administratrix of one of the subject estates either alone or As can be seen, therefore, it is of no moment whether the
conjointly with PCIB. All the sales in question were executed by "contracts to sell" upon which the deeds in question were
Magno in 1966 already, but before that, the court had based were executed by Hodges before or after the death of
previously authorized or otherwise sanctioned expressly many his wife. In a word, We hold, for the reasons already stated,
of her act as administratrix involving expenditures from the that the properties covered by the deeds being assailed pertain
estate made by her either conjointly with or independently from or should be deemed as pertaining to the estate of Mrs.
PCIB, as Administrator of the Estate of Hodges. Thus, it may Hodges; hence, any supposed irregularity attending the
be said that said buyers-appellees merely followed precedents actuations of the trial court may be invoked only by her heirs,
in previous orders of the court. Accordingly, unless the not by PCIB, and since the said heirs are not objecting, and the
impugned orders approving those sales indubitably suffer from defects pointed out not being strictly jurisdictional in nature, all
some clearly fatal infirmity the Court would rather affirm them. things considered, particularly the unnecessary disturbance of
rights already created in favor of innocent third parties, it is
It is quite apparent from the record that the properties covered best that the impugned orders are not disturbed.
by said sales are equivalent only to a fraction of what should
constitute the estate of Mrs. Hodges, even if it is assumed that In view of these considerations, We do not find sufficient merit
the same would finally be held to be only one-fourth of the in the assignments of error under discussion.
conjugal properties of the spouses as of the time of her death
or, to be more exact, one-half of her estate as per the inventory Assignments of error V to VIII,
submitted by Hodges as executor, on May 12, 1958. In none of XVI to XVIII, XXVI to XXIX, XXXVII
its numerous, varied and voluminous pleadings, motions and to XXXVIII, XLIV to XLVI and LI.
manifestations has PCIB claimed any possibility otherwise.
Such being the case, to avoid any conflict with the heirs of All these assignments of error commonly deal with alleged
Hodges, the said properties covered by the questioned deeds non-fulfillment by the respective vendees, appellees herein, of
of sale executed by appellee Magno may be treated as among the terms and conditions embodied in the deeds of sale
those corresponding to the estate of Mrs. Hodges, which would
referred to in the assignments of error just discussed. It is of the impugned sales are not objecting, and that they are the
claimed that some of them never made full payments in ones who are precisely urging that said sales be sanctioned,
accordance with the respective contracts to sell, while in the the assignments of error under discussion have no basis and
cases of the others, like Lorenzo Carles, Jose Pablico, Alfredo must accordingly be as they are hereby overruled.
Catedral and Salvador S. Guzman, the contracts with them had
already been unilaterally cancelled by PCIB pursuant to With particular reference to assignments LIII to LXI, assailing
automatic rescission clauses contained in them, in view of the the orders of the trial court requiring PCIB to surrender the
failure of said buyers to pay arrearages long overdue. But respective owner's duplicate certificates of title over the
PCIB's posture is again premised on its assumption that the properties covered by the sales in question and otherwise
properties covered by the deeds in question could not pertain directing the Register of Deeds of Iloilo to cancel said
to the estate of Mrs. Hodges. We have already held above that, certificates and to issue new transfer certificates of title in favor
it being evident that a considerable portion of the conjugal of the buyers-appellees, suffice it to say that in the light of the
properties, much more than the properties covered by said above discussion, the trial court was within its rights to so
deeds, would inevitably constitute the estate of Mrs. Hodges, to require and direct, PCIB having refused to give way, by
avoid unnecessary legal complications, it can be assumed that withholding said owners' duplicate certificates, of the
said properties form part of such estate. From this point of corresponding registration of the transfers duly and legally
view, it is apparent again that the questions, whether or not it approved by the court.
was proper for appellee Magno to have disregarded the
cancellations made by PCIB, thereby reviving the rights of the Assignments of error LXII to LXVII
respective buyers-appellees, and, whether or not the rules
governing new dispositions of properties of the estate were
All these assignments of error commonly deal with the appeal
strictly followed, may not be raised by PCIB but only by the
against orders favoring appellee Western Institute of
heirs of Mrs. Hodges as the persons designated to inherit the
Technology. As will be recalled, said institute is one of the
same, or perhaps the government because of the still unpaid
buyers of real property covered by a contract to sell executed
inheritance taxes. But, again, since there is no pretense that
by Hodges prior to the death of his wife. As of October, 1965, it
any objections were raised by said parties or that they would
was in arrears in the total amount of P92,691.00 in the
necessarily be prejudiced, the contentions of PCIB under the
payment of its installments on account of its purchase, hence it
instant assignments of error hardly merit any consideration.
received under date of October 4, 1965 and October 20, 1965,
letters of collection, separately and respectively, from PCIB
Assignments of error IX to XII, XIX and appellee Magno, in their respective capacities as
to XXI, XXX to XXIV, XXXIX to XL, administrators of the distinct estates of the Hodges spouses,
XLVII to XLIX, LII and LIII to LXI. albeit, while in the case of PCIB it made known that "no other
arrangement can be accepted except by paying all your past
PCIB raises under these assignments of error two issues which due account", on the other hand, Magno merely said she would
according to it are fundamental, namely: (1) that in approving "appreciate very much if you can make some remittance to
the deeds executed by Magno pursuant to contracts to sell bring this account up-to-date and to reduce the amount of the
already cancelled by it in the performance of its functions as obligation." (See pp. 295-311, Green R. on A.) On November
administrator of the estate of Hodges, the trial court deprived 3, 1965, the Institute filed a motion which, after alleging that it
the said estate of the right to invoke such cancellations it was ready and willing to pay P20,000 on account of its overdue
(PCIB) had made and (2) that in so acting, the court "arrogated installments but uncertain whether it should pay PCIB or
unto itself, while acting as a probate court, the power to Magno, it prayed that it be "allowed to deposit the aforesaid
determine the contending claims of third parties against the amount with the court pending resolution of the conflicting
estate of Hodges over real property," since it has in effect claims of the administrators." Acting on this motion, on
determined whether or not all the terms and conditions of the November 23, 1965, the trial court issued an order, already
respective contracts to sell executed by Hodges in favor of the quoted in the narration of facts in this opinion, holding that
buyers-appellees concerned were complied with by the latter. payment to both or either of the two administrators is "proper
What is worse, in the view of PCIB, is that the court has taken and legal", and so "movant — can pay to both estates or either
the word of the appellee Magno, "a total stranger to his estate of them", considering that "in both cases (Special Proceedings
as determinative of the issue". 1307 and 1672) there is as yet no judicial declaration of heirs
nor distribution of properties to whomsoever are entitled
Actually, contrary to the stand of PCIB, it is this last point thereto."
regarding appellee Magno's having agreed to ignore the
cancellations made by PCIB and allowed the buyers-appellees The arguments under the instant assignments of error revolve
to consummate the sales in their favor that is decisive. Since around said order. From the procedural standpoint, it is
We have already held that the properties covered by the claimed that PCIB was not served with a copy of the Institute's
contracts in question should be deemed to be portions of the motion, that said motion was heard, considered and resolved
estate of Mrs. Hodges and not that of Hodges, it is PCIB that is on November 23, 1965, whereas the date set for its hearing
a complete stranger in these incidents. Considering, therefore, was November 20, 1965, and that what the order grants is
that the estate of Mrs. Hodges and her heirs who are the real different from what is prayed for in the motion. As to the
parties in interest having the right to oppose the consummation
substantive aspect, it is contended that the matter treated in contained, it is perhaps desirable that a brief restatement of the
the motion is beyond the jurisdiction of the probate court and whole situation be made together with our conclusions in
that the order authorized payment to a person other than the regard to its various factual and legal aspects. .
administrator of the estate of Hodges with whom the Institute
had contracted. The instant cases refer to the estate left by the late Charles
Newton Hodges as well as that of his wife, Linnie Jane
The procedural points urged by appellant deserve scant Hodges, who predeceased him by about five years and a half.
consideration. We must assume, absent any clear proof to the In their respective wills which were executed on different
contrary, that the lower court had acted regularly by seeing to it occasions, each one of them provided mutually as follows: "I
that appellant was duly notified. On the other hand, there is give, devise and bequeath all of the rest, residue and
nothing irregular in the court's having resolved the motion three remainder (after funeral and administration expenses, taxes
days after the date set for hearing the same. Moreover, the and debts) of my estate, both real and personal, wherever
record reveals that appellants' motion for reconsideration situated or located, to my beloved (spouse) to have and to hold
wherein it raised the same points was denied by the trial court unto (him/her) — during (his/her) natural lifetime", subject to
on March 7, 1966 (p. 462, Green R. on A.) Withal, We are not the condition that upon the death of whoever of them survived
convinced that the relief granted is not within the general intent the other, the remainder of what he or she would inherit from
of the Institute's motion. the other is "give(n), devise(d) and bequeath(ed)" to the
brothers and sisters of the latter.
Insofar as the substantive issues are concerned, all that need
be said at this point is that they are mere reiterations of Mrs. Hodges died first, on May 23, 1957. Four days later, on
contentions We have already resolved above adversely to May 27, Hodges was appointed special administrator of her
appellants' position. Incidentally, We may add, perhaps, to estate, and in a separate order of the same date, he was
erase all doubts as to the propriety of not disturbing the lower "allowed or authorized to continue the business in which he
court's orders sanctioning the sales questioned in all these was engaged, (buying and selling personal and real properties)
appeal s by PCIB, that it is only when one of the parties to a and to perform acts which he had been doing while the
contract to convey property executed by a deceased person deceased was living." Subsequently, on December 14, 1957,
raises substantial objections to its being implemented by the after Mrs. Hodges' will had been probated and Hodges had
executor or administrator of the decedent's estate that Section been appointed and had qualified as Executor thereof, upon
8 of Rule 89 may not apply and, consequently, the matter has, his motion in which he asserted that he was "not only part
to be taken up in a separate action outside of the probate owner of the properties left as conjugal, but also, the successor
court; but where, as in the cases of the sales herein involved, to all the properties left by the deceased Linnie Jane Hodges",
the interested parties are in agreement that the conveyance be the trial court ordered that "for the reasons stated in his motion
made, it is properly within the jurisdiction of the probate court to dated December 11, 1957, which the Court considers well
give its sanction thereto pursuant to the provisions of the rule taken, ... all the sales, conveyances, leases and mortgages of
just mentioned. And with respect to the supposed automatic all properties left by the deceased Linnie Jane Hodges
rescission clauses contained in the contracts to sell executed executed by the Executor, Charles Newton Hodges are hereby
by Hodges in favor of herein appellees, the effect of said APPROVED. The said Executor is further authorized to
clauses depend on the true nature of the said contracts, execute subsequent sales, conveyances, leases and
despite the nomenclature appearing therein, which is not mortgages of the properties left by the said deceased Linnie
controlling, for if they amount to actual contracts of sale instead Jane Hodges in consonance with the wishes contained in the
of being mere unilateral accepted "promises to sell", (Art. 1479, last will and testament of the latter."
Civil Code of the Philippines, 2nd paragraph) the pactum
commissorium or the automatic rescission provision would not Annually thereafter, Hodges submitted to the court the
operate, as a matter of public policy, unless there has been a corresponding statements of account of his administration, with
previous notarial or judicial demand by the seller (10 Manresa the particularity that in all his motions, he always made it point
263, 2nd ed.) neither of which have been shown to have been to urge the that "no person interested in the Philippines of the
made in connection with the transactions herein involved. time and place of examining the herein accounts be given
notice as herein executor is the only devisee or legatee of the
Consequently, We find no merit in the assignments of error deceased in accordance with the last will and testament
Number LXII to LXVII. already probated by the Honorable Court." All said accounts
approved as prayed for.
SUMMARY
Nothing else appears to have been done either by the court a
Considering the fact that this decision is unusually extensive quo or Hodges until December 25, 1962. Importantly to be the
and that the issues herein taken up and resolved are rather provision in the will of Mrs. Hodges that her share of the
numerous and varied, what with appellant making seventy- conjugal partnership was to be inherited by her husband "to
eight assignments of error affecting no less than thirty separate have and to hold unto him, my said husband, during his natural
orders of the court a quo, if only to facilitate proper lifetime" and that "at the death of my said husband, I give,
understanding of the import and extent of our rulings herein devise and bequeath all the rest, residue and remainder of my
estate, both real and personal, wherever situated or located, to to the estate of Linnie Jane Hodges", his
be equally divided among my brothers and sisters, share and wife, since her death.
share alike", which provision naturally made it imperative that
the conjugal partnership be promptly liquidated, in order that On said date, December 25, 1962, Hodges died. The very next
the "rest, residue and remainder" of his wife's share thereof, as day, upon motion of herein respondent and appellee, Avelina
of the time of Hodges' own death, may be readily known and A. Magno, she was appointed by the trial court as
identified, no such liquidation was ever undertaken. The record Administratrix of the Testate Estate of Linnie Jane Hodges, in
gives no indication of the reason for such omission, although Special Proceedings No. 1307 and as Special Administratrix of
relatedly, it appears therein: the estate of Charles Newton Hodges, "in the latter case,
because the last will of said Charles Newton Hodges is still
1. That in his annual statement submitted to kept in his vault or iron safe and that the real and personal
the court of the net worth of C. N. Hodges properties of both spouses may be lost, damaged or go to
and the Estate of Linnie Jane Hodges, waste, unless Special Administratrix is appointed," (Order of
Hodges repeatedly and consistently reported December 26, 1962, p. 27, Yellow R. on A.) although, soon
the combined income of the conjugal enough, on December 29, 1962, a certain Harold K. Davies
partnership and then merely divided the was appointed as her Co-Special Administrator, and when
same equally between himself and the estate Special Proceedings No. 1672, Testate Estate of Charles
of the deceased wife, and, more importantly, Newton Hodges, was opened, Joe Hodges, as next of kin of
he also, as consistently, filed corresponding the deceased, was in due time appointed as Co-Administrator
separate income tax returns for each of said estate together with Atty. Fernando P. Mirasol, to
calendar year for each resulting half of such replace Magno and Davies, only to be in turn replaced
combined income, thus reporting that the eventually by petitioner PCIB alone.
estate of Mrs. Hodges had its own income
distinct from his own. At the outset, the two probate proceedings appear to have
been proceeding jointly, with each administrator acting together
2. That when the court a quo happened to with the other, under a sort of modus operandi. PCIB used to
inadvertently omit in its order probating the secure at the beginning the conformity to and signature of
will of Mrs. Hodges, the name of one of her Magno in transactions it wanted to enter into and submitted the
brothers, Roy Higdon then already same to the court for approval as their joint acts. So did Magno
deceased, Hodges lost no time in asking for do likewise. Somehow, however, differences seem to have
the proper correction "in order that the heirs arisen, for which reason, each of them began acting later on
of deceased Roy Higdon may not think or separately and independently of each other, with apparent
believe they were omitted, and that they sanction of the trial court. Thus, PCIB had its own lawyers
were really interested in the estate of the whom it contracted and paid handsomely, conducted the
deceased Linnie Jane Hodges". business of the estate independently of Magno and otherwise
acted as if all the properties appearing in the name of Charles
3. That in his aforementioned motion of Newton Hodges belonged solely and only to his estate, to the
December 11, 1957, he expressly stated that exclusion of the brothers and sisters of Mrs. Hodges, without
"deceased Linnie Jane Hodges died leaving considering whether or not in fact any of said properties
no descendants or ascendants except corresponded to the portion of the conjugal partnership
brothers and sisters and herein petitioner as pertaining to the estate of Mrs. Hodges. On the other hand,
the surviving spouse, to inherit the properties Magno made her own expenditures, hired her own lawyers, on
of the decedent", thereby indicating that he the premise that there is such an estate of Mrs. Hodges, and
was not excluding his wife's brothers and dealth with some of the properties, appearing in the name of
sisters from the inheritance. Hodges, on the assumption that they actually correspond to the
estate of Mrs. Hodges. All of these independent and separate
4. That Hodges allegedly made statements actuations of the two administrators were invariably approved
and manifestations to the United States by the trial court upon submission. Eventually, the differences
inheritance tax authorities indicating that he reached a point wherein Magno, who was more cognizant than
had renounced his inheritance from his wife anyone else about the ins and outs of the businesses and
in favor of her other heirs, which attitude he properties of the deceased spouses because of her long and
is supposed to have reiterated or ratified in intimate association with them, made it difficult for PCIB to
an alleged affidavit subscribed and sworn to perform normally its functions as administrator separately from
here in the Philippines and in which he even her. Thus, legal complications arose and the present judicial
purportedly stated that his reason for so controversies came about.
disclaiming and renouncing his rights under
his wife's will was to "absolve (him) or (his) Predicating its position on the tenor of the orders of May 27
estate from any liability for the payment of and December 14, 1957 as well as the approval by the court a
income taxes on income which has accrued quo of the annual statements of account of Hodges, PCIB
holds to the view that the estate of Mrs. Hodges has already
been in effect closed with the virtual adjudication in the brothers and sisters effective at the latest upon the death of
mentioned orders of her whole estate to Hodges, and that, Hodges.
therefore, Magno had already ceased since then to have any
estate to administer and the brothers and sisters of Mrs. In this decision, for the reasons discussed above, and upon the
Hodges have no interests whatsoever in the estate left by issues just summarized, We overrule PCIB's contention that
Hodges. Mainly upon such theory, PCIB has come to this Court the orders of May 27, 1957 and December 14, 1957 amount to
with a petition for certiorari and prohibition praying that the an adjudication to Hodges of the estate of his wife, and We
lower court's orders allowing respondent Magno to continue recognize the present existence of the estate of Mrs. Hodges,
acting as administratrix of the estate of Mrs. Hodges in Special as consisting of properties, which, while registered in that
Proceedings 1307 in the manner she has been doing, as name of Hodges, do actually correspond to the remainder of
detailed earlier above, be set aside. Additionally, PCIB the share of Mrs. Hodges in the conjugal partnership, it
maintains that the provision in Mrs. Hodges' will instituting her appearing that pursuant to the pertinent provisions of her will,
brothers and sisters in the manner therein specified is in the any portion of said share still existing and undisposed of by her
nature of a testamentary substitution, but inasmuch as the husband at the time of his death should go to her brothers and
purported substitution is not, in its view, in accordance with the sisters share and share alike. Factually, We find that the
pertinent provisions of the Civil Code, it is ineffective and may proven circumstances relevant to the said orders do not
not be enforced. It is further contended that, in any event, warrant the conclusion that the court intended to make thereby
inasmuch as the Hodges spouses were both residents of the such alleged final adjudication. Legally, We hold that the tenor
Philippines, following the decision of this Court in Aznar vs. of said orders furnish no basis for such a conclusion, and what
Garcia, or the case of Christensen, 7 SCRA 95, the estate left is more, at the time said orders were issued, the proceedings
by Mrs. Hodges could not be more than one-half of her share had not yet reached the point when a final distribution and
of the conjugal partnership, notwithstanding the fact that she adjudication could be made. Moreover, the interested parties
was citizen of Texas, U.S.A., in accordance with Article 16 in were not duly notified that such disposition of the estate would
relation to Articles 900 and 872 of the Civil Code. Initially, We be done. At best, therefore, said orders merely allowed Hodges
issued a preliminary injunction against Magno and allowed to dispose of portions of his inheritance in advance of final
PCIB to act alone. adjudication, which is implicitly permitted under Section 2 of
Rule 109, there being no possible prejudice to third parties,
At the same time PCIB has appealed several separate orders inasmuch as Mrs. Hodges had no creditors and all pertinent
of the trial court approving individual acts of appellee Magno in taxes have been paid.
her capacity as administratrix of the estate of Mrs. Hodges,
such as, hiring of lawyers for specified fees and incurring More specifically, We hold that, on the basis of circumstances
expenses of administration for different purposes and presently extant in the record, and on the assumption that
executing deeds of sale in favor of her co-appellees covering Hodges' purported renunciation should not be upheld, the
properties which are still registered in the name of Hodges, estate of Mrs. Hodges inherited by her brothers and sisters
purportedly pursuant to corresponding "contracts to sell" consists of one-fourth of the community estate of the spouses
executed by Hodges. The said orders are being questioned on at the time of her death, minus whatever Hodges had
jurisdictional and procedural grounds directly or indirectly gratuitously disposed of therefrom during the period from, May
predicated on the principal theory of appellant that all the 23, 1957, when she died, to December 25, 1962, when he died
properties of the two estates belong already to the estate of provided, that with regard to remunerative dispositions made
Hodges exclusively. by him during the same period, the proceeds thereof, whether
in cash or property, should be deemed as continuing to be part
On the other hand, respondent-appellee Magno denies that the of his wife's estate, unless it can be shown that he had
trial court's orders of May 27 and December 14, 1957 were subsequently disposed of them gratuitously.
meant to be finally adjudicatory of the hereditary rights of
Hodges and contends that they were no more than the court's At this juncture, it may be reiterated that the question of what
general sanction of past and future acts of Hodges as executor are the pertinent laws of Texas and what would be the estate
of the will of his wife in due course of administration. As to the of Mrs. Hodges under them is basically one of fact, and
point regarding substitution, her position is that what was given considering the respective positions of the parties in regard to
by Mrs. Hodges to her husband under the provision in question said factual issue, it can already be deemed as settled for the
was a lifetime usufruct of her share of the conjugal partnership, purposes of these cases that, indeed, the free portion of said
with the naked ownership passing directly to her brothers and estate that could possibly descend to her brothers and sisters
sisters. Anent the application of Article 16 of the Civil Code, by virtue of her will may not be less than one-fourth of the
she claims that the applicable law to the will of Mrs. Hodges is conjugal estate, it appearing that the difference in the stands of
that of Texas under which, she alleges, there is no system of the parties has reference solely to the legitime of Hodges,
legitime, hence, the estate of Mrs. Hodges cannot be less than PCIB being of the view that under the laws of Texas, there is
her share or one-half of the conjugal partnership properties. such a legitime of one-fourth of said conjugal estate and
She further maintains that, in any event, Hodges had as a Magno contending, on the other hand, that there is none. In
matter of fact and of law renounced his inheritance from his other words, hereafter, whatever might ultimately appear, at
wife and, therefore, her whole estate passed directly to her the subsequent proceedings, to be actually the laws of Texas
on the matter would no longer be of any consequence, since
PCIB would anyway be in estoppel already to claim that the The foregoing considerations leave the Court with no
estate of Mrs. Hodges should be less than as contended by it alternative than to conclude that in predicating its orders on the
now, for admissions by a party related to the effects of foreign assumption, albeit unexpressed therein, that there is an estate
laws, which have to be proven in our courts like any other of Mrs. Hodges to be distributed among her brothers and
controverted fact, create estoppel. sisters and that respondent Magno is the legal administratrix
thereof, the trial court acted correctly and within its jurisdiction.
In the process, We overrule PCIB's contention that the Accordingly, the petition for certiorari and prohibition has to be
provision in Mrs. Hodges' will in favor of her brothers and denied. The Court feels however, that pending the liquidation
sisters constitutes ineffective hereditary substitutions. But of the conjugal partnership and the determination of the
neither are We sustaining, on the other hand, Magno's pose specific properties constituting her estate, the two
that it gave Hodges only a lifetime usufruct. We hold that by administrators should act conjointly as ordered in the Court's
said provision, Mrs. Hodges simultaneously instituted her resolution of September 8, 1972 and as further clarified in the
brothers and sisters as co-heirs with her husband, with the dispositive portion of its decision.
condition, however, that the latter would have complete rights
of dominion over the whole estate during his lifetime and what Anent the appeals from the orders of the lower court
would go to the former would be only the remainder thereof at sanctioning payment by appellee Magno, as administratrix, of
the time of Hodges' death. In other words, whereas they are expenses of administration and attorney's fees, it is obvious
not to inherit only in case of default of Hodges, on the other that, with Our holding that there is such an estate of Mrs.
hand, Hodges was not obliged to preserve anything for them. Hodges, and for the reasons stated in the body of this opinion,
Clearly then, the essential elements of testamentary the said orders should be affirmed. This We do on the
substitution are absent; the provision in question is a simple assumption We find justified by the evidence of record, and
case of conditional simultaneous institution of heirs, whereby seemingly agreed to by appellant PCIB, that the size and value
the institution of Hodges is subject to a partial resolutory of the properties that should correspond to the estate of Mrs.
condition the operative contingency of which is coincidental Hodges far exceed the total of the attorney's fees and
with that of the suspensive condition of the institution of his administration expenses in question.
brothers and sisters-in-law, which manner of institution is not
prohibited by law. With respect to the appeals from the orders approving
transactions made by appellee Magno, as administratrix,
We also hold, however, that the estate of Mrs. Hodges covering properties registered in the name of Hodges, the
inherited by her brothers and sisters could be more than just details of which are related earlier above, a distinction must be
stated, but this would depend on (1) whether upon the proper made between those predicated on contracts to sell executed
application of the principle of renvoi in relation to Article 16 of by Hodges before the death of his wife, on the one hand, and
the Civil Code and the pertinent laws of Texas, it will appear those premised on contracts to sell entered into by him after
that Hodges had no legitime as contended by Magno, and (2) her death. As regards the latter, We hold that inasmuch as the
whether or not it can be held that Hodges had legally and payments made by appellees constitute proceeds of sales of
effectively renounced his inheritance from his wife. Under the properties belonging to the estate of Mrs. Hodges, as may be
circumstances presently obtaining and in the state of the implied from the tenor of the motions of May 27 and December
record of these cases, as of now, the Court is not in a position 14, 1957, said payments continue to pertain to said estate,
to make a final ruling, whether of fact or of law, on any of these pursuant to her intent obviously reflected in the relevant
two issues, and We, therefore, reserve said issues for further provisions of her will, on the assumption that the size and value
proceedings and resolution in the first instance by the court a of the properties to correspond to the estate of Mrs. Hodges
quo, as hereinabove indicated. We reiterate, however, that would exceed the total value of all the properties covered by
pending such further proceedings, as matters stand at this the impugned deeds of sale, for which reason, said properties
stage, Our considered opinion is that it is beyond cavil that may be deemed as pertaining to the estate of Mrs. Hodges.
since, under the terms of the will of Mrs. Hodges, her husband And there being no showing that thus viewing the situation,
could not have anyway legally adjudicated or caused to be there would be prejudice to anyone, including the government,
adjudicated to himself her whole share of their conjugal the Court also holds that, disregarding procedural technicalities
partnership, albeit he could have disposed any part thereof in favor of a pragmatic and practical approach as discussed
during his lifetime, the resulting estate of Mrs. Hodges, of above, the assailed orders should be affirmed. Being a
which Magno is the uncontested administratrix, cannot be less stranger to the estate of Mrs. Hodges, PCIB has no personality
than one-fourth of the conjugal partnership properties, as of the to raise the procedural and jurisdictional issues raised by it.
time of her death, minus what, as explained earlier, have been And inasmuch as it does not appear that any of the other heirs
gratuitously disposed of therefrom, by Hodges in favor of third of Mrs. Hodges or the government has objected to any of the
persons since then, for even if it were assumed that, as orders under appeal, even as to these parties, there exists no
contended by PCIB, under Article 16 of the Civil Code and reason for said orders to be set aside.
applying renvoi the laws of the Philippines are the ones
ultimately applicable, such one-fourth share would be her free DISPOSITIVE PART
disposable portion, taking into account already the legitime of
her husband under Article 900 of the Civil Code.
IN VIEW OF ALL THE FOREGOING PREMISES, judgment is Generally and in all other respects, the parties and the court a
hereby rendered DISMISSING the petition in G. R. Nos. L- quo are directed to adhere henceforth, in all their actuations in
27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936- Special Proceedings 1307 and 1672, to the views passed and
37 and the other thirty-one numbers hereunder ordered to be ruled upon by the Court in the foregoing opinion.
added after payment of the corresponding docket fees, all the
orders of the trial court under appeal enumerated in detail on Appellant PCIB is ordered to pay, within five (5) days from
pages 35 to 37 and 80 to 82 of this decision; the existence of notice hereof, thirty-one additional appeal docket fees, but this
the Testate Estate of Linnie Jane Hodges, with respondent- decision shall nevertheless become final as to each of the
appellee Avelina A. Magno, as administratrix thereof is parties herein after fifteen (15) days from the respective notices
recognized, and it is declared that, until final judgment is to them hereof in accordance with the rules.
ultimately rendered regarding (1) the manner of applying Article
16 of the Civil Code of the Philippines to the situation obtaining Costs against petitioner-appellant PCIB.
in these cases and (2) the factual and legal issue of whether or
not Charles Newton Hodges had effectively and legally
renounced his inheritance under the will of Linnie Jane MENANDRO B. LAUREANO vs. COURT OF APPEALS AND
Hodges, the said estate consists of one-fourth of the SINGAPORE AIRLINES LIMITED; G.R. No. 114776.
community properties of the said spouses, as of the time of the February 2, 2000; QUISUMBING, J.:
death of the wife on May 23, 1957, minus whatever the
husband had already gratuitously disposed of in favor of third This petition for review on certiorari under Rule 45 of the Rules
persons from said date until his death, provided, first, that with of Court seeks to reverse the Decision of the Court of Appeals,
respect to remunerative dispositions, the proceeds thereof dated October 29, 1993, in C.A. G.R. No. CV 34476, as well as
shall continue to be part of the wife's estate, unless its Resolution dated February 28, 1994, which denied the
subsequently disposed of gratuitously to third parties by the motion for reconsideration.
husband, and second, that should the purported renunciation
be declared legally effective, no deductions whatsoever are to The facts of the case as summarized by the respondent
be made from said estate; in consequence, the preliminary appellate court are as follows:
injunction of August 8, 1967, as amended on October 4 and
December 6, 1967, is lifted, and the resolution of September 8, "Sometime in 1978, plaintiff [Menandro B.
1972, directing that petitioner-appellant PCIB, as Administrator Laureano, herein petitioner], then Director of
of the Testate Estate of Charles Newton Hodges, in Special Flight Operations and Chief Pilot of Air
Proceedings 1672, and respondent-appellee Avelina A. Manila, applied for employment with
Magno, as Administratrix of the Testate Estate of Linnie Jane defendant company [herein private
Hodges, in Special Proceedings 1307, should act thenceforth respondent] through its Area Manager in
always conjointly, never independently from each other, as Manila.
such administrators, is reiterated, and the same is made part of
this judgment and shall continue in force, pending the
On September 30, 1978, after the usual
liquidation of the conjugal partnership of the deceased spouses
personal interview, defendant wrote to
and the determination and segregation from each other of their
plaintiff, offering a contract of employment as
respective estates, provided, that upon the finality of this
an expatriate B-707 captain for an original
judgment, the trial court should immediately proceed to the
period of two (2) years commencing on
partition of the presently combined estates of the spouses, to
January 21, 1978, Plaintiff accepted the offer
the end that the one-half share thereof of Mrs. Hodges may be
and commenced working on January 20,
properly and clearly identified; thereafter, the trial court should
1979. After passing the six-month probation
forthwith segregate the remainder of the one-fourth herein
period, plaintiff's appointment was confirmed
adjudged to be her estate and cause the same to be turned
effective July 21, 1979. (Annex "B", p. 30,
over or delivered to respondent for her exclusive administration
Rollo).
in Special Proceedings 1307, while the other one-fourth shall
remain under the joint administration of said respondent and
petitioner under a joint proceedings in Special Proceedings On July 21, 1979, defendant offered plaintiff
1307 and 1672, whereas the half unquestionably pertaining to an extension of his two-year contract to five
Hodges shall be administered by petitioner exclusively in (5) years effective January 21, 1979 to
Special Proceedings 1672, without prejudice to the resolution January 20, 1984 subject to the terms and
by the trial court of the pending motions for its removal as conditions set forth in the contract of
administrator12; and this arrangement shall be maintained until employment, which the latter accepted
the final resolution of the two issues of renvoi and renunciation (Annex "C", p. 31, Rec.).
hereby reserved for further hearing and determination, and the
corresponding complete segregation and partition of the two During his service as B-707 captain, plaintiff
estates in the proportions that may result from the said on August 24, 1980, while in command of a
resolution. flight, committed a noise violation offense at
the Zurich Airport, for which plaintiff the Labor Arbiter. Defendant moved to
apologized. (Exh. "3", p. 307, Rec.). dismiss on jurisdictional grounds. Before said
motion was resolved, the complaint was
Sometime in 1980, plaintiff featured in a tail withdrawn. Thereafter, plaintiff filed the
scraping incident wherein the tail of the instant case for damages due to illegal
aircraft scraped or touched the runway termination of contract of services before the
during landing. He was suspended for a few court a quo (Complaint, pp. 1-10, Rec.).
days until he was investigated by a board
headed by Capt. Choy. He was reprimanded. Again, defendant on February 11, 1987 filed
Scjuris a motion to dismiss alleging inter alia: (1)
that the court has no jurisdiction over the
On September 25, 1981, plaintiff was invited subject matter of the case, and (2) that
to take a course of A-300 conversion training Philippine courts have no jurisdiction over
at Aeroformacion, Toulouse, France at the instant case. Defendant contends that
defendant's expense. Having successfully the complaint is for illegal dismissal together
completed and passed the training course, with a money claim arising out of and in the
plaintiff was cleared on April 7, 1981 for solo course of plaintiff's employment "thus it is the
duty as captain of the Airbus A-300 and Labor Arbiter and the NLRC who have the
subsequently appointed as captain of the A- jurisdiction pursuant to Article 217 of the
300 fleet commanding an Airbus A-300 in Labor Code" and that, since plaintiff was
flights over Southeast Asia. (Annexes "D", employed in Singapore, all other aspects of
"E" and "F", pp. 34-38, Rec.). his employment contract and/or documents
executed in Singapore. Thus, defendant
Sometime in 1982, defendant, hit by a postulates that Singapore laws should apply
recession, initiated cost-cutting measures. and courts thereat shall have jurisdiction.
Seventeen (17) expatriate captains in the (pp. 50-69, Rec.). Misjuris
Airbus fleet were found in excess of the
defendant's requirement (t.s.n., July 6, 1988. In traversing defendant's arguments, plaintiff
p. 11). Consequently, defendant informed its claimed that: (1) where the items demanded
expatriate pilots including plaintiff of the in a complaint are the natural consequences
situation and advised them to take advance flowing from a breach of an obligation and
leaves. (Exh. "15", p. 466, Rec.). not labor benefits, the case is intrinsically a
civil dispute; (2) the case involves a question
Realizing that the recession would not be for that is beyond the field of specialization of
a short time, defendant decided to terminate labor arbiters; and (3) if the complaint is
its excess personnel (t.s.n., July 6, 1988, p. grounded not on the employee's dismissal
17). It did not, however, immediately per se but on the manner of said dismissal
terminate it's A-300 pilots. It reviewed their and the consequence thereof, the case falls
qualifications for possible promotion to the B- under the jurisdiction of the civil courts. (pp.
747 fleet. Among the 17 excess Airbus pilots 70-73, Rec.)
reviewed, twelve were found qualified.
Unfortunately, plaintiff was not one of the On March 23, 1987, the court a quo denied
twelve. Jurissc defendant's motion to dismiss (pp. 82-84,
Ibid). The motion for reconsideration was
On October 5, 1982, defendant informed likewise denied. (p. 95 ibid)
plaintiff of his termination effective November
1, 1982 and that he will be paid three (3) On September 16, 1987, defendant filed its
months salary in lieu of three months notice answer reiterating the grounds relied upon in
(Annex "I", pp. 41-42, Rec.). Because he its motion to dismiss and further arguing that
could not uproot his family on such short plaintiff is barred by laches, waiver, and
notice, plaintiff requested a three-month estoppel from instituting the complaint and
notice to afford him time to exhaust all that he has no cause of action. (pp. 102-
possible avenues for reconsideration and 115)"
retention. Defendant gave only two (2)
months notice and one (1) month salary. On April 10, 1991, the trial court handed down its decision in
(t.s.n., Nov. 12, 1987. p. 25). favor of plaintiff. The dispositive portion of which reads:
Now, before the Court, petitioner poses the following queries: In our view, neither Article 1144 nor Article 1146 of the Civil
Code is here pertinent. What is applicable is Article 291 of the
1. IS THE PRESENT ACTION ONE Labor Code, viz:
BASED ON CONTRACT WHICH
PRESCRIBES IN TEN YEARS UNDER "Article 291. Money claims. - All money
ARTICLE 1144 OF THE NEW CIVIL CODE claims arising from employee-employer
OR ONE FOR DAMAGES ARISING FROM relations accruing during the effectivity of this
Code shall be filed within three (3) years prescription period at three (3) years and which governs under
from the time the cause of action accrued; this jurisdiction.
otherwise they shall be forever barred.
Petitioner claims that the running of the prescriptive period was
x x x" Misact tolled when he filed his complaint for illegal dismissal before
the Labor Arbiter of the National Labor Relations Commission.
What rules on prescription should apply in cases like this one However, this claim deserves scant consideration; it has no
has long been decided by this Court. In illegal dismissal, it is legal leg to stand on. In Olympia International, Inc. vs. Court of
settled, that the ten-year prescriptive period fixed in Article Appeals, we held that "although the commencement of a civil
1144 of the Civil Code may not be invoked by petitioners, for action stops the running of the statute of prescription or
the Civil Code is a law of general application, while the limitations, its dismissal or voluntary abandonment by plaintiff
prescriptive period fixed in Article 292 of the Labor Code [now leaves the parties in exactly the same position as though no
Article 291] is a SPECIAL LAW applicable to claims arising action had been commenced at all."
from employee-employer relations.
Now, as to whether petitioner's separation from the company
More recently in De Guzman. vs. Court of Appeals, where the due to retrenchment was valid, the appellate court found that
money claim was based on a written contract, the Collective the employment contract of petitioner allowed for pre-
Bargaining Agreement, the Court held: termination of employment. We agree with the Court of
Appeals when it said, Sdjad
"...The language of Art. 291 of the Labor
Code does not limit its application only to "It is a settled rule that contracts have the
'money claims specifically recoverable under force of law between the parties. From the
said Code' but covers all money claims moment the same is perfected, the parties
arising from an employee-employer are bound not only to the fulfillment of what
relations" (Citing Cadalin v. POEA has been expressly stipulated but also to all
Administrator, 238 SCRA 721, 764 [1994]; consequences which, according to their
and Uy v. National Labor Relations nature, may be in keeping with good faith,
Commission, 261 SCRA 505, 515 [1996]). ... usage and law. Thus, when plaintiff-appellee
accepted the offer of employment, he was
It should be noted further that Article 291 of bound by the terms and conditions set forth
the Labor Code is a special law applicable to in the contract, among others, the right of
money claims arising from employer- mutual termination by giving three months
employee relations; thus, it necessarily written notice or by payment of three months
prevails over Article 1144 of the Civil Code, a salary. Such provision is clear and readily
general law. Basic is the rule in statutory understandable, hence, there is no room for
construction that 'where two statutes are of interpretation."
equal theoretical application to a particular
case, the one designed therefore should xxx
prevail.' (Citing Leveriza v. Intermediate
Appellate Court, 157 SCRA 282, 294.) Further, plaintiff-appellee's contention that he
Generalia specialibus non derogant." is not bound by the provisions of the
Agreement, as he is not a signatory thereto,
In the light of Article 291, aforecited, we agree with the deserves no merit. It must be noted that
appellate court's conclusion that petitioner's action for when plaintiff-appellee's employment was
damages due to illegal termination filed again on January 8, confirmed, he applied for membership with
1987 or more than four (4) years after the effective date of his the Singapore Airlines Limited (Pilots)
dismissal on November 1, 1982 has already prescribed. Association, the signatory to the
aforementioned Agreement. As such,
"In the instant case, the action for damages plaintiff-appellee is estopped from
due to illegal termination was filed by questioning the legality of the said
plaintiff-appellee only on January 8, 1987 or agreement or any proviso contained therein."
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982. Moreover, the records of the present case clearly show that
Clearly, plaintiff-appellee's action has already respondent court's decision is amply supported by evidence
prescribed." and it did not err in its findings, including the reason for the
retrenchment:
We base our conclusion not on Article 1144 of the Civil Code
but on Article 291 of the Labor Code, which sets the "When defendant-appellant was faced with
the world-wide recession of the airline
industry resulting in a slow down in the (1) Sy Kiat was legally married to Yao Kee
company's growth particularly in the regional [CFI decision, pp. 12-27; Rollo, pp. 49-64;]
operation (Asian Area) where the Airbus 300
operates. It had no choice but to adopt cost (2) Sze Sook Wah, Sze Lai Cho and Sze
cutting measures, such as cutting down Chun Yen are the legitimate children of Yao
services, number of frequencies of flights, Kee with Sy Mat [CFI decision, pp. 28-31;
and reduction of the number of flying points Rollo. pp. 65-68;] and,
for the A-300 fleet (t.s.n., July 6, 1988, pp.
17-18). As a result, defendant-appellant had (3) Aida Sy-Gonzales, Manuel Sy, Teresita
to layoff A-300 pilots, including plaintiff- Sy-Bernabe and Rodolfo Sy are the
appellee, which it found to be in excess of acknowledged illegitimate offsprings of Sy
what is reasonably needed." Kiat with Asuncion Gillego [CFI decision, pp.
27-28; Rollo, pp. 64- 65.]
All these considered, we find sufficient factual and legal basis
to conclude that petitioner's termination from employment was held if favor of the oppositors (petitioners herein) and
for an authorized cause, for which he was given ample notice appointed Sze Sook Wah as the administratrix of the intestate
and opportunity to be heard, by respondent company. No error estate of the deceased [CFI decision, pp. 68-69; Rollo, pp.
nor grave abuse of discretion, therefore, could be attributed to 105-106.]
respondent appellate court. Sppedsc
3. With respect to the AVENUE TRACTOR Specifically, petitioners rely on the following provision of
AND DIESEL PARTS SUPPLY ... , the Republic Act No. 5502, entitled "An Act Revising Rep. Act No.
parties mutually agree and covenant that— 3278, otherwise known as the Charter of the City of Caloocan',
with regard to the Juvenile and Domestic Relations Court:
(a) The stocks and
merchandize and the SEC. 91-A. Creation and Jurisdiction of the
furniture and equipments Court.—
..., shall be divided into two
equal shares between, and xxx xxx xxx
distributed to, Sy Kiat who
shall own
The provisions of the Judiciary Act to the
one-half of the total and
contrary notwithstanding, the court shall
the other half to Asuncion
have exclusive original jurisdiction to hear
Gillego who shall transfer
and decide the following cases:
the same to their children,
namely, Aida Sy, Manuel
Sy, Teresita Sy, and xxx xxx xxx
Rodolfo Sy.
(2) Cases involving custody, guardianship,
(b) the business name and adoption, revocation of adoption, paternity
premises ... shall be and acknowledgment;
retained by Sy Kiat.
However, it shall be his (3) Annulment of marriages, relief from
obligation to give to the marital obligations, legal separation of
aforenamed children an spouses, and actions for support;
amount of One Thousand
Pesos ( Pl,000.00 ) (4) Proceedings brought under the provisions
monthly out of the rental of of title six and title seven, chapters one to
the two doors of the same three of the civil code;
building now occupied by
Everett Construction. xxx xxx xxx
xxx xxx xxx and the ruling in the case of Bartolome v. Bartolome [G.R. No.
L-23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira
(5) With respect to the acquisition, during the [G.R. No. L-42615, 72 SCRA 307.]
existence of the
common-law husband-and-wife relationship
With the enactment of Batas Pambansa Blg. 129, otherwise Manila on November 1929, and the alleged last will and
known as the Judiciary Reorganization Act of 1980, the testament executed in Kulangsu, Amoy, China, on 4 January
Juvenile and Domestic Relations Courts were abolished. Their 1931, by Jose B. Suntay. The value of the estate left by the
functions and jurisdiction are now vested with the Regional deceased is more than P50,000.
Trial Courts [See Section 19 (7), B.P. Blg. 129 and
Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, On 14 May 1934 Jose B. Suntay, a Filipino citizen and resident
143 SCRA 356, 360] hence it is no longer necessary to pass of the Philippines, died in the city of Amoy, Fookien province,
upon the issue of jurisdiction raised by petitioners. Republic of China, leaving real and personal properties in the
Philippines and a house in Amoy, Fookien province, China,
Moreover, even without the exactment of Batas Pambansa Blg. and children by the first marriage had with the late Manuela T.
129 we find in Rep. Act No. 5502 sec. 91-A last paragraph that: Cruz namely, Apolonio, Concepcion, Angel, Manuel, Federico,
Ana, Aurora, Emiliano, and Jose, Jr. and a child named Silvino
xxx xxx xxx by the second marriage had with Maria Natividad Lim Billian
who survived him. Intestate proceedings were instituted in the
If any question involving any of the above Court of First Instance of Bulacan (special proceedings No.
matters should arise as an incident in any 4892) and after hearing letters of administration were issued to
case pending in the ordinary court, said Apolonio Suntay. After the latter's death Federico C. Suntay
incident shall be determined in the main was appointed administrator of the estate. On 15 October 1934
case. the surviving widow filed a petition in the Court of First Instance
of Bulacan for the probate of a last will and testament claimed
to have been executed and signed in the Philippines on
xxx xxx xxx
November 1929 by the late Jose B. Suntay. This petition was
denied because of the loss of said will after the filing of the
As held in the case of Divinagracia v. Rovira [G.R. No. L42615. petition and before the hearing thereof and of the insufficiency
August 10, 1976, 72 SCRA 307]: of the evidence to establish the loss of the said will. An appeal
was taken from said order denying the probate of the will and
xxx xxx xxx this Court held the evidence before the probate court sufficient
to prove the loss of the will and remanded the case to the
It is true that under the aforequoted section 1 Court of First Instance of Bulacan for the further proceedings
of Republic Act No. 4834 **** a case (63 Phil., 793). In spite of the fact that a commission from the
involving paternity and acknowledgment may probate court was issued on 24 April 1937 for the taking of the
be ventilated as an incident in the intestate deposition of Go Toh, an attesting witness to the will, on 7
or testate proceeding (See Baluyot vs. Ines February 1938 the probate court denied a motion for
Luciano, L-42215, July 13, 1976). But that continuance of the hearing sent by cablegram from China by
legal provision presupposes that such an the surviving widow and dismissed the petition. In the
administration proceeding is pending or meantime the Pacific War supervened. After liberation,
existing and has not been terminated. [at pp. claiming that he had found among the files, records and
313-314.] (Emphasis supplied.) documents of his late father a will and testament in Chinese
characters executed and signed by the deceased on 4 January
xxx xxx xxx 1931 and that the same was filed, recorded and probated in
the Amoy district court, Province of Fookien, China, Silvino
Suntay filed a petition in the intestate proceedings praying for
The reason for ths rule is not only "to obviate the rendition of
the probate of the will executed in the Philippines on November
conflicting rulings on the same issue by the Court of First
1929 (Exhibit B) or of the will executed in Amoy, Fookien,
Instance and the Juvenile and Domestic Relations Court" [Vda.
China, on 4 January 1931 (Exhibit N).
de Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72
SCRA 52, 63] but more importantly to prevent multiplicity of
suits. Accordingly, this Court finds no reversible error There is no merit in the contention that the petitioner Silvino
committed by respondent court. Suntay and his mother Maria Natividad Lim Billian are
estopped from asking for the probate of the lost will or of the
foreign will because of the transfer or assignment of their share
WHEREFORE, the decision of the Court of Appeals is hereby
right, title and interest in the estate of the late Jose B. Suntay
AFFIRMED. SO ORDERED.
to Jose G. Gutierrez and the spouses Ricardo Gutierrez and
Victoria Goño and the subsequent assignment thereof by the
In re: Testate Estate of the deceased JOSE B. SUNTAY. assignees to Francisco Pascual and by the latter to Federico
SILVINO SUNTAY vs. In re: Intestate Estate of the C. Suntay, for the validity and legality of such assignments
deceased JOSE B. SUNTAY, FEDERICO C. SUNTAY; G.R. cannot be threshed out in this proceedings which is concerned
Nos. L-3087 and L-3088; July 31, 1954; PADILLA, J.: only with the probate of the will and testament executed in the
Philippines on November 1929 or of the foreign will allegedly
This is an appeal from a decree of the Court of First Instance of executed in Amoy on 4 January 1931 and claimed to have
Bulacan disallowing the alleged will and testament executed in
been probated in the municipal district court of Amoy, Fookien Ana Suntay testifies that sometime in September 1934 in the
province, Republic of China. house of her brother Apolonio Suntay she learned that her
father left a will "because of the arrival of my brother Manuel
As to prescription, the dismissal of the petition for probate of Suntay, who was bringing along with him certain document and
the will on 7 February 1938 was no bar to the filing of this he told us or he was telling us that it was the will of our father
petition on 18 June 1947, or before the expiration of ten years. Jose B. Suntay which was taken from Go Toh. ..." (p. 524, t. s.
n., hearing of 24 February 1948); that she saw her brother
As to the lost will, section 6, Rule 77, provides: Apolonio Suntay read the document in her presence and of
Manuel and learned of the adjudication made in the will by her
father of his estate, to wit: one-third to his children, one-third to
No will shall be proved as a lost or destroyed will
Silvino and his mother and the other third to Silvino, Apolonio,
unless the execution and validity of the same be
Concepcion and Jose, Jr. (pp. 526-8, 530-1, 542, t. s. n. Id.);
established, and the will is proved to have been in
that "after Apolonio read that portion, then he turned over the
existence at the time of the death of the testator, or is
document to Manuel, and he went away," (p. 528, t. s. n., Id.).
shown to have been fraudulently or accidentally
On cross-examination, she testifies that she read the part of
destroyed in the lifetime of the testator without his
the will on adjudication to know what was the share of each
knowledge, nor unless its provisions are clearly and
heir (pp. 530, 544, t. s. n., Id.) and on redirect she testifies that
distinctly proved by at least two credible witnesses.
she saw the signature of her father, Go Toh, Manuel Lopez
When a lost will is proved, the provisions thereof must
and Alberto Barretto (p. 546, t. s. n., Id.).
be distinctly stated and certified by the judge, under
the seal of the court, and the certificate must be filed
and recorded as other wills are filed and recorded. Anastacio Teodoro testifies that one day in November 1934 (p.
273, t. s. n., hearing of 19 January 1948), before the last
postponement of the hearing granted by the Court, Go Toh
The witnesses who testified to the provisions of the lost will are
arrived at his law office in the De los Reyes Building and left an
Go Toh, an attesting witness, Anastacio Teodoro and Ana
envelope wrapped in red handkerchief [Exhibit C] (p. 32, t. s.
Suntay. Manuel Lopez, who was an attesting witness to the
n., hearing of 13 October 1947); that he checked up the
lost will, was dead at the time of the hearing of this alternative
signatures on the envelope Exhibit A with those on the will
petition. In his deposition Go Toh testifies that he was one of
placed in the envelope (p. 33, t. s. n., Id.); that the will was
the witnesses to the lost will consisting of twenty-three sheets
exactly the same as the draft Exhibit B (pp. 32, 47, 50, t. s. n.,
signed by Jose B. Suntay at the bottom of the will and each
Id.).
and every page thereof in the presence of Alberto Barretto,
Manuel Lopez and himself and underneath the testator's
signature the attesting witnesses signed and each of them If the will was snatched after the delivery thereof by Go Toh to
signed the attestation clause and each and every page of the Anastacio Teodoro And returned by the latter to the former
will in the presence of the testator and of the other witnesses because they could not agree on the amount of fees, the
(answers to the 31st, 41st, 42nd, 49th, 50th, 55th and 63rd former coming to the latter's office straight from the boat (p.
interrogatories, Exhibit D-1), but did not take part in the drafting 315, t. s. n., hearing of 19 January 1948) that brought him to
thereof (answer to the 11th interrogatory, Id.); that he knew the the Philippines from Amoy, and that delivery took place in
contents of the will written in Spanish although he knew very November 1934 (p. 273, t. s. n., Id.), then the testimony of Ana
little of that language (answers to the 22nd and 23rd Suntay that she saw and heard her brother Apolonio Suntay
interrogatories and to X-2 cross-interrogatory, Id.) and all he read the will sometime in September 1934 (p. 524, t. s. n.,
knows about the contends of the lost will was revealed to him hearing of 24 February 1948), must not be true.
by Jose B. Suntay at the time it was executed (answers to the
25th interrogatory and to X-4 and X-8 cross-interrogatories, Although Ana Suntay would be a good witness because she
Id.); that Jose B. Suntay told him that the contents thereof are was testifying against her own interest, still the fact remains
the same as those of the draft (Exhibit B) (answers to the 33rd that she did not read the whole will but only the adjudication
interrogatory and to X-8 cross-interrogatory, Id.) which he saw (pp. 526-8, 530-1, 542, t. s. n., Id.) and saw only the signature,
in the office of Alberto Barretto in November 1929 when the will of her father and of the witnesses Go Toh, Manuel Lopez and
was signed (answers to the 69th, 72nd, and 74th Alberto Barretto (p. 546, t. s. n., Id.). But her testimony on
interrogatories, Id); that Alberto Barretto handed the draft and cross-examination that she read the part of the will on
said to Jose B. Suntay: "You had better see if you want any adjudication is inconsistent with her testimony in chief that after
correction" (answers to the 81st, 82nd and 83rd interrogatories, Apolonio had read that part of the will he turned over or handed
Id.); that "after checking Jose B. Suntay put the "Exhibit B" in the document to Manuel who went away (p. 528, t. s. n., Id.).
his pocket and had the original signed and executed" (answers
to the 91st interrogatory, and to X-18 cross-interrogatory, Id.); If it is true that Go Toh saw the draft Exhibit B in the office of
that Mrs. Suntay had the draft of the will (Exhibit B) translated Alberto Barretto in November 1929 when the will was signed,
into Chinese and he read the translation (answers to the 67th then the part of his testimony that Alberto Barretto handed the
interrogatory, Id.); that he did not read the will and did not draft to Jose B. Suntay to whom he said: "You had better see if
compare it (check it up) with the draft (Exhibit B) (answers to X- you want any correction" and that "after checking Jose B.
6 and X-20 cross-interrogatories, Id.). Suntay put the "Exhibit B" in his pocket and had the original
signed and executed" cannot be true, for it was not the time for handwritten insertions or additions in lead pencil to Exhibit B
correcting the draft of the will, because it must have been are not his (pp. 415-7 435-6, 457, t. s. n., Id.); that the final
corrected before and all corrections and additions written in draft of the first will made up of four or five pages (p. 400, t. s.
lead pencil must have been inserted and copied in the final n., Id.) was signed and executed, two or three months after
draft of the will which was signed on that occasion. The Suntay and Lopez had called on him (pp. 397-8, 403, 449, t. s.
bringing in for the draft (Exhibit B) on that occasion is just to fit n., Id.) in his office at the Cebu Portland Cement in the China
it within the framework of the appellant's theory. At any rate, all Banking Building on Dasmariñas street by Jose B. Suntay,
of Go Toh's testimony by deposition on the provisions of the Manuel Lopez and a Chinaman who had all come from
alleged lost will is hearsay, because he came to know or he Hagonoy (p. 398, t. s. n., Id.); that on that occasion they
learned to them from information given him by Jose B. Suntay brought an envelope (Exhibit A) where the following words
and from reading the translation of the draft (Exhibit B) into were written: "Testamento de Jose B. Suntay" (pp. 399, 404, t.
Chinese. s. n., Id.); that after the signing of the will it was placed inside
the envelope (Exhibit A) together with an inventory of the
Much stress is laid upon the testimony of Federico C. Suntay properties of Jose B. Suntay and the envelope was sealed by
who testifies that he read the supposed will or the alleged will the signatures of the testator and the attesting witnesses (pp.
of his father and that the share of the surviving widow, 398, 401, 441, 443, 461, t. s. n., Id.); that he again saw the
according to the will, is two-thirds of the estate (p. 229, t. s. n., envelope (Exhibit A) in his house one Saturday in the later part
hearing of 24 October 1947). But this witness testified to of August 1934, brought by Go Toh and it was then in perfect
oppose the appointment of a co-administrator of the estate, for condition (pp. 405-6, 411, 440-2, t. s. n., Id.); that on the
the reason that he had acquired the interest of the surviving following Monday Go Toh went to his law office bringing along
widow not only in the estate of her deceased husband but also with him the envelope (Exhibit A) in the same condition; that he
in the conjugal property (pp. 148, 205, 228, 229, 231, t. s. n., told Go Toh that he would charge P25,000 as fee for probating
Id.) Whether he read the original will or just the copy thereof the will (pp. 406, 440-2, Id.); that Go Toh did not leave the
(Exhibit B) is not clear. For him the important point was that he envelope (Exhibit A) either in his house or in his law office (p.
had acquired all the share, participation and interest of the 407, t. s. n., Id.); that Go Toh said he wanted to keep it and on
surviving widow and of the only child by the second marriage in no occasion did Go Toh leave it to him (pp. 409, 410, t. s. n.,
the estate of his deceased father. Be that as it may, his Id.).
testimony that under the will the surviving widow would take
two-thirds of the estate of the late Jose B. Suntay is at variance The testimony of Go Toh taken and heard by Assistant Fiscal
with Exhibit B and the testimony of Anastacio Teodoro. F. B. Albert in connection with the complaint for estafa filed
According to the latter, the third for strict legitime is for the ten against Manuel Suntay for the alleged snatching of the
children; the third for betterment is for Silvino, Apolonio, envelope (Exhibit A), corroborates the testimony of Alberto
Concepcion and Jose Jr.; and the third for free disposal is for Barretto to the effect that only one will was signed by Jose B.
the surviving widow and her child Silvino. Suntay at his office in which he (Alberto Barretto), Manuel
Lopez and Go Toh took part as attesting witnesses (p. 15, t. s.
Hence, granting that there was a will duly executed by Jose B. n., Exhibit 6). Go Toh testified before the same assistant fiscal
Suntay placed in the envelope (Exhibit A) and that it was in that he did not leave the will in the hands of Anastacio Teodoro
existence at the time of, and not revoked before, his death, still (p. 26, t. s. n., Exhibit 6). He said, quoting his own words,
the testimony of Anastacio Teodoro alone falls short of the "Because I can not give him this envelope even though the
legal requirement that the provisions of the lost will must be contract (on fees) was signed. I have to bring that document to
"clearly and distinctly proved by at least two credible court or to anywhere else myself." (p. 27, t. s. n., Exhibit 6).
witnesses." Credible witnesses mean competent witnesses and
those who testify to facts from or upon hearsay are neither As to the will claimed to have been executed on 4 January
competent nor credible witnesses. 1931 in Amoy, China, the law on the point in Rule 78. Section 1
of the rule provides:
On the other hand, Alberto Barretto testifies that in the early
part of 1929 he prepared or drew up two mills for Jose B. Wills proved and allowed in a foreign country,
Suntay at the latter's request, the rough draft of the first will according to the laws of such country, may be
was in his own handwriting, given to Manuel Lopez for the final allowed, filed, and recorded by the proper Court of
draft or typing and returned to him; that after checking up the First Instance in the Philippines.
final with the rough draft he tore it and returned the final draft to
Manuel Lopez; that this draft was in favor of all the children and Section 2 provides:
the widow (pp. 392-4, 449, t. s. n., hearing of 21 February
1948); that two months later Jose B. Suntay and Manuel Lopez When a copy of such will and the allowance thereof,
called on him and the former asked him to draw up another will duly authenticated, is filed with a petition for
favoring more his wife and child Silvino; that he had the rough allowance in the Philippines, by the executor or other
draft of the second will typed (pp. 395, 449 t. s. n., Id.) and person interested, in the court having jurisdiction,
gave it to Manuel Lopez (p. 396, t. s. n., Id.); that he did not such court shall fix a time and place for the hearing,
sign as witness the second will of Jose B. Suntay copied from
the typewritten draft [Exhibit B] (p. 420, t. s. n., Id.); that the
and cause notice thereof to be given as in case of an The above minutes were satisfactorily confirmed by
original will presented for allowance. the interrogated parties, who declare that there are no
errors, after said minutes were loudly read and
Section 3 provides: announced actually in the court.
If it appears at the hearing that the will should be Done and subscribed on the Nineteenth day of the
allowed in the Philippines, the court shall so allow it, English month of the 35th year of the Republic of
and a certificate of its allowance, signed by the Judge, China in the Civil Section of the Municipal District
and attested by the seal of the courts, to which shall Court of Amoy, China.
be attached a copy of the will, shall be filed and
recorded by the clerk, and the will shall have the HUANG KUANG CHENG
same effect as if originally proved and allowed in such Clerk of Court
court.
CHIANG TENG HWA
The fact that the municipal district court of Amoy, China, is a Judge
probate court must be proved. The law of China on procedure
in the probate or allowance of wills must also be proved. The (Exhibit N-13, p. 89 Folder of Exhibits.).
legal requirements for the execution of a valid will in China in
1931 should also be established by competent evidence. There does not purport to probate or allow the will which was the
is no proof on these points. The unverified answers to the subject of the proceedings. In view thereof, the will and the
questions propounded by counsel for the appellant to the alleged probate thereof cannot be said to have been done in
Consul General of the Republic of China set forth in Exhibits R- accordance with the accepted basic and fundamental concepts
1 and R-2, objected to by counsel for the appellee, are and principles followed in the probate and allowance of wills.
inadmissible, because apart from the fact that the office of Consequently, the authenticated transcript of proceedings held
Consul General does not qualify and make the person who in the municipal district court of Amoy, China, cannot be
holds it an expert on the Chinese law on procedure in probate deemed and accepted as proceedings leading to the probate
matters, if the same be admitted, the adverse party would be or allowance of a will and, therefore, the will referred to therein
deprived of his right to confront and cross-examine the witness. cannot be allowed, filed and recorded by a competent court of
Consuls are appointed to attend to trade matters. Moreover, it this country.
appears that all the proceedings had in the municipal district
court of Amoy were for the purpose of taking the testimony of
The decree appealed from is affirmed, without pronouncement
two attesting witnesses to the will and that the order of the
as to costs.
municipal district court of Amoy does not purport to probate the
will. In the absence of proof that the municipal district court of
Amoy is a probate court and on the Chinese law of procedure DUMEZ COMPANY and TRANS-ORIENT ENGINEERS, INC.,
in probate matters, it may be presumed that the proceedings in petitioners, vs. NATIONAL LABOR RELATIONS
the matter of probating or allowing a will in the Chinese courts COMMISSION and VERONICO EBILANE, respondents.; G.R.
are the a deposition or to a perpetuation of testimony, and No. 74495. July 11, 1996; HERMOSISIMA, JR., J.:
even if it were so it does not measure same as those provided
for in our laws on the subject. It is a proceedings in rem and for Before us is a petition for certiorari assailing the Decision of the
the validity of such proceedings personal notice or by National Labor Relations Commission (hereafter, NLRC) in an
publication or both to all interested parties must be made. The illegal dismissal case involving an overseas contract worker
interested parties in the case were known to reside in the who contracted a debilitating illness while rendering services
Philippines. The evidence shows that no such notice was under a subsisting job contract in Riyadh, Saudi Arabia. The
received by the interested parties residing in the Philippines assailed Decision affirmed the award by the Workers'
(pp. 474, 476, 481, 503-4, t. s. n., hearing of 24 February Assistance and Adjudication Office of the Philippine Overseas
1948). The proceedings had in the municipal district court of Employment Administration (hereafter POEA) in favor of
Amoy, China, may be likened toe or come up to the standard of private respondent in the amount of U.S.$1,110.00 or its peso
such proceedings in the Philippines for lack of notice to all equivalent as and for his medical compensation benefits.
interested parties and the proceedings were held at the back of
such interested parties. The facts of the case are not in dispute:
The order of the municipal district court of Amoy, China, which On May 21, 1982, petitioner Dumez Company, a French
reads as follows: company, through petitioner Trans-Orient Engineers, Inc., a
corporation organized and existing under the laws of the
ORDER: Philippines, engaged the services of private respondent
Veronico Ebilane as carpenter for one of its projects in the
SEE BELOW Middle East, with Riyadh, Saudi Arabia, as his place of actual
employment. The parties executed and signed a one-year
overseas employment agreement embodying the terms and position adopted by public respondent National Labor
conditions of private respondent's employment. Relations Commission." The Solicitor General does not dispute
private complainant's entitlement, under Saudi Arabia law, to
Private respondent commenced performance of said contract medical benefits corresponding to the period of his physical
on July 3, 1982. On August 31, 1982, while at the job site, incapacity. It is his position, however, that while payment of
private respondent was suddenly seized by abdominal pain said medical benefits is explicitly mandated by the Social
and rushed to the Riyadh Central Hospital were appendectomy Insurance Law of Saudi Arabia,
was performed on him. During his confinement, he developed
right-sided weakness and numbness and difficulty of speaking x x x the same law x x x is equally explicit that the liability
which was found to have been caused by Atrial Fibrillation and decreed therein devolves at the General Organization's
CVA embolism. expense, and not on the employer of the private respondent.
In a letter dated September 22, 1982, petitioners formally Significantly, neither the private nor the public respondent has
terminated private respondent's employment effective filed any pleading to refute the aforementioned postulate of the
September 29, 1982, up to which time petitioners paid private Solicitor General.
respondent his salaries under his employment contract.
Thereafter, on October 13, 1982, private respondent was Understandably, the sole error attributed to the NLRC and the
repatriated to Manila. POEA is that there is no legal basis to require petitioners to
pay private respondent medical compensation benefits equal to
On November 23, 1982, private respondent filed a complaint 75% of his salaries for four (4) months.
for illegal dismissal against petitioners. Such complaint was
filed with the Workers' Assistance and Adjudication Office of Petitioners are correct.
the POEA.
The POEA Administrator, in finding petitioners liable to private
Private respondent asseverates that he bad been terminated respondent for medical benefits accruing to the latter under the
pursuant to the provision of Section 1 (d) of the employment Social Insurance Law of Saudi Arabia, took judicial notice of
agreement which refers to termination of an employee who is the said law. To this extent, the POEA Administrator's
unqualified. He maintains that such ground for termination did actuations are legally defensible. We have earlier ruled in
not exist in his case and, thus, his dismissal was without Norse Management Co. (PTE) vs. National Seamen Board that
cause. evidence is usually a matter of procedure of which a mere
quasi-judicial body is not strict about. Although in a long line of
On January 24, 1984, the POEA Administrator rendered the cases, we have ruled that a foreign law, being a matter of
assailed Decision ordering petitioners to pay private evidence must be alleged and proved, in order to be
respondent medical compensation benefits in the amount of recognized and applied in a particular controversy involving
U.S.$1,110.00 or its peso equivalent. Notwithstanding an conflicts of laws, jurisprudence on this matter was not meant to
explicit finding made in the assailed Decision that "there can be apply to cases before administrative or quasi-judicial bodies in
no dispute that complainant could be terminated for medical the light of the well-settled rule that administrative and quasi-
reasons," still petitioners were found to have failed to perform judicial bodies are not bound strictly by technical rules.
its obligation to give private respondent his "daily allowance for Nonetheless, only to this extent were the acts of the POEA
each day of work disability, including holidays." Administrator amply supported by the law. Her actual
application thereof, however, is starkly erroneous.
Believing that the POEA Administrator erred in finding them
liable for private respondent's medical compensation benefits, Section 6(a) of the Overseas Employment Agreement entered
petitioners appealed to the NLRC. In a Resolution promulgated into and signed by the private parties herein, provides that
on March 25, 1986, the NLRC affirmed in toto the assailed "Workmen's Compensation insurance benefits will be provided
Decision and dismissed the appeal for lack of merit. within the limits of the compensation law of the host country."
That compensation for disability was to be provided in
Petitioners thus came to this Court on a petition for certiorari accordance with the law of the host country, Saudi Arabia, is a
seeking the voiding of the Resolution of the NLRC. In the necessary consequence of the compulsory coverage under the
meantime, petitioners prayed that a temporary restraining order General Organization for Social Insurance Law of Saudi Arabia
be issued to enjoin the POEA from enforcing the assailed (hereafter, GOSI Law of Saudi Arabia), upon all workers,
Resolution. regardless of nationality, sex or age, who render their services
within the territory of Saudi Arabia by virtue of a labor contract.
As prayed for, we issued a temporary restraining order
enjoining the POEA and the NLRC from enforcing the assailed Article 49 of the GOSI Law of Saudi Arabia provides that the
Resolution. General Organization shall pay to the beneficiaries the
insurance compensation, the employer being under no
On November 17, 1986, the Solicitor General filed a Comment obligation to pay any allowance to the insured or to his heirs
"as his own, considering that he is unable to agree with the unless the injury has been intentionally caused by the
employer or the injury has occurred by reason of the latter's 31, 1984 to December 28, 1984;
gross error or failure to abide by the GOSI Law or the rules and
relating to occupational health and safety.
3) HK$905.00 at fixed cost in the action;
and
Under the GOSI Law of Saudi Arabia as pleaded by petitioners
clearly the obligation to pay medical benefits as compensation 4) at least $80,000.00 representing
for work-related injury or illness, devolves upon the General attorneys fees, litigation expenses
Organization and not upon petitioners. Furthermore, after and cost, with interest thereon from
taking judicial notice of the GOSI Law of Saudi Arabia, the the date of the judgment until fully
POEA Administrator considered the said law as one of a paid.
similar nature as that of our own compensation laws. Thus, in
awarding the medical benefits to private respondent, she On March 3, 1988, the defendant filed a Motion to
rationalized the same by quoting Article 166 of the Labor Code Dismiss. However, before the court could resolve
of the Philippines which provides that "the State shall promote the said motion, a fire which partially razed the
and develop a tax-exempt employees' compensation program Quezon City Hall Building on June 11, 1988 totally
whereby employees x x x in the event of work-connected destroyed the office of this Court, together with all
disability or death, may promptly secure adequate income its records, equipment and properties. On July 26,
benefit and medical or related benefits." Indeed, we may 1988, the plaintiff, through counsel filed a Motion for
postulate further that the policies underlying our compensation Reconstitution of Case Records. The Court, after
laws and the GOSI Law of Saudi Arabia being similar, the allowing the defendant to react thereto, granted the
nature thereof could not be so dissimilar. Suffice it to say that said Motion and admitted the annexes attached
our own compensation program imposes on the employer thereto as the reconstituted records of this case per
nothing more than the obligation to remit monthly premiums to Order dated September 6, 1988. Thereafter, the
the State Insurance Fund and it is the latter, not the employer, Motion to Dismiss, the resolution of which had been
on which is laid the burden of compensating the employee for deferred, was denied by the Court in its Order of
any disability; in fact, once the employer pays his share to the October 4, 1988.
fund, all obligation on his part to his employees is ended. No On October 19, 1988, defendant filed his Answer.
showing at all has there been that petitioners had failed to The case was then set for pre-trial conference. At
comply with its obligations as employer under the GOSI Law of the conference, the parties could not arrive at any
Saudi Arabia. settlement. However, they agreed on the following
stipulations of facts:
WHEREFORE, the petition for certiorari is GRANTED. The
decisions of the POEA Administrator and of the NLRC are 1) The defendant admits the
hereby ANNULLED and SET ASIDE. No pronouncement as to existence of the judgment dated
costs. SO ORDERED. December 28, 1984 as well as its
amendment dated April 13, 1987,
but not necessarily the authenticity
ASIAVEST LIMITED vs. THE COURT OF APPEALS AND or validity thereof;
ANTONIO HERAS; G.R. No. 128803. September 25, 1998;
DAVIDE, JR., J.: 2) The plaintiff is not doing business
and is not licensed to do business in
In issue is the enforceability in the Philippines of a foreign the Philippines;
judgment. The antecedents are summarized in the 24 August 3) The residence of defendant, Antonio
1990 Decision of Branch 107 of the Regional Trial Court of Heras, is New Manila, Quezon City.
Quezon City in Civil Case No. Q-52452; thus:
The only issue for this Court to determine is,
The plaintiff Asiavest Limited filed a complaint on whether or not the judgment of the Hong Kong
December 3, 1987 against the defendant Antonio Court has been repelled by evidence of want of
Heras praying that said defendant be ordered to pay jurisdiction, want of notice to the party, collusion,
to the plaintiff the amounts awarded by the Hong fraud or clear mistake of law or fact, such as to
Kong Court Judgment dated December 28, 1984 overcome the presumption established in Section
and amended on April 13, 1987, to wit: 50, Rule 39 of the Rules of Court in favor of foreign
judgments.
1) US$1,810,265.40 or its equivalent in
Hong Kong currency at the time of In view of the admission by the defendant of the
payment with legal interest from existence of the aforementioned judgment (Pls. See
December 28, 1984 until fully paid; Stipulations of Facts in the Order dated January 5,
1989 as amended by the Order of January 18,
2) interest on the sum of US$1,500.00 at 1989), as well as the legal presumption in favor of
9.875% per annum from October the plaintiff as provided for in paragraph (b), Sec.
50, (Ibid.), the plaintiff presented only documentary
evidence to show rendition, existence, and anyway, it is not a legal requirement to do
authentication of such judgment by the proper so under Hong Kong laws;
officials concerned (Pls. See Exhibits A thru B, with
a) The writ of summons or claim can
their submarkings). In addition, the plaintiff
be served by the solicitor
presented testimonial and documentary evidence to
(lawyer) of the claimant or
show its entitlement to attorneys fees and other
plaintiff. In Hong Kong there are
expenses of litigation.
no Court personnel who serve
On the other hand, the defendant presented two writs of summons and/or most
witnesses, namely, Fortunata dela Vega and Russel other processes.
Warren Lousich.
b) If the writ of summons or claim (or
The gist of Ms. dela Vegas testimony is to the effect complaint) is not contested, the
that no writ of summons or copy of a statement of claimant or the plaintiff is not
claim of Asiavest Limited was ever served in the required to present proof of his
office of the Navegante Shipping Agency Limited claim or complaint nor present
and/or for Mr. Antonio Heras, and that no service of evidence under oath of the
the writ of summons was either served on the claim in order to obtain a
defendant at his residence in New Manila, Quezon Judgment.
City. Her knowledge is based on the fact that she
c) There is no legal requirement that
was the personal secretary of Mr. Heras during his
such a Judgment or decision
JD Transit days up to the latter part of 1972 when
rendered by the Court in Hong
he shifted or diversified to shipping business in
Kong [to] make a recitation of
Hong Kong; that she was in-charge of all his letters
the facts or the law upon which
and correspondence, business commitments,
the claim is based.
undertakings, conferences and appointments, until
October 1984 when Mr. Heras left Hong Kong for d) There is no necessity to furnish
good; that she was also the Officer-in-Charge or the defendant with a copy of the
Office Manager of Navegante Shipping Agency Judgment or decision rendered
LTD, a Hong Kong registered and based company against him.
acting as ships agent, up to and until the company
closed shop sometime in the first quarter of 1985, e) In an action based on a
when shipping business collapsed worldwide; that guarantee, there is no
the said company held office at 34-35 Connaught established legal requirement
Road, Central Hong Kong and later transferred to or obligation under Hong Kong
Caxton House at Duddel Street, Hong Kong, until laws that the creditor must first
the company closed shop in 1985; and that she was bring proceedings against the
certain of such facts because she held office at principal debtor. The creditor
Caxton House up to the first quarter of 1985. can immediately go against the
guarantor.
Mr. Lousich was presented as an expert on the laws
of Hong Kong, and as a representative of the law On cross examination, Mr. Lousich stated that
office of the defendants counsel who made a before he was commissioned by the law firm of the
verification of the record of the case filed by the defendants counsel as an expert witness and to
plaintiff in Hong Kong against the defendant, as well verify the records of the Hong Kong case, he had
as the procedure in serving Court processes in been acting as counsel for the defendant in a
Hong Kong. number of commercial matters; that there was an
application for service of summons upon the
In his affidavit (Exh. 2) which constitutes his direct defendant outside the jurisdiction of Hong Kong;
testimony, the said witness stated that: that there was an order of the Court authorizing
service upon Heras outside of Hong Kong,
The defendant was sued on the basis of
particularly in Manila or any other place in the
his personal guarantee of the obligations
Philippines (p. 9, TSN, 2/14/90); that there must be
of Compania Hermanos de Navegacion
adequate proof of service of summons, otherwise
S.A. There is no record that a writ of
the Hong Kong Court will refuse to render judgment
summons was served on the person of
(p. 10, ibid); that the mere fact that the Hong Kong
the defendant in Hong Kong, or that any
Court rendered judgment, it can be presumed that
such attempt at service was made.
there was service of summons; that in this case, it is
Likewise, there is no record that a copy of
not just a presumption because there was an
the judgment of the High Court was
affidavit stating that service was effected in [sic] a
furnished or served on the defendant;
particular man here in Manila; that such affidavit
was filed by one Jose R. Fernandez of the firm ASIAVEST moved for the reconsideration of the decision. It
Sycip Salazar on the 21st of December 1984, and sought an award of judicial costs and an increase in attorneys
stated in essence that on Friday, the 23rd of fees in the amount of US$19,346.45 with interest until full
November 1984 he served the 4th defendant at No. payment of the said obligations. On the other hand, HERAS no
6 First Street, Quezon City by leaving it at that longer opposed the motion and instead appealed the decision
address with Mr. Dionisio Lopez, the son-in-law of to the Court of Appeals, which docketed the appeal as CA-G.R.
the 4th defendant the copy of the writ and Mr. Lopez CV No. 29513.
informed me and I barely believed that he would
bring the said writ to the attention of the 4th In its order November 1990, the trial court granted ASIAVESTs
defendant (pp. 11-12, ibid.); that upon filing of that motion for reconsideration by increasing the award of attorneys
affidavit, the Court was asked and granted judgment fees to US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
against the 4th defendant; and that if the summons CURRENCY, AND TO PAY THE COSTS OF THIS SUIT,
or claim is not contested, the claimant of the plaintiff provided that ASIAVEST would pay the corresponding filing
is not required to present proof of his claim or fees for the increase. ASIAVEST appealed the order requiring
complaint or present evidence under oath of the prior payment of filing fees. However, it later withdrew its
claim in order to obtain judgment; and that such appeal and paid the additional filing fees.
judgment can be enforced in the same manner as a
judgment rendered after full hearing. On 3 April 1997, the Court of Appeals rendered its decision
reversing the decision of the trial court and dismissing
The trial court held that since the Hong Kong court judgment ASIAVESTs complaint without prejudice. It underscored the
had been duly proved, it is a presumptive evidence of a right as fact that a foreign judgment does not of itself have any
between the parties; hence, the party impugning it had the extraterritorial application. For it to be given effect, the foreign
burden to prove want of jurisdiction over his person. HERAS tribunal should have acquired jurisdiction over the person and
failed to discharge that burden. He did not testify to state the subject matter. If such tribunal has not acquired jurisdiction,
categorically and under oath that he never received summons. its judgment is void.
Even his own witness Lousich admitted that HERAS was
served with summons in his Quezon City residence. As to De The Court of Appeals agreed with the trial court that matters of
la Vegas testimony regarding non-service of summons, the remedy and procedure such as those relating to service of
same was hearsay and had no probative value. summons upon the defendant are governed by the lex fori,
which was, in this case, the law of Hong Kong. Relative
As to HERAS contention that the Hong Kong court judgment thereto, it gave weight to Lousichs testimony that under the
violated the Constitution and the procedural laws of the Hong Kong law, the substituted service of summons upon
Philippines because it contained no statements of the facts and HERAS effected in the Philippines by the clerk of Sycip Salazar
the law on which it was based, the trial court ruled that since Hernandez & Gatmaitan firm would be valid provided that it
the issue related to procedural matters, the law of the forum, was done in accordance with Philippine laws. It then stressed
i.e., Hong Kong laws, should govern. As testified by the expert that where the action is in personam and the defendant is in
witness Lousich, such legalities were not required under Hong the Philippines, the summons should be personally served on
Kong laws. The trial court also debunked HERAS contention the defendant pursuant to Section 7, Rule 14 of the Rules of
that the principle of excussion under Article 2058 of the Civil Court. Substituted service may only be availed of where the
Code of the Philippines was violated. It declared that matters of defendant cannot be promptly served in person, the fact of
substance are subject to the law of the place where the impossibility of personal service should be explained in the
transaction occurred; in this case, Hong Kong laws must proof of service. It also found as persuasive HERAS argument
govern. that instead of directly using the clerk of the Sycip Salazar
Hernandez & Gatmaitan law office, who was not authorized by
The trial court concluded that the Hong Kong court judgment the judge of the court issuing the summons, ASIAVEST should
should be recognized and given effect in this jurisdiction for have asked for leave of the local courts to have the foreign
failure of HERAS to overcome the legal presumption in favor of summons served by the sheriff or other court officer of the
the foreign judgment. It then decreed; thus: place where service was to be made, or for special reasons by
any person authorized by the judge.
WHEREFORE, judgment is hereby rendered
ordering defendant to pay to the plaintiff the The Court of Appeals agreed with HERAS that notice sent
following sums or their equivalents in Philippine outside the state to a non-resident is unavailing to give
currency at the time of payment: US$1,810,265.40 jurisdiction in an action against him personally for money
plus interest on the sum of US$1,500,000.00 at recovery. Summons should have been personally served on
9.875% per annum from October 31, 1984 to HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS
December 28, 1984, and HK$905 as fixed cost, was physically present in Hong Kong for nearly 14 years. Since
with legal interests on the aggregate amount from there was not even an attempt to serve summons on HERAS
December 28, 1984, and to pay attorneys fees in in Hong Kong, the Hong Kong Supreme Court did not acquire
the sum of P80,000.00.
jurisdiction over HERAS. Nonetheless, it did not totally of Section 50, Rule 39 of the Rules of Court is on the party
foreclose the claim of ASIAVEST; thus: challenging the foreign judgment -- HERAS in this case.
While We are not fully convinced that [HERAS] has At the pre-trial conference, HERAS admitted the existence of
a meritorious defense against [ASIAVESTs] claims the Hong Kong judgment. On the other hand, ASIAVEST
or that [HERAS] ought to be absolved of any presented evidence to prove rendition, existence, and
liability, nevertheless, in view of the foregoing authentication of the judgment by the proper officials. The
discussion, there is a need to deviate from the judgment is thus presumed to be valid and binding in the
findings of the lower court in the interest of justice country from which it comes, until the contrary is shown.
and fair play. This, however, is without prejudice to Consequently, the first ground relied upon by ASIAVEST has
whatever action [ASIAVEST] might deem proper in merit. The presumption of validity accorded foreign judgment
order to enforce its claims against [HERAS]. would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
Finally, the Court of Appeals also agreed with HERAS that it
was necessary that evidence supporting the validity of the The main argument raised against the Hong Kong judgment is
foreign judgment be submitted, and that our courts are not that the Hong Kong Supreme Court did not acquire jurisdiction
bound to give effect to foreign judgments which contravene our over the person of HERAS. This involves the issue of whether
laws and the principle of sound morality and public policy. summons was properly and validly served on HERAS. It is
settled that matters of remedy and procedure such as those
ASIAVEST forthwith filed the instant petition alleging that the relating to the service of process upon the defendant are
Court of Appeals erred in ruling that governed by the lex fori or the law of the forum, i.e., the law of
Hong Kong in this case. HERAS insisted that according to his
I. IT WAS NECESSARY FOR [ASIAVEST] TO witness Mr. Lousich, who was presented as an expert on Hong
PRESENT EVIDENCE SUPPORTING THE Kong laws, there was no valid service of summons on him.
VALIDITY OF THE JUDGMENT;
II. THE SERVICE OF SUMMONS ON [HERAS] In his counter-affidavit, which served as his direct testimony
WAS DEFECTIVE UNDER PHILIPPINE LAW; per agreement of the parties, Lousich declared that the record
III. SUMMONS SHOULD HAVE BEEN of the Hong Kong case failed to show that a writ of summons
PERSONALLY SERVED ON HERAS IN HONG was served upon HERAS in Hong Kong or that any such
KONG; attempt was made. Neither did the record show that a copy of
IV. THE HONG KONG SUMMONS SHOULD HAVE the judgment of the court was served on HERAS. He stated
BEEN SERVED WITH LEAVE OF PHILIPPINE further that under Hong Kong laws (a) a writ of summons could
COURTS; be served by the solicitor of the claimant or plaintiff; and (b)
V. THE FOREIGN JUDGMENT CONTRAVENES where the said writ or claim was not contested, the claimant or
PHILIPPINE LAWS, THE PRINCIPLES OF SOUND plaintiff was not required to present proof under oath in order to
MORALITY, AND THE PUBLIC POLICY OF THE obtain judgment.
PHILIPPINES.
On cross-examination by counsel for ASIAVEST, Lousich
Being interrelated, we shall take up together the assigned testified that the Hong Kong court authorized service of
errors. summons on HERAS outside of its jurisdiction, particularly in
the Philippines. He admitted also the existence of an affidavit
Under paragraph (b) of Section 50, Rule 39 of the Rules of of one Jose R. Fernandez of the Sycip Salazar Hernandez &
Court, which was the governing law at the time this case was Gatmaitan law firm stating that he (Fernandez) served
decided by the trial court and respondent Court of Appeals, a summons on HERAS on 13 November 1984 at No. 6, 1 st St.,
foreign judgment against a person rendered by a court having Quezon City, by leaving a copy with HERASs son-in-law
jurisdiction to pronounce the judgment is presumptive evidence Dionisio Lopez. On redirect examination, Lousich declared that
of a right as between the parties and their successors in such service of summons would be valid under Hong Kong
interest by the subsequent title. However, the judgment may be laws provided that it was in accordance with Philippine laws.
repelled by evidence of want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact. We note that there was no objection on the part of ASIAVEST
on the qualification of Mr. Lousich as an expert on the Hong
Also, Section 3(n) of Rule 131 of the New Rules of Evidence Kong law. Under Sections 24 and 25, Rule 132 of the New
provides that in the absence of proof to the contrary, a court, or Rules of Evidence, the record of public documents of a
judge acting as such, whether in the Philippines or elsewhere, sovereign authority, tribunal, official body, or public officer may
is presumed to have acted in the lawful exercise of jurisdiction. 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
Hence, once the authenticity of the foreign judgment is proved,
Philippines, with a certificate that such officer has the custody.
the burden to repel it on grounds provided for in paragraph (b)
The certificate may be issued by a secretary of the embassy or
legation, consul general, consul, vice consul, or consular particular issue, the presumption of identity or similarity or the
agent, or any officer in the foreign service of the Philippines so-called processual presumption shall come into play. It will
stationed in the foreign country in which the record is kept, and thus be presumed that the Hong Kong law on the matter is
authenticated by the seal of his office. The attestation must similar to the Philippine law.
state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be, and As stated in Valmonte vs. Court of Appeals, it will be helpful to
must be under the official seal of the attesting officer. determine first whether the action is in personam, in rem, or
quasi in rem because the rules on service of summons under
Nevertheless, the testimony of an expert witness may be Rule 14 of the Rules of Court of the Philippines apply
allowed to prove a foreign law. An authority on private according to the nature of the action.
international law thus noted:
An action in personam is an action against a person on the
Although it is desirable that foreign law be proved in basis of his personal liability. An action in rem is an action
accordance with the above rule, however, the against the thing itself instead of against the person. An action
Supreme Court held in the case of Willamette Iron quasi in rem is one wherein an individual is named as
and Steel Works v. Muzzal, that Section 41, Rule defendant and the purpose of the proceeding is to subject his
123 (Section 25, Rule 132 of the Revised Rules of interest therein to the obligation or lien burdening the property.
Court) does not exclude the presentation of other
competent evidence to prove the existence of a In an action in personam, jurisdiction over the person of the
foreign law. In that case, the Supreme Court defendant is necessary for the court to validly try and decide
considered the testimony under oath of an attorney- the case. Jurisdiction over the person of a resident defendant
at-law of San Francisco, California, who quoted who does not voluntarily appear in court can be acquired by
verbatim a section of California Civil Code and who personal service of summons as provided under Section 7,
stated that the same was in force at the time the Rule 14 of the Rules of Court. If he cannot be personally
obligations were contracted, as sufficient evidence served with summons within a reasonable time, substituted
to establish the existence of said law. Accordingly, service may be made in accordance with Section 8 of said
in line with this view, the Supreme Court in the Rule. If he is temporarily out of the country, any of the following
Collector of Internal Revenue v. Fisher et al., upheld modes of service may be resorted to: (1) substituted service
the Tax Court in considering the pertinent law of set forth in Section 8; (2) personal service outside the country,
California as proved by the respondents witness. In with leave of court; (3) service by publication, also with leave of
that case, the counsel for respondent testified that court; or (4) any other manner the court may deem sufficient.
as an active member of the California Bar since
1951, he is familiar with the revenue and taxation However, in an action in personam wherein the defendant is a
laws of the State of California. When asked by the non-resident who does not voluntarily submit himself to the
lower court to state the pertinent California law as authority of the court, personal service of summons within the
regards exemption of intangible personal properties, state is essential to the acquisition of jurisdiction over her
the witness cited Article 4, Sec. 13851 (a) & (b) of person. This method of service is possible if such defendant is
the California Internal and Revenue Code as physically present in the country. If he is not found therein, the
published in Derrings California Code, a publication court cannot acquire jurisdiction over his person and therefore
of Bancroft-Whitney Co., Inc. And as part of his cannot validly try and decide the case against him. An
testimony, a full quotation of the cited section was exception was laid down in Gemperle v. Schenker wherein a
offered in evidence by respondents. Likewise, in non-resident was served with summons through his wife, who
several naturalization cases, it was held by the was a resident of the Philippines and who was his
Court that evidence of the law of a foreign country representative and attorney-in-fact in a prior civil case filed by
on reciprocity regarding the acquisition of him; moreover, the second case was a mere offshoot of the
citizenship, although not meeting the prescribed rule first case.
of practice, may be allowed and used as basis for
favorable action, if, in the light of all the
On the other hand, in a proceeding in rem or quasi in rem,
circumstances, the Court is satisfied of the
jurisdiction over the person of the defendant is not a
authenticity of the written proof offered. Thus, in a
prerequisite to confer jurisdiction on the court provided that the
number of decisions, mere authentication of the
court acquires jurisdiction over the res. Nonetheless, summons
Chinese Naturalization Law by the Chinese
must be served upon the defendant not for the purpose of
Consulate General of Manila was held to be
vesting the court with jurisdiction but merely for satisfying the
competent proof of that law.
due process requirements. Thus, where the defendant is a
non-resident who is not found in the Philippines and (1) the
There is, however, nothing in the testimony of Mr. Lousich that action affects the personal status of the plaintiff; (2) the action
touched on the specific law of Hong Kong in respect of service relates to, or the subject matter of which is property in the
of summons either in actions in rem or in personam, and where Philippines in which the defendant has or claims a lien or
the defendant is either a resident or nonresident of Hong Kong. interest; (3) the action seeks the exclusion of the defendant
In view of the absence of proof of the Hong Kong law on this
from any interest in the property located in the Philippines; or service of summons on him through a security guard in his
(4) the property of the defendant has been attached in the Quezon City residence and through a lawyer in his office in that
Philippines -- service of summons may be effected by (a) city. In his Motion to Dismiss, he did not question the
personal service out of the country, with leave of court; (b) jurisdiction of the Philippine court over his person on the
publication, also with leave of court; or (c) any other manner ground of invalid service of summons. What was in issue was
the court may deem sufficient. his residence as far as the Hong Kong suit was concerned. We
therefore conclude that the stipulated fact that HERAS is a
In the case at bar, the action filed in Hong Kong against resident of New Manila, Quezon City, Philippines refers to his
HERAS was in personam, since it was based on his personal residence at the time jurisdiction over his person was being
guarantee of the obligation of the principal debtor. Before we sought by the Hong Kong court. With that stipulation of fact,
can apply the foregoing rules, we must determine first whether ASIAVEST cannot now claim that HERAS was a resident of
HERAS was a resident of Hong Kong. Hong Kong at the time.
Fortunata de la Vega, HERAS’s personal secretary in Hong Accordingly, since HERAS was not a resident of Hong Kong
Kong since 1972 until 1985, testified that HERAS was the and the action against him was, indisputably, one in personam,
President and part owner of a shipping company in Hong Kong summons should have been personally served on him in Hong
during all those times that she served as his secretary. He had Kong. The extraterritorial service in the Philippines was
in his employ a staff of twelve. He had business commitments, therefore invalid and did not confer on the Hong Kong court
undertakings, conferences, and appointments until October jurisdiction over his person. It follows that the Hong Kong court
1984 when [he] left Hong Kong for good. HERASs other judgment cannot be given force and effect here in the
witness, Russel Warren Lousich, testified that he had acted as Philippines for having been rendered without jurisdiction.
counsel for HERAS for a number of commercial matters.
ASIAVEST then infers that HERAS was a resident of Hong Even assuming that HERAS was formerly a resident of Hong
Kong because he maintained a business there. Kong, he was no longer so in November 1984 when the
extraterritorial service of summons was attempted to be made
It must be noted that in his Motion to Dismiss, as well as in his on him. As declared by his secretary, which statement was not
Answer to ASIAVESTs complaint for the enforcement of the disputed by ASIAVEST, HERAS left Hong Kong in October
Hong Kong court judgment, HERAS maintained that the Hong 1984 for good. His absence in Hong Kong must have been the
Kong court did not have jurisdiction over him because the reason why summons was not served on him therein; thus,
fundamental rule is that jurisdiction in personam over non- ASIAVEST was constrained to apply for leave to effect service
resident defendants, so as to sustain a money judgment, must in the Philippines, and upon obtaining a favorable action on the
be based upon personal service of summons within the state matter, it commissioned the Sycip Salazar Hernandez &
which renders the judgment. Gatmaitan law firm to serve the summons here in the
Philippines.
For its part, ASIAVEST, in its Opposition to the Motion to
Dismiss contended: The question of Hong Kong courts want of In Brown v. Brown, the defendant was previously a resident of
jurisdiction is therefore a triable issue if it is to be pleaded by the Philippines. Several days after a criminal action for
the defendant to repel the foreign judgment. Facts showing concubinage was filed against him, he abandoned the
jurisdictional lack (e.g. that the Hong Kong suit was in Philippines. Later, a proceeding quasi in rem was instituted
personam, that defendant was not a resident of Hong Kong against him. Summons in the latter case was served on the
when the suit was filed or that he did not voluntarily submit to defendants attorney-in-fact at the latters address. The Court
the Hong Kong courts jurisdiction) should be alleged and held that under the facts of the case, it could not be said that
proved by the defendant. the defendant was still a resident of the Philippines because he
ha[d] escaped to his country and [was] therefore an absentee
In his Reply (to the Opposition to Motion to Dismiss), HERAS in the Philippines. As such, he should have been summoned in
argued that the lack of jurisdiction over his person was the same manner as one who does not reside and is not found
corroborated by ASIAVESTs allegation in the complaint that he in the Philippines.
has his residence at No. 6, 1st St., New Manila, Quezon City,
Philippines. He then concluded that such judicial admission Similarly, HERAS, who was also an absentee, should have
amounted to evidence that he was and is not a resident of been served with summons in the same manner as a non-
Hong Kong. resident not found in Hong Kong. Section 17, Rule 14 of the
Rules of Court providing for extraterritorial service will not apply
Significantly, in the pre-trial conference, the parties came up because the suit against him was in personam. Neither can we
with stipulations of facts, among which was that the residence apply Section 18, which allows extraterritorial service on a
of defendant, Antonio Heras, is New Manila, Quezon City. 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
We note that the residence of HERAS insofar as the action for
only temporarily but for good.
the enforcement of the Hong Kong court judgment is
concerned, was never in issue. He never challenged the
IN VIEW OF ALL THE FOREGOING, judgment is hereby confederating with each other and with the late President
rendered DENYING the petition in this case and AFFIRMING Ferdinand E. Marcos, all residents of Manila, Philippines, and
the assailed judgment of the Court of Appeals in CA-G.R. CV within the jurisdiction of this Honorable Court, did then and
No. 29513.No costs. SO ORDERED. there wilfully, unlawfully and feloniously fail to submit reports in
the prescribed form and/or register with the Foreign Exchange
Department of the Central Bank within 90 days from October
ROBERTO S. BENEDICTO and HECTOR T. RIVERA,
21, 1983 as required of them being residents
petitioners, vs. THE COURT OF APPEALS, HON.
habitually/customarily earning, acquiring or receiving foreign
GUILLERMO L. LOJA, SR., PRESIDING JUDGE, REGIONAL
exchange from whatever source or from invisibles locally or
TRIAL COURT OF MANILA, BRANCH 26, and PEOPLE OF
from abroad, despite the fact they actually earned interests
THE PHILIPPINES, respondents; [G.R. No. 125359.
regularly every six (6 ) months for the first two years and then
September 4, 2001]; QUISUMBING, J.:
quarterly thereafter for their investment of $50-million, later
reduced to $25-million in December 1985, in Philippine-issued
Assailed in this petition is the consolidated decision rendered dollar denominated treasury notes with floating rates and in
on May 23, 1996, by the Court of Appeals in CA-G.R. SP No.
bearer form, in the name of Bank Hofmann, AG, Zurich,
35928 and CA-G.R. SP No. 35719. CA-G.R. SP No. 35928 Switzerland, for the benefit of Avertina Foundation, their front
had affirmed the order dated September 6, 1994, of the organization established for economic advancement purposes
Regional Trial Court, Manila, Branch 26, insofar as it denied with secret foreign exchange account Category (Rubric) C.A.R.
petitioners respective Motions to Quash the Informations in No. 211 925-02 in Swiss Credit Bank (also known as SKA) in
twenty-five (25) criminal cases for violation of Central Bank Zurich, Switzerland, which earned, acquired or received for the
Circular No. 960. Therein included were informations involving:
accused Imelda Romualdez Marcos and her late husband an
(a) consolidated Criminal Cases Nos. 91-101879 to 91-101883 interest of $2,267,892 as of December 16, 1985 which was
filed against Mrs. Imelda R. Marcos, Roberto S. Benedicto, and remitted to Bank Hofmann, AG, through Citibank, New York,
Hector T. Rivera; (b) consolidated Criminal Cases Nos. 91- United States of America, for the credit of said Avertina
101884 to 91-101892 filed against Mrs. Marcos and Benedicto; account on December 19, 1985, aside from the redemption of
and (c) Criminal Cases Nos. 92-101959 to 92-101969 also
$25 million (one-half of the original $50-M) as of December 16,
against Mrs. Marcos and Benedicto. Note, however, that the 1985 and outwardly remitted from the Philippines in the
Court of Appeals already dismissed Criminal Case No. 91- amounts of $7,495,297.49 and $17,489,062.50 on December
101884.
18, 1985 for further investment outside the Philippines without
first complying with the Central Bank reporting/registering
The factual antecedents of the instant petition are as follows: requirements.
On December 27, 1991, Mrs. Imelda Marcos and Messrs. CONTRARY TO LAW.
Benedicto and Rivera were indicted for violation of Section 10
of Circular No. 960 in relation to Section 34 of the Central Bank The other charge sheets were similarly worded except the days
Act (Republic Act No. 265, as amended) in five Informations of the commission of the offenses, the name(s) of the alleged
filed with the Regional Trial Court of Manila. Docketed as dummy or dummies, the amounts in the foreign exchange
Criminal Cases Nos. 91-101879 to 91-101883, the charge accounts maintained, and the names of the foreign banks
sheets alleged that the trio failed to submit reports of their where such accounts were held by the accused.
foreign exchange earnings from abroad and/or failed to register
with the Foreign Exchange Department of the Central Bank
On January 3, 1992, eleven more Informations accusing Mrs.
within the period mandated by Circular No. 960. Said Circular
Marcos and Benedicto of the same offense, again in relation to
prohibited natural and juridical persons from maintaining
different accounts, were filed with the same court, docketed as
foreign exchange accounts abroad without prior authorization
Criminal Cases Nos. 92-101959 to 92-101969. The
from the Central Bank. It also required all residents of the
Informations were similarly worded as the earlier indictments,
Philippines who habitually earned or received foreign
save for the details as to the dates of the violations of Circular
currencies from invisibles, either locally or abroad, to report
No. 960, the identities of the dummies used, the balances and
such earnings or receipts to the Central Bank. Violations of the
sources of the earnings, and the names of the foreign banks
Circular were punishable as a criminal offense under Section
where these accounts were maintained.
34 of the Central Bank Act.
For a charge of forum shopping to prosper, there must exist 1. Allowed to return to the Philippines on September 19,
between an action pending in one court and another action 1993on the condition that he face the criminal charges pending
before another court: (a) identity of parties, or at least such in courts, petitioner-appellant Benedicto, joined by his co-
parties as represent the same interests in both actions; (b) petitioner Rivera, lost no time in attending to the pending
identity of rights asserted and relief prayed for, the relief being criminal charges by posting bail in the above-mentioned cases.
founded on the same facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the 2. Not having been afforded a real opportunity of attending the
other action will, regardless of which party is successful, preliminary investigation because of their forced absence from
amount to res judicata in the action under consideration. Here, the Philippines then, petitioners-appellants invoked their right
to due process thru motions for preliminary investigationUpon act committed before the reenactment continues to be an
denial of their demands for preliminary investigation, the offense in the statute books and pending cases are not
petitioners intended to elevate the matter to the Honorable affected, regardless of whether the new penalty to be imposed
Court of Appeals and actually caused the filing of a petition for is more favorable to the accused.
certiorari/prohibition sometime before their arraignment but
immediately caused the withdrawal thereofin view of the In the instant case, it must be noted that despite the repeal of
prosecutions willingness to go to pre-trial wherein petitioners Circular No. 960, Circular No. 1353 retained the same
would be allowed access to the records of preliminary reportorial requirement for residents receiving earnings or
investigation which they could use for purposes of filing a profits from non-trade foreign exchange transactions. Second,
motion to quash if warranted. even the most cursory glance at the repealing circulars,
Circular Nos. 1318 and 1353 shows that both contain a saving
3. Thus, instead of remanding the Informations to the clause, expressly providing that the repeal of Circular No. 960
Department of Justicerespondent Judge set the case for pre- shall have no effect on pending actions for violation of the latter
trial in order to afford all the accused access to the records of Circular. A saving clause operates to except from the effect of
the prosecution the repealing law what would otherwise be lost under the new
law. In the present case, the respective saving clauses of
xxx Circular Nos. 1318 and 1353 clearly manifest the intent to
reserve the right of the State to prosecute and punish offenses
5. On the basis of disclosures at the pre-trial, the petitioners- for violations of the repealed Circular No. 960, where the cases
appellants Benedicto and Rivera moved for the quashing of the are either pending or under investigation.
informations/cases
Petitioners, however, insist that the repeal of Republic Act No.
The foregoing admissions lead us to conclude that petitioners 265, particularly Section 34, by Republic Act No. 7653,
have expressly waived their right to question any supposed removed the applicability of any penal sanction for violations of
irregularity in the preliminary investigation or to ask for a new any non-trade foreign exchange transactions previously
preliminary investigation. Petitioners, in the above excerpts penalized by Circular No. 960. Petitioners posit that a
from this petition, admit posting bail immediately following their comparison of the two provisions shows that Section 36 of
return to the country, entered their respective pleas to the Republic Act No. 7653 neither retained nor reinstated Section
charges, and filed various motions and pleadings. By so doing, 34 of Republic Act No. 265. Since, in creating the Bangko
without simultaneously demanding a proper preliminary Sentral ng Pilipinas, Congress did not include in its charter a
investigation, they have waived any and all irregularities in the clause providing for the application of Section 34 of Republic
conduct of a preliminary investigation. The trial court did not err Act No. 265 to pending cases, petitioners pending dollar-salting
in denying the motion to quash the informations on the ground cases are now bereft of statutory penalty, the saving clause in
of want of or improperly conducted preliminary investigation. Circular No. 1353 notwithstanding. In other words, absent a
The absence of a preliminary investigation is not a ground to provision in Republic Act No. 7653 expressly reviving the
quash the information. applicability of any penal sanction for the repealed mandatory
foreign exchange reporting regulations formerly required under
Circular No. 960, violations of aforesaid repealed Circular can
On the second issue, petitioners contend that they are being
no longer be prosecuted criminally.
prosecuted for acts punishable under laws that have already
been repealed. They point to the express repeal of Central
Bank Circular No. 960 by Circular Nos. 1318 and 1353 as well A comparison of the old Central Bank Act and the new Bangko
as the express repeal of Republic Act No. 265 by Republic Act Sentrals charter repealing the former show that in consonance
No. 7653. Petitioners, relying on Article 22 of the Revised with the general objective of the old law and the new law to
Penal Code, contend that repeal has the effect of extinguishing maintain internal and external monetary stability in the
the right to prosecute or punish the offense committed under Philippines and preserve the international value of the peso,
the old laws. both the repealed law and the repealing statute contain a penal
clause which sought to penalize in general, violations of the
law as well as orders, instructions, rules, or regulations issued
As a rule, an absolute repeal of a penal law has the effect of
by the Monetary Board. In the case of the Bangko Sentral, the
depriving a court of its authority to punish a person charged
scope of the penal clause was expanded to include violations
with violation of the old law prior to its repeal. This is because
of other pertinent banking laws enforced or implemented by the
an unqualified repeal of a penal law constitutes a legislative act
Bangko Sentral. In the instant case, the acts of petitioners
of rendering legal what had been previously declared as illegal,
sought to be penalized are violations of rules and regulations
such that the offense no longer exists and it is as if the person
issued by the Monetary Board. These acts are proscribed and
who committed it never did so. There are, however, exceptions
penalized in the penal clause of the repealed law and this
to the rule. One is the inclusion of a saving clause in the
proviso for proscription and penalty was reenacted in the
repealing statute that provides that the repeal shall have no
repealing law. We find, therefore, that while Section 34 of
effect on pending actions. Another exception is where the
Republic Act No. 265 was repealed, it was nonetheless,
repealing act reenacts the former statute and punishes the act
simultaneously reenacted in Section 36 of Republic Act No.
previously penalized under the old law. In such instance, the
7653. Where a clause or provision or a statute for that matter is
simultaneously repealed and reenacted, there is no effect, were intended to operate retroactively. There is, therefore, no
upon the rights and liabilities which have accrued under the ex post facto law in this case.
original statute, since the reenactment, in effect neutralizes the
repeal and continues the law in force without interruption. The On the third issue, petitioners ask us to note that the dollar
rule applies to penal laws and statutes with penal provisions. interest earnings subject of the criminal cases instituted against
Thus, the repeal of a penal law or provision, under which a them were remitted to foreign banks on various dates between
person is charged with violation thereof and its simultaneous 1983 to 1987. They maintain that given the considerable lapse
reenactment penalizing the same act done by him under the of time from the dates of the commission of the offenses to the
old law, will neither preclude the accuseds prosecution nor institution of the criminal actions in 1991 and 1992, the States
deprive the court of its jurisdiction to hear and try his case. As right to prosecute them for said offenses has already
pointed out earlier, the act penalized before the reenactment prescribed. Petitioners assert that the Court of Appeals erred in
continues to remain an offense and pending cases are computing the prescriptive period from February 1986.
unaffected. Therefore, the repeal of Republic Act No. 265 by Petitioners theorize that since the remittances were made
Republic Act No. 7653 did not extinguish the criminal liability of through the Central Bank as a regulatory authority, the dates of
petitioners for transgressions of Circular No. 960 and cannot, the alleged violations are known, and prescription should thus
under the circumstances of this case, be made a basis for be counted from these dates.
quashing the indictments against petitioners.
In ruling that the dollar-salting cases against petitioners have
Petitioners, however, point out that Section 36 of Republic Act not yet prescribed, the court a quo quoted with approval the
No. 7653, in reenacting Section 34 of the old Central Act, trial courts finding that:
increased the penalty for violations of rules and regulations
issued by the Monetary Board. They claim that such increase [T]he alleged violations of law were discovered only after the
in the penalty would give Republic Act No. 7653 an ex post EDSA Revolution in 1986 when the dictatorship was toppled
facto application, violating the Bill of Rights. down. The date of the discovery of the offense, therefore,
should be the basis in computing the prescriptive period. Since
Is Section 36 of Republic Act No. 7653 an ex post facto (the) offenses charged are punishable by imprisonment of not
legislation? more than five (5) years, they prescribe in eight (8) years.
Thus, only a little more than four (4) years had elapsed from
An ex post facto law is one which: (1) makes criminal an act the date of discovery in 1986 when the cases were filed in
done before the passage of the law and which was innocent 1991.
when done, and punishes such an act; (2) aggravates a crime,
or makes it greater than it was when committed; (3) changes The offenses for which petitioners are charged are penalized
the punishment and inflicts a greater punishment than the law by Section 34 of Republic Act No. 265 by a fine of not more
annexed to the crime when committed; (4) alters the legal rules than Twenty Thousand Pesos (P20,000.00) and by
of evidence, and authorizes conviction upon less or different imprisonment of not more than five years. Pursuant to Act No.
testimony than the law required at the time of the commission 3326, which mandates the periods of prescription for violations
of the offense; (5) assuming to regulate civil rights, and of special laws, the prescriptive period for violations of Circular
remedies only, in effect imposes penalty or deprivation of a No. 960 is eight (8) years. The period shall commence to run
right for something which when done was lawful; and (6) from the day of the commission of the violation of the law, and
deprives a person accused of a crime of some lawful protection if the same be not known at the time, from the discovery
to which he has become entitled such as the protection of a thereof and institution of judicial proceedings for its
former conviction or acquittal, or a proclamation of amnesty. investigation and punishment. In the instant case, the
indictments against petitioners charged them with having
The test whether a penal law runs afoul of the ex post facto conspired with the late President Ferdinand E. Marcos in
clause of the Constitution is: Does the law sought to be applied transgressing Circular No. 960. Petitioners contention that the
retroactively take from an accused any right that was regarded dates of the commission of the alleged violations were known
at the time of the adoption of the constitution as vital for the and prescription should be counted from these dates must be
protection of life and liberty and which he enjoyed at the time of viewed in the context of the political realities then prevailing.
the commission of the offense charged against him? Petitioners, as close associates of Mrs. Marcos, were not only
protected from investigation by their influence and connections,
The crucial words in the test are vital for the protection of life but also by the power and authority of a Chief Executive
and liberty. We find, however, the test inapplicable to the penal exercising strong-arm rule. This Court has taken judicial notice
clause of Republic Act No. 7653. Penal laws and laws which, of the fact that Mr. Marcos, his family, relations, and close
while not penal in nature, nonetheless have provisions defining associates resorted to all sorts of clever schemes and
offenses and prescribing penalties for their violation operate manipulations to disguise and hide their illicit acquisitions. In
prospectively. Penal laws cannot be given retroactive effect, the instant case, prescription cannot, therefore, be made to run
except when they are favorable to the accused. Nowhere in from the dates of the commission of the offenses charged, for
Republic Act No. 7653, and in particular Section 36, is there the obvious reason that the commission of those offenses were
any indication that the increased penalties provided therein not known as of those dates. It was only after the EDSA
Revolution of February, 1986, that the recovery of ill-gotten than the exception. Hence, petitioners may not claim
wealth became a highly prioritized state policy, pursuant to the exemption under Section 10(q).
explicit command of the Provisional Constitution. To ascertain
the relevant facts to recover ill-gotten properties amassed by With respect to the banking laws of Switzerland cited by
the leaders and supporters of the (Marcos) regime various petitioners, the rule is that Philippine courts cannot take judicial
government agencies were tasked by the Aquino notice of foreign laws. Laws of foreign jurisdictions must be
administration to investigate, and as the evidence on hand may alleged and proved. Petitioners failed to prove the Swiss law
reveal, file and prosecute the proper cases. Applying the relied upon, either by: (1) an official publication thereof; or (2) a
presumption that official duty has been regularly performed, we copy attested by the officer having the legal custody of the
are more inclined to believe that the violations for which record, or by his deputy, and accompanied by a certification
petitioners are charged were discovered only during the post- from the secretary of the Philippine embassy or legation in
February 1986 investigations and the tolling of the prescriptive such country or by the Philippine consul general, consul, vice-
period should be counted from the dates of discovery of their consul, or consular agent stationed in such country, or by any
commission. The criminal actions against petitioners, which other authorized officer in the Philippine foreign service
gave rise to the instant case, were filed in 1991 and 1992, or assigned to said country that such officer has custody. Absent
well within the eight-year prescriptive period counted from such evidence, this Court cannot take judicial cognizance of
February 1986. the foreign law invoked by Benedicto and Rivera.
The fourth issue involves petitioners claim that they incurred no Anent the fifth issue, petitioners insist that the government
criminal liability for violations of Circular No. 960 since they granted them absolute immunity under the Compromise
were exempted from its coverage. Agreement they entered into with the government on
November 3, 1990. Petitioners cite our decision in Republic v.
Petitioners postulate that since the purchases of treasury notes Sandiganbayan, 226 SCRA 314 (1993), upholding the validity
were done through the Central Banks Securities Servicing of the said Agreement and directing the various government
Department and payments of the interest were coursed agencies to be consistent with it. Benedicto and Rivera now
through its Securities Servicing Department/Foreign Exchange insist that the absolute immunity from criminal investigation or
Department, their filing of reports would be surplusage, since prosecution granted to petitioner Benedicto, his family, as well
the requisite information were already with the Central Bank. as to officers and employees of firms owned or controlled by
Furthermore, they contend that the foreign currency investment Benedicto under the aforesaid Agreement covers the suits filed
accounts in the Swiss banks were subject to absolute for violations of Circular No. 960, which gave rise to the
confidentiality as provided for by Republic Act No. 6426, as present case.
amended by Presidential Decree Nos. 1035, 1246, and 1453,
and fell outside the ambit of the reporting requirements The pertinent provisions of the Compromise Agreement read:
imposed by Circular No. 960. Petitioners further rely on the
exemption from reporting provided for in Section 10(q), WHEREAS, this Compromise Agreement covers the remaining
Circular No. 960, and the confidentiality granted to Swiss bank claims and the cases of the Philippine Government against
accounts by the laws of Switzerland. Roberto S. Benedicto including his associates and nominees,
namely, Julita C. Benedicto, Hector T. Rivera, x x x
Petitioners correctly point out that Section 10(q) of Circular No.
960 exempts from the reporting requirement foreign currency WHEREAS, specifically these claims are the subject matter of
eligible for deposit under the Philippine Foreign Exchange the following cases (stress supplied):
Currency Deposit System, pursuant to Republic Act No. 6426,
as amended. But, in order to avail of the aforesaid exemption,
1. Sandiganbayan Civil Case No. 9
petitioners must show that they fall within its scope. Petitioners
must satisfy the requirements for eligibility imposed by Section
2, Republic Act No. 6426. Not only do we find the record bare 2. Sandiganbayan Civil Case No. 24
of any proof to support petitioners claim of falling within the
coverage of Republic Act No. 6426, we likewise find from a 3. Sandiganbayan Civil Case No. 34
reading of Section 2 of the Foreign Currency Deposit Act that
said law is inapplicable to the foreign currency accounts in 4. Tanodbayan (Phil-Asia)
question. Section 2, Republic Act No. 6426 speaks of deposit
with such Philippine banks in good standing, as maybe 5. PCGG I.S. No. 1
designated by the Central Bank for the purpose. The criminal
cases filed against petitioners for violation of Circular No. 960
xxx
involve foreign currency accounts maintained in foreign banks,
not Philippine banks. By invoking the confidentiality guarantees
WHEREAS, following the termination of the United States and
provided for by Swiss banking laws, petitioners admit such
Swiss cases, and also without admitting the merits of their
reports made. The rule is that exceptions are strictly construed
respective claims and counterclaims presently involved in
and apply only so far as their language fairly warrants, with all
uncertain, protracted and expensive litigation, the Republic of
doubts being resolved in favor of the general proviso rather
the Philippines, solely motivated by the desire for the family, and alleged cronies, one of whom was respondent
immediate accomplishment of its recovery mission and Mr. Roberto S. Benedicto.
Benedicto being interested to lead a peaceful and normal
pursuit of his endeavors, the parties have decided to withdraw Nowhere is there a mention of the criminal cases filed against
and/or dismiss their mutual claims and counterclaims under the petitioners for violations of Circular No. 960. Conformably with
cases pending in the Philippines, earlier referred to Article 1370 of the Civil Code, the Agreement relied upon by
(underscoring supplied); petitioners should include only cases specifically mentioned
therein. Applying the parol evidence rule, where the parties
xxx have reduced their agreement into writing, the contents of the
writing constitute the sole repository of the terms of the
II. Lifting of Sequestrations, Extension of Absolute Immunity agreement between the parties. Whatever is not found in the
and Recognition of the Freedom to Travel text of the Agreement should thus be construed as waived and
abandoned. Scrutiny of the Compromise Agreement will reveal
a) The Government hereby lifts the sequestrations over the that it does not include all cases filed by the government
assets listed in Annex C hereof, the same being within the against Benedicto, his family, and associates.
capacity of Mr. Benedicto to acquire from the exercise of his
profession and conduct of business, as well as all the Additionally, the immunity covers only criminal investigation or
haciendas listed in his name in Negros Occidental, all of which prosecution against said persons for acts (or) omissions
were inherited by him or acquired with income from his committed prior to February 25, 1986 that may be alleged to
inheritanceand all the other sequestered assets that belong to have violated any penal laws, including but not limited to
Benedicto and his corporation/nominees which are not listed in Republic Act No. 3019, in relation to the acquisition of any
Annex A as ceded or to be ceded to the Government. asset treated, mentioned, or included in this Agreement. It is
only when the criminal investigation or case involves the
Provided, however, (that) any asset(s) not otherwise settled or acquisition of any ill-gotten wealth treated, mentioned, or
covered by this Compromise Agreement, hereinafter found and included in this Agreement that petitioners may invoke
clearly established with finality by proper competent court as immunity. The record is bereft of any showing that the interest
being held by Mr. Roberto S. Benedicto in trust for the family of earnings from foreign exchange deposits in banks abroad,
the late Ferdinand E. Marcos, shall be returned or surrendered which is the subject matter of the present case, are treated,
to the Government for appropriate custody and disposition. mentioned, or included in the Compromise Agreement. The
phraseology of the grant of absolute immunity in the
Agreement precludes us from applying the same to the criminal
b) The Government hereby extends absolute immunity, as
charges faced by petitioners for violations of Circular No. 960.
authorized under the pertinent provisions of Executive Orders
A contract cannot be construed to include matters distinct from
Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his
those with respect to which the parties intended to contract.
family, officers and employees of his corporations above
mentioned, who are included in past, present and future cases
and investigations of the Philippine Government, such that In sum, we find that no reversible error of law may be attributed
there shall be no criminal investigation or prosecution against to the Court of Appeals in upholding the orders of the trial court
said persons for acts (or) omissions committed prior to denying petitioners Motion to Quash the Informations in
February 25, 1986, that may be alleged to have violated any Criminal Case Nos. 91-101879 to 91-101883, 91-101884 to 91-
laws, including but not limited to Republic Act No. 3019, in 101892, and 92-101959 to 92-101969. In our view, none of the
relation to the acquisition of any asset treated, mentioned or grounds provided for in the Rules of Court upon which
included in this Agreement. petitioners rely, finds application in this case.
xxx One final matter. During the pendency of this petition, counsel
for petitioner Roberto S. Benedicto gave formal notice to the
Court that said petitioner died on May 15, 2000. The death of
In construing contracts, it is important to ascertain the intent of
an accused prior to final judgment terminates his criminal
the parties by looking at the words employed to project their
liability as well as the civil liability based solely thereon.
intention. In the instant case, the parties clearly listed and
limited the applicability of the Compromise Agreement to the
cases listed or identified therein. We have ruled in another WHEREFORE, the instant petition is DISMISSED. The
case involving the same Compromise Agreement that: assailed consolidated Decision of the Court of Appeals dated
May 23, 1996, in CA-G.R. SP No. 35928 and CA-G.R. SP No.
35719, is AFFIRMED WITH MODIFICATION that the charges
[T]he subject matters of the disputed compromise agreement
against deceased petitioner, Roberto S. Benedicto, particularly
are Sandiganbayan Civil Case No. 0009, Civil Case No. 00234,
in Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to
Civil Case No. 0034, the Phil-Asia case before the Tanodbayan
101892, and 92-101959 to 92-101969, pending before the
and PCGG I.S. No. 1. The cases arose from complaints for
Regional Trial Court of Manila, Branch 26, are ordered dropped
reconveyance, reversion, accounting, restitution, and damages
and that any criminal as well as civil liability ex delicto that
against former President Ferdinand E. Marcos, members of his
might be attributable to him in the aforesaid cases are declared
extinguished by reason of his death on May 15, 2000. No The Ruling of the Court of Appeals
pronouncement as to costs. SO ORDERED.
The Court of Appeals sustained the RTC orders denying the
MANUFACTURERS HANOVER TRUST CO. and/or motion for partial summary judgment. The Court of Appeals
CHEMICAL BANK, petitioners, vs. RAFAEL MA. GUERRERO, ruled that the Walden affidavit does not serve as proof of the
respondent.; [G.R. No. 136804. February 19, 2003]; CARPIO, New York law and jurisprudence relied on by the Bank to
J.: support its motion. The Court of Appeals considered the New
York law and jurisprudence as public documents defined in
Section 19, Rule 132 of the Rules on Evidence, as follows:
The Case
The Antecedents (a) The written official acts, or records of the official
acts of the sovereign authority, official bodies
and tribunals, and public officers, whether of
On May 17, 1994, respondent Rafael Ma. Guerrero (Guerrero
the Philippines, or of a foreign country;
for brevity) filed a complaint for damages against petitioner
Manufacturers Hanover Trust Co. and/or Chemical Bank (the
Bank for brevity) with the Regional Trial Court of Manila (RTC x x x.
for brevity). Guerrero sought payment of damages allegedly for
(1) illegally withheld taxes charged against interests on his The Court of Appeals opined that the following procedure
checking account with the Bank; (2) a returned check worth outlined in Section 24, Rule 132 should be followed in proving
US$18,000.00 due to signature verification problems; and (3) foreign law:
unauthorized conversion of his account. Guerrero amended his
complaint on April 18, 1995. SEC. 24. Proof of official record. The record of public
documents referred to in paragraph (a) of Section 19, when
On September 1, 1995, the Bank filed its Answer alleging, inter admissible for any purpose, may be evidenced by an official
alia, that by stipulation Guerreros account is governed by New publication thereof or by a copy attested by the officer having
York law and this law does not permit any of Guerreros claims the legal custody of the record, or by his deputy, and
except actual damages. Subsequently, the Bank filed a Motion accompanied, if the record is not kept in the Philippines, with a
for Partial Summary Judgment seeking the dismissal of certificate that such officer has the custody. If the office in
Guerreros claims for consequential, nominal, temperate, moral which the record is kept is in a foreign country, the certificate
and exemplary damages as well as attorneys fees on the same may be made by a secretary of the embassy or legation,
ground alleged in its Answer. The Bank contended that the trial consul general, consul, vice consul, or consular agent or by
should be limited to the issue of actual damages. Guerrero any officer in the foreign service of the Philippines stationed in
opposed the motion. the foreign country in which the record is kept, and
authenticated by the seal of his office.
The affidavit of Alyssa Walden, a New York attorney,
supported the Banks Motion for Partial Summary Judgment. The Court of Appeals likewise rejected the Banks argument
Alyssa Waldens affidavit (Walden affidavit for brevity) stated that Section 2, Rule 34 of the old Rules of Court allows the
that Guerreros New York bank account stipulated that the Bank to move with the supporting Walden affidavit for partial
governing law is New York law and that this law bars all of summary judgment in its favor. The Court of Appeals clarified
Guerreros claims except actual damages. The Philippine that the Walden affidavit is not the supporting affidavit referred
Consular Office in New York authenticated the Walden to in Section 2, Rule 34 that would prove the lack of genuine
affidavit. issue between the parties. The Court of Appeals concluded
that even if the Walden affidavit is used for purposes of
The RTC denied the Banks Motion for Partial Summary summary judgment, the Bank must still comply with the
Judgment and its motion for reconsideration on March 6, 1996 procedure prescribed by the Rules to prove the foreign law.
and July 17, 1996, respectively. The Bank filed a petition for
certiorari and prohibition with the Court of Appeals assailing the The Issues
RTC Orders. In its Decision dated August 24, 1998, the Court
of Appeals dismissed the petition. On December 14, 1998, the The Bank contends that the Court of Appeals committed
Court of Appeals denied the Banks motion for reconsideration. reversible error in -
Section 2. Summary judgment for defending party. A party Under Section 24 of Rule 132, the record of public documents
against whom a claim, counterclaim, or cross-claim is asserted of a sovereign authority or tribunal may be proved by (1) an
or a declaratory relief is sought may, at any time, move with official publication thereof or (2) a copy attested by the
supporting affidavits for a summary judgment in his favor as to officer having the legal custody thereof. Such official
all or any part thereof. publication or copy must be accompanied, if the record is not
kept in the Philippines, with a certificate that the attesting
A court may grant a summary judgment to settle expeditiously officer has the legal custody thereof. The certificate may be
a case if, on motion of either party, there appears from the issued by any of the authorized Philippine embassy or consular
pleadings, depositions, admissions, and affidavits that no officials stationed in the foreign country in which the record is
important issues of fact are involved, except the amount of kept, and authenticated by the seal of his office. The attestation
damages. In such event, the moving party is entitled to a must state, in substance, that the copy is a correct copy of the
judgment as a matter of law. original, or a specific part thereof, as the case may be, and
must be under the official seal of the attesting officer.
In a motion for summary judgment, the crucial question is: are
the issues raised in the pleadings genuine, sham or fictitious, Certain exceptions to this rule were recognized in Asiavest
as shown by affidavits, depositions or admissions Limited v. Court of Appeals which held that:
accompanying the motion?
x x x:
A genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which Although it is desirable that foreign law be proved in
is fictitious or contrived so as not to constitute a genuine issue accordance with the above rule, however, the Supreme Court
for trial. held in the case of Willamette Iron and Steel Works v. Muzzal,
that Section 41, Rule 123 (Section 25, Rule 132 of the Revised 5. The Uniform Commercial Code (UCC) governs many
Rules of Court) does not exclude the presentation of other aspects of a Banks relationship with its depositors. In this case,
competent evidence to prove the existence of a foreign law. In it governs Guerreros claim arising out of the non-payment of
that case, the Supreme Court considered the testimony under the $18,000 check. Guerrero claims that this was a wrongful
oath of an attorney-at-law of San Francisco, California, who dishonor. However, the UCC states that justifiable refusal to
quoted verbatim a section of California Civil Code and who pay or accept as opposed to dishonor, occurs when a bank
stated that the same was in force at the time the obligations refuses to pay a check for reasons such as a missing
were contracted, as sufficient evidence to establish the indorsement, a missing or illegible signature or a forgery, 3-
existence of said law. Accordingly, in line with this view, the 510, Official Comment 2. .. to the Complaint, MHT returned the
Supreme Court in the Collector of Internal Revenue v. Fisher et check because it had no signature card on . and could not
al., upheld the Tax Court in considering the pertinent law of verify Guerreros signature. In my opinion, consistent with the
California as proved by the respondents witness. In that case, UCC, that is a legitimate and justifiable reason not to pay.
the counsel for respondent testified that as an active member
of the California Bar since 1951, he is familiar with the revenue 6. Consequential damages are not available in the ordinary
and taxation laws of the State of California. When asked by the case of a justifiable refusal to pay. UCC 1-106 provides that
lower court to state the pertinent California law as regards neither consequential or special or punitive damages may be
exemption of intangible personal properties, the witness cited had except as specifically provided in the Act or by other rule of
Article 4, Sec. 13851 (a) & (b) of the California Internal and law. UCC 4-103 further provides that consequential damages
Revenue Code as published in Derrings California Code, a can be recovered only where there is bad faith. This is more
publication of Bancroft-Whitney Co., Inc. And as part of his restrictive than the New York common law, which may allow
testimony, a full quotation of the cited section was offered in consequential damages in a breach of contract case (as does
evidence by respondents. Likewise, in several naturalization the UCC where there is a wrongful dishonor).
cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of 7. Under New York law, requests for lost profits, damage to
citizenship, although not meeting the prescribed rule of reputation and mental distress are considered consequential
practice, may be allowed and used as basis for favorable damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312,
action, if, in the light of all the circumstances, the Court is 319, 540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif
satisfied of the authenticity of the written proof offered. Thus, in Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718,
a number of decisions, mere authentication of the Chinese 374 N.Y.S..2d 868, 869-70 (4th Dept 1975) damage to
Naturalization Law by the Chinese Consulate General of reputation); Dobbs, Law of Remedies 12.4(1) at 63 (emotional
Manila was held to be competent proof of that law. (Emphasis distress).
supplied)
Now, before the Court, petitioner poses the following queries: In our view, neither Article 1144 nor Article 1146 of the Civil
Code is here pertinent. What is applicable is Article 291 of the
1. IS THE PRESENT ACTION ONE Labor Code, viz:
BASED ON CONTRACT WHICH
PRESCRIBES IN TEN YEARS UNDER "Article 291. Money claims. - All money
ARTICLE 1144 OF THE NEW CIVIL CODE claims arising from employee-employer
OR ONE FOR DAMAGES ARISING FROM relations accruing during the effectivity of this
AN INJURY TO THE RIGHTS OF THE Code shall be filed within three (3) years
PLAINTIFF WHICH PRESCRIBES IN FOUR from the time the cause of action accrued;
YEARS UNDER ARTICLE 1146 OF THE otherwise they shall be forever barred.
NEW CIVIL CODE?
x x x" Misact
2. CAN AN EMPLOYEE WITH A
FIXED PERIOD OF EMPLOYMENT BE What rules on prescription should apply in cases like this one
RETRENCHED BY HIS EMPLOYER? has long been decided by this Court. In illegal dismissal, it is
settled, that the ten-year prescriptive period fixed in Article
3. CAN THERE BE VALID 1144 of the Civil Code may not be invoked by petitioners, for
RETRENCHMENT IF AN EMPLOYER the Civil Code is a law of general application, while the
prescriptive period fixed in Article 292 of the Labor Code [now leaves the parties in exactly the same position as though no
Article 291] is a SPECIAL LAW applicable to claims arising action had been commenced at all."
from employee-employer relations.
Now, as to whether petitioner's separation from the company
More recently in De Guzman. vs. Court of Appeals, where the due to retrenchment was valid, the appellate court found that
money claim was based on a written contract, the Collective the employment contract of petitioner allowed for pre-
Bargaining Agreement, the Court held: termination of employment. We agree with the Court of
Appeals when it said, Sdjad
"...The language of Art. 291 of the Labor
Code does not limit its application only to "It is a settled rule that contracts have the
'money claims specifically recoverable under force of law between the parties. From the
said Code' but covers all money claims moment the same is perfected, the parties
arising from an employee-employer are bound not only to the fulfillment of what
relations" (Citing Cadalin v. POEA has been expressly stipulated but also to all
Administrator, 238 SCRA 721, 764 [1994]; consequences which, according to their
and Uy v. National Labor Relations nature, may be in keeping with good faith,
Commission, 261 SCRA 505, 515 [1996]). ... usage and law. Thus, when plaintiff-appellee
accepted the offer of employment, he was
It should be noted further that Article 291 of bound by the terms and conditions set forth
the Labor Code is a special law applicable to in the contract, among others, the right of
money claims arising from employer- mutual termination by giving three months
employee relations; thus, it necessarily written notice or by payment of three months
prevails over Article 1144 of the Civil Code, a salary. Such provision is clear and readily
general law. Basic is the rule in statutory understandable, hence, there is no room for
construction that 'where two statutes are of interpretation."
equal theoretical application to a particular
case, the one designed therefore should xxx
prevail.' (Citing Leveriza v. Intermediate
Appellate Court, 157 SCRA 282, 294.) Further, plaintiff-appellee's contention that he
Generalia specialibus non derogant." is not bound by the provisions of the
Agreement, as he is not a signatory thereto,
In the light of Article 291, aforecited, we agree with the deserves no merit. It must be noted that
appellate court's conclusion that petitioner's action for when plaintiff-appellee's employment was
damages due to illegal termination filed again on January 8, confirmed, he applied for membership with
1987 or more than four (4) years after the effective date of his the Singapore Airlines Limited (Pilots)
dismissal on November 1, 1982 has already prescribed. Association, the signatory to the
aforementioned Agreement. As such,
"In the instant case, the action for damages plaintiff-appellee is estopped from
due to illegal termination was filed by questioning the legality of the said
plaintiff-appellee only on January 8, 1987 or agreement or any proviso contained therein."
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982. Moreover, the records of the present case clearly show that
Clearly, plaintiff-appellee's action has already respondent court's decision is amply supported by evidence
prescribed." and it did not err in its findings, including the reason for the
retrenchment:
We base our conclusion not on Article 1144 of the Civil Code
but on Article 291 of the Labor Code, which sets the "When defendant-appellant was faced with
prescription period at three (3) years and which governs under the world-wide recession of the airline
this jurisdiction. industry resulting in a slow down in the
company's growth particularly in the regional
Petitioner claims that the running of the prescriptive period was operation (Asian Area) where the Airbus 300
tolled when he filed his complaint for illegal dismissal before operates. It had no choice but to adopt cost
the Labor Arbiter of the National Labor Relations Commission. cutting measures, such as cutting down
However, this claim deserves scant consideration; it has no services, number of frequencies of flights,
legal leg to stand on. In Olympia International, Inc. vs. Court of and reduction of the number of flying points
Appeals, we held that "although the commencement of a civil for the A-300 fleet (t.s.n., July 6, 1988, pp.
action stops the running of the statute of prescription or 17-18). As a result, defendant-appellant had
limitations, its dismissal or voluntary abandonment by plaintiff to layoff A-300 pilots, including plaintiff-
appellee, which it found to be in excess of Overseas Construction Board (POCB), assigned and
what is reasonably needed." transferred all its rights and interests under the joint venture
agreement to VPECI, a construction and engineering firm duly
All these considered, we find sufficient factual and legal basis registered with the POCB. However, on 2 May 1981, 3-Plex
to conclude that petitioner's termination from employment was and VPECI entered into an agreement that the execution of the
for an authorized cause, for which he was given ample notice Project would be under their joint management.
and opportunity to be heard, by respondent company. No error
nor grave abuse of discretion, therefore, could be attributed to The SOB required the contractors to submit (1) a performance
respondent appellate court. Sppedsc bond of ID271,808/610 representing 5% of the total contract
price and (2) an advance payment bond of ID541,608/901
ACCORDINGLY, the instant petition is DISMISSED. The representing 10% of the advance payment to be released upon
decision of the Court of Appeals in C.A. CV No. 34476 is signing of the contract. To comply with these requirements,
AFFIRMED. respondents 3-Plex and VPECI applied for the issuance of a
guarantee with petitioner Philguarantee, a government financial
SO ORDERED. institution empowered to issue guarantees for qualified Filipino
contractors to secure the performance of approved service
contracts abroad.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner, vs. V.P. EUSEBIO
Petitioner Philguarantee approved respondents application.
CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.; Subsequently, letters of guarantee were issued by
VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO
Philguarantee to the Rafidain Bank of Baghdad covering 100%
E. SANTOS; ILUMINADA SANTOS; AND FIRST of the performance and advance payment bonds, but they
INTEGRATED BONDING AND INSURANCE COMPANY, were not accepted by SOB. What SOB required was a letter-
INC., ; [G.R. No. 140047. July 13, 2004]; DAVIDE, JR., C.J.:
guarantee from Rafidain Bank, the government bank of Iraq.
Rafidain Bank then issued a performance bond in favor of SOB
This case is an offshoot of a service contract entered into by a on the condition that another foreign bank, not Philguarantee,
Filipino construction firm with the Iraqi Government for the would issue a counter-guarantee to cover its exposure. Al Ahli
construction of the Institute of Physical Therapy-Medical Bank of Kuwait was, therefore, engaged to provide a counter-
Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq guarantee to Rafidain Bank, but it required a similar counter-
war was ongoing. guarantee in its favor from the petitioner. Thus, three layers of
guarantees had to be arranged.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch Upon the application of respondents 3-Plex and VPECI,
58, petitioner Philippine Export and Foreign Loan Guarantee petitioner Philguarantee issued in favor of Al Ahli Bank of
Corporation (hereinafter Philguarantee) sought reimbursement Kuwait Letter of Guarantee No. 81-194-F (Performance Bond
from the respondents of the sum of money it paid to Al Ahli Guarantee) in the amount of ID271,808/610 and Letter of
Bank of Kuwait pursuant to a guarantee it issued for Guarantee No. 81-195-F (Advance Payment Guarantee) in the
respondent V.P. Eusebio Construction, Inc. (VPECI). amount of ID541,608/901, both for a term of eighteen months
from 25 May 1981. These letters of guarantee were secured by
The factual and procedural antecedents in this case are as (1) a Deed of Undertaking executed by respondents VPECI,
follows: Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex,
and Spouses Eduardo E. Santos and Iluminada Santos; and
On 8 November 1980, the State Organization of Buildings (2) a surety bond issued by respondent First Integrated
(SOB), Ministry of Housing and Construction, Baghdad, Iraq, Bonding and Insurance Company, Inc. (FIBICI). The Surety
awarded the construction of the Institute of Physical Bond was later amended on 23 June 1981 to increase the
TherapyMedical Rehabilitation Center, Phase II, in Baghdad, amount of coverage from P6.4 million to P6.967 million and to
Iraq, (hereinafter the Project) to Ajyal Trading and Contracting change the bank in whose favor the petitioners guarantee was
Company (hereinafter Ajyal), a firm duly licensed with the issued, from Rafidain Bank to Al Ahli Bank of Kuwait.
Kuwait Chamber of Commerce for a total contract price of
ID5,416,089/046 (or about US$18,739,668). On 11 June 1981, SOB and the joint venture VPECI and Ajyal
executed the service contract for the construction of the
On 7 March 1981, respondent spouses Eduardo and Iluminada Institute of Physical Therapy Medical Rehabilitation Center,
Santos, in behalf of respondent 3-Plex International, Inc. Phase II, in Baghdad, Iraq, wherein the joint venture contractor
(hereinafter 3-Plex), a local contractor engaged in construction undertook to complete the Project within a period of 547 days
business, entered into a joint venture agreement with Ajyal or 18 months. Under the Contract, the Joint Venture would
wherein the former undertook the execution of the entire supply manpower and materials, and SOB would refund to the
Project, while the latter would be entitled to a commission of former 25% of the project cost in Iraqi Dinar and the 75% in US
4% of the contract price. Later, or on 8 April 1981, respondent dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars.
3-Plex, not being accredited by or registered with the Philippine
The construction, which was supposed to start on 2 June 1981, Both petitioner Philguarantee and respondent VPECI sought
commenced only on the last week of August 1981. Because of the assistance of some government agencies of the
this delay and the slow progress of the construction work due Philippines. On 10 August 1987, VPECI requested the Central
to some setbacks and difficulties, the Project was not Bank to hold in abeyance the payment by the petitioner to
completed on 15 November 1982 as scheduled. But in October allow the diplomatic machinery to take its course, for otherwise,
1982, upon foreseeing the impossibility of meeting the deadline the Philippine government , through the Philguarantee and the
and upon the request of Al Ahli Bank, the joint venture Central Bank, would become instruments of the Iraqi
contractor worked for the renewal or extension of the Government in consummating a clear act of injustice and
Performance Bond and Advance Payment Guarantee. inequity committed against a Filipino contractor.
Petitioners Letters of Guarantee Nos. 81-194-F (Performance
Bond) and 81-195-F (Advance Payment Bond) with expiry date On 27 August 1987, the Central Bank authorized the
of 25 November 1982 were then renewed or extended to 9 remittance for its account of the amount of US$876,564
February 1983 and 9 March 1983, respectively. The surety (equivalent to ID271, 808/610) to Al Ahli Bank representing full
bond was also extended for another period of one year, from payment of the performance counter-guarantee for VPECIs
12 May 1982 to 12 May 1983. The Performance Bond was project in Iraq.
further extended twelve times with validity of up to 8 December
1986, while the Advance Payment Guarantee was extended On 6 November 1987, Philguarantee informed VPECI that it
three times more up to 24 May 1984 when the latter was would remit US$876,564 to Al Ahli Bank, and reiterated the
cancelled after full refund or reimbursement by the joint venture joint and solidary obligation of the respondents to reimburse
contractor. The surety bond was likewise extended to 8 May the petitioner for the advances made on its counter-guarantee.
1987.
In order that the debtor may be in default it is necessary that The Iraqi Government does not have the
the following requisites be present: (1) that the obligation be foreign exchange to fulfill its contractual
demandable and already liquidated; (2) that the debtor delays obligations of paying 75% of progress
performance; and (3) that the creditor requires the performance billings in US dollars.
because it must appear that the tolerance or benevolence of
the creditor must have ended. It could also be argued that the amount of
ID281,414/066 retained by SOB from the
As stated earlier, SOB cannot yet demand complete proposed project is more than the amount
performance from VPECI because it has not yet itself of the outstanding counterguarantee.
performed its obligation in a proper manner, particularly the
payment of the 75% of the cost of the Project in US Dollars. In a nutshell, since the petitioner was aware of the contractors
The VPECI cannot yet be said to have incurred in delay. Even outstanding receivables from SOB, it should have set up
assuming that there was delay and that the delay was compensation as was proposed in its project situationer.
attributable to VPECI, still the effects of that delay ceased upon
the renunciation by the creditor, SOB, which could be implied
Moreover, the petitioner was very much aware of the
when the latter granted several extensions of time to the
predicament of the respondents. In fact, in its 13 May 1987
former. Besides, no demand has yet been made by SOB
letter to the OMEAA, DFA, Manila, it stated:
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 VPECI also maintains that the delay in the completion of the
demands judicially or extra-judicially the performance of the project was mainly due to SOBs violation of contract terms and
obligation. Without such demand, the effects of default will not as such, call on the guarantee has no basis.
arise.
While PHILGUARANTEE is prepared to honor its commitment
Moreover, the petitioner as a guarantor is entitled to the benefit under the guarantee, PHILGUARANTEE does not want to be
of excussion, that is, it cannot be compelled to pay the creditor an instrument in any case of inequity committed against a
SOB unless the property of the debtor VPECI has been Filipino contractor. It is for this reason that we are constrained
exhausted and all legal remedies against the said debtor have to seek your assistance not only in ascertaining the veracity of
been resorted to by the creditor. It could also set up Al Ahli Banks claim that it has paid Rafidain Bank but possibly
compensation as regards what the creditor SOB may owe the averting such an event. As any payment effected by the banks
principal debtor VPECI. In this case, however, the petitioner will complicate matters, we cannot help underscore the
has clearly waived these rights and remedies by making the urgency of VPECIs bid for government intervention for the
payment of an obligation that was yet to be shown to be amicable termination of the contract and release of the
rightfully due the creditor and demandable of the principal performance guarantee.
debtor.
But surprisingly, though fully cognizant of SOBs violations of
As found by the Court of Appeals, the petitioner fully knew that the service contract and VPECIs outstanding receivables from
the joint venture contractor had collectibles from SOB which SOB, as well as the situation obtaining in the Project site
could be set off with the amount covered by the performance compounded by the Iran-Iraq war, the petitioner opted to pay
guarantee. In February 1987, the OMEAA transmitted to the the second layer guarantor not only the full amount of the
petitioner a copy of a telex dated 10 February 1987 of the performance bond counter-guarantee but also interests and
Philippine Ambassador in Baghdad, Iraq, informing it of the penalty charges.
note verbale sent by the Iraqi Ministry of Foreign Affairs stating
that the past due obligations of the joint venture contractor from This brings us to the next question: May the petitioner as a
the petitioner would be deducted from the dues of the two guarantor secure reimbursement from the respondents for
contractors. what it has paid under Letter of Guarantee No. 81-194-F?
Also, in the project situationer attached to the letter to the As a rule, a guarantor who pays for a debtor should be
OMEAA dated 26 March 1987, the petitioner raised as among indemnified by the latter and would be legally subrogated to the
the arguments to be presented in support of the cancellation of rights which the creditor has against the debtor. However, a
the counter-guarantee the fact that the amount of person who makes payment without the knowledge or against
ID281,414/066 retained by SOB from the Project was more the will of the debtor has the right to recover only insofar as the
payment has been beneficial to the debtor. If the obligation was
subject to defenses on the part of the debtor, the same the National Labor Relations Commission (NLRC) (Third
defenses which could have been set up against the creditor Division) in POEA ADJ (L) 94-06-2194, ordering Expertise
can be set up against the paying guarantor. Search International (ESI), EDI-Staffbuilders International, Inc.
(EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and
From the findings of the Court of Appeals and the trial court, it severally to pay Eleazar S. Gran (Gran) the amount of USD
is clear that the payment made by the petitioner guarantor did 16,150.00 as unpaid salaries.
not in any way benefit the principal debtor, given the project
status and the conditions obtaining at the Project site at that The Facts
time. Moreover, the respondent contractor was found to have
valid defenses against SOB, which are fully supported by Petitioner EDI is a corporation engaged in recruitment and
evidence and which have been meritoriously set up against the placement of Overseas Filipino Workers (OFWs).5 ESI is
paying guarantor, the petitioner in this case. And even if the another recruitment agency which collaborated with EDI to
deed of undertaking and the surety bond secured petitioners process the documentation and deployment of private
guaranty, the petitioner is precluded from enforcing the same respondent to Saudi Arabia.
by reason of the petitioners undue payment on the guaranty.
Rights under the deed of undertaking and the surety bond do Private respondent Gran was an OFW recruited by EDI, and
not arise because these contracts depend on the validity of the deployed by ESI to work for OAB, in Riyadh, Kingdom of Saudi
enforcement of the guaranty. Arabia.6
The petitioner guarantor should have waited for the natural It appears that OAB asked EDI through its October 3, 1993
course of guaranty: the debtor VPECI should have, in the first letter for curricula vitae of qualified applicants for the position of
place, defaulted in its obligation and that the creditor SOB "Computer Specialist."7 In a facsimile transmission dated
should have first made a demand from the principal debtor. It is November 29, 1993, OAB informed EDI that, from the
only when the debtor does not or cannot pay, in whole or in applicants' curricula vitae submitted to it for evaluation, it
part, that the guarantor should pay. When the petitioner selected Gran for the position of "Computer Specialist." The
guarantor in this case paid against the will of the debtor VPECI, faxed letter also stated that if Gran agrees to the terms and
the debtor VPECI may set up against it defenses available conditions of employment contained in it, one of which was a
against the creditor SOB at the time of payment. This is the monthly salary of SR (Saudi Riyal) 2,250.00 (USD 600.00), EDI
hard lesson that the petitioner must learn. may arrange for Gran's immediate dispatch.8
As the government arm in pursuing its objective of providing After accepting OAB's offer of employment, Gran signed an
the necessary support and assistance in order to enable employment contract9 that granted him a monthly salary of
[Filipino exporters and contractors to operate viably under the USD 850.00 for a period of two years. Gran was then deployed
prevailing economic and business conditions, the petitioner to Riyadh, Kingdom of Saudi Arabia on February 7, 1994.
should have exercised prudence and caution under the
circumstances. As aptly put by the Court of Appeals, it would
Upon arrival in Riyadh, Gran questioned the discrepancy in his
be the height of inequity to allow the petitioner to pass on its
monthly salary—his employment contract stated USD 850.00;
losses to the Filipino contractor VPECI which had sternly
while his Philippine Overseas Employment Agency (POEA)
warned against paying the Al Ahli Bank and constantly
Information Sheet indicated USD 600.00 only. However,
apprised it of the developments in the Project implementation.
through the assistance of the EDI office in Riyadh, OAB agreed
to pay Gran USD 850.00 a month.10
WHEREFORE, the petition for review on certiorari is hereby
DENIED for lack of merit, and the decision of the Court of
After Gran had been working for about five months for OAB,
appeals in CA-G.R. CV No. 39302 is AFFIRMED.
his employment was terminated through OAB's July 9, 1994
letter,11 on the following grounds:
No pronouncement as to costs. SO ORDERED.
This Petition for Review on Certiorari1 seeks to set aside the 3. Insubordination or disobedience to Top
October 18, 2000 Decision2 of the Court of Appeals (CA) in Management Order and/or instructions (non-submittal
CA-G.R. SP No. 56120 which affirmed the January 15, 1999 of daily activity reports despite several instructions).
Decision3 and September 30, 1999 Resolution4 rendered by
On July 11, 1994, Gran received from OAB the total amount of prohibited transaction under Article 34 (b) of the Labor Code.
SR 2,948.00 representing his final pay, and on the same day, This scheme constituted misrepresentation through the
he executed a Declaration13 releasing OAB from any financial conspiracy between EDI and ESI in misleading Gran and even
obligation or otherwise, towards him. POEA of the actual terms and conditions of the OFW's
employment. In addition, it was found that Gran did not commit
After his arrival in the Philippines, Gran instituted a complaint, any act that constituted a legal ground for dismissal. The
on July 21, 1994, against ESI/EDI, OAB, Country Bankers alleged non-compliance with contractual stipulations relating to
Insurance Corporation, and Western Guaranty Corporation Gran's salary and contract duration, and the absence of pre-
with the NLRC, National Capital Region, Quezon City, which qualification requirements cannot be attributed to Gran but to
was docketed as POEA ADJ (L) 94-06-2194 for underpayment EDI, which dealt directly with OAB. In addition, the charge of
of wages/salaries and illegal dismissal. insubordination was not substantiated, and Gran was not even
afforded the required notice and investigation on his alleged
The Ruling of the Labor Arbiter offenses.
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Thus, the NLRC reversed the Labor Arbiter's Decision and
Caday, to whom Gran's case was assigned, ruled that there rendered a new one, the dispositive portion of which reads:
was neither underpayment nor illegal dismissal.
WHEREFORE, the assailed decision is SET ASIDE.
The Labor Arbiter reasoned that there was no underpayment of Respondents Expertise Search International, Inc., EDI
salaries since according to the POEA-Overseas Contract Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr
Worker (OCW) Information Sheet, Gran's monthly salary was Est. (OAB) are hereby ordered jointly and severally
USD 600.00, and in his Confirmation of Appointment as liable to pay the complainant Eleazar Gran the
Computer Specialist, his monthly basic salary was fixed at SR Philippine peso equivalent at the time of actual
2,500.00, which was equivalent to USD 600.00. payment of SIXTEEN THOUSAND ONE HUNDRED
FIFTY US DOLLARS (US$16,150.00) representing
his salaries for the unexpired portion of his contract.
Arbiter Caday also cited the Declaration executed by Gran, to
justify that Gran had no claim for unpaid salaries or wages
against OAB. SO ORDERED.16
With regard to the issue of illegal dismissal, the Labor Arbiter Gran then filed a Motion for Execution of Judgment 17 on March
found that Gran failed to refute EDI's allegations; namely, (1) 29, 1999 with the NLRC and petitioner receiving a copy of this
that Gran did not submit a single activity report of his daily motion on the same date.18
activity as dictated by company policy; (2) that he was not
qualified for the job as computer specialist due to his To prevent the execution, petitioner filed an Opposition19 to
insufficient knowledge in programming and lack of knowledge Gran's motion arguing that the Writ of Execution cannot issue
in ACAD system; (3) that Gran refused to follow management's because it was not notified of the appellate proceedings before
instruction for him to gain more knowledge of the job to prove the NLRC and was not given a copy of the memorandum of
his worth as computer specialist; (4) that Gran's employment appeal nor any opportunity to participate in the appeal.
contract had never been substituted; (5) and that Gran was
paid a monthly salary of USD 850.00, and USD 350.00 monthly Seeing that the NLRC did not act on Gran's motion after EDI
as food allowance. had filed its Opposition, petitioner filed, on August 26, 1999, a
Motion for Reconsideration of the NLRC Decision after
Accordingly, the Labor Arbiter decided that Gran was validly receiving a copy of the Decision on August 16, 1999.20
dismissed from his work due to insubordination, disobedience,
and his failure to submit daily activity reports. The NLRC then issued a Resolution21 denying petitioner's
Motion for Reconsideration, ratiocinating that the issues and
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's arguments raised in the motion "had already been amply
complaint for lack of merit. discussed, considered, and ruled upon" in the Decision, and
that there was "no cogent reason or patent or palpable error
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the that warrant any disturbance thereof."
NLRC, Third Division. However, it appears from the records
that Gran failed to furnish EDI with a copy of his Appeal Unconvinced of the NLRC's reasoning, EDI filed a Petition for
Memorandum. Certiorari before the CA. Petitioner claimed in its petition that
the NLRC committed grave abuse of discretion in giving due
The Ruling of the NLRC course to the appeal despite Gran's failure to perfect the
appeal.
On the procedural issue, the appellate court held that "Gran's II. WHETHER PETITIONER EDI HAS ESTABLISHED
failure to furnish a copy of his appeal memorandum [to EDI BY WAY OF SUBSTANTIAL EVIDENCE THAT
was] a mere formal lapse, an excusable neglect and not a GRAN'S TERMINATION WAS JUSTIFIABLE BY
jurisdictional defect which would justify the dismissal of his REASON OF INCOMPETENCE. COROLLARY
appeal."22 The court also held that petitioner EDI failed to prove HERETO, WHETHER THE PRIETO VS. NLRC
that private respondent was terminated for a valid cause and in RULING, AS APPLIED BY THE COURT OF
accordance with due process; and that Gran's Declaration APPEALS, IS APPLICABLE IN THE INSTANT CASE.
releasing OAB from any monetary obligation had no force and
effect. The appellate court ratiocinated that EDI had the burden III. WHETHER PETITIONER HAS ESTABLISHED BY
of proving Gran's incompetence; however, other than the WAY OF SUBSTANTIAL EVIDENCE THAT GRAN'S
termination letter, no evidence was presented to show how and TERMINATION WAS JUSTIFIABLE BY REASON OF
why Gran was considered to be incompetent. The court held INSUBORDINATION AND DISOBEDIENCE.
that since the law requires the recruitment agencies to subject
OFWs to trade tests before deployment, Gran must have been IV. WHETHER GRAN WAS AFFORDED DUE
competent and qualified; otherwise, he would not have been PROCESS PRIOR TO TERMINATION.
hired and deployed abroad.
As a result of these findings, on October 18, 2000, the In Estrada v. National Labor Relations Commission,24 this
appellate court denied the petition to set aside the NLRC Court set aside the order of the NLRC which dismissed an
Decision. appeal on the sole ground that the appellant did not furnish the
appellee a memorandum of appeal contrary to the
Hence, this instant petition is before the Court. requirements of Article 223 of the New Labor Code and
Section 9, Rule XIII of its Implementing Rules and Regulations.
The Issues
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the
Petitioner raises the following issues for our consideration: order of dismissal of an appeal to the NLRC based on the
ground that "there is no showing whatsoever that a copy of the
appeal was served by the appellant on the appellee"25 was
I. WHETHER THE FAILURE OF GRAN TO FURNISH
annulled. The Court ratiocinated as follows:
A COPY OF HIS APPEAL MEMORANDUM TO
PETITIONER EDI WOULD CONSTITUTE A
JURISDICTIONAL DEFECT AND A DEPRIVATION The failure to give a copy of the appeal to the adverse
OF PETITIONER EDI'S RIGHT TO DUE PROCESS party was a mere formal lapse, an excusable neglect.
Time and again We have acted on petitions to review
decisions of the Court of Appeals even in the absence postmaster. However, the NLRC Rules do not state what would
of proof of service of a copy thereof to the Court of constitute proper proof of service.
Appeals as required by Section 1 of Rule 45, Rules of
Court. We act on the petitions and simply require Sec. 13, Rule 13 of the Rules of Court, provides for proofs of
the petitioners to comply with the rule.26 service:
(Emphasis supplied.)
Section 13. Proof of service.—Proof of personal
The J.D. Magpayo ruling was reiterated in Carnation service shall consist of a written admission of the
Philippines Employees Labor Union-FFW v. National Labor party served or the official return of the server, or the
Relations Commission,27 Pagdonsalan v. NLRC,28 and in affidavit of the party serving, containing a full
Sunrise Manning Agency, Inc. v. NLRC.29 statement of the date, place and manner of service. If
the service is by ordinary mail, proof thereof shall
Thus, the doctrine that evolved from these cases is that failure consist of an affidavit of the person mailing of facts
to furnish the adverse party with a copy of the appeal is treated showing compliance with section 7 of this Rule. If
only as a formal lapse, an excusable neglect, and hence, not a service is made by registered mail, proof shall be
jurisdictional defect. Accordingly, in such a situation, the appeal made by such affidavit and registry receipt issued
should not be dismissed; however, it should not be given due by the mailing office. The registry return card
course either. As enunciated in J.D. Magpayo, the duty that is shall be filed immediately upon its receipt by the
imposed on the NLRC, in such a case, is to require the sender, or in lieu thereof the unclaimed letter
appellant to comply with the rule that the opposing party together with the certified or sworn copy of the
should be provided with a copy of the appeal notice given by the postmaster to the addressee
memorandum. (emphasis supplied).
While Gran's failure to furnish EDI with a copy of the Appeal Based on the foregoing provision, it is obvious that the list
Memorandum is excusable, the abject failure of the NLRC to submitted by Gran is not conclusive proof that he had served a
order Gran to furnish EDI with the Appeal Memorandum copy of his appeal memorandum to EDI, nor is it conclusive
constitutes grave abuse of discretion. proof that EDI received its copy of the Appeal Memorandum.
He should have submitted an affidavit proving that he mailed
The records reveal that the NLRC discovered that Gran failed the Appeal Memorandum together with the registry receipt
to furnish EDI a copy of the Appeal Memorandum. The NLRC issued by the post office; afterwards, Gran should have
then ordered Gran to present proof of service. In compliance immediately filed the registry return card.
with the order, Gran submitted a copy of Camp Crame Post
Office's list of mail/parcels sent on April 7, 1998.30 The post Hence, after seeing that Gran failed to attach the proof of
office's list shows that private respondent Gran sent two pieces service, the NLRC should not have simply accepted the post
of mail on the same date: one addressed to a certain Dan O. office's list of mail and parcels sent; but it should have
de Guzman of Legaspi Village, Makati; and the other appears required Gran to properly furnish the opposing parties
to be addressed to Neil B. Garcia (or Gran), 31 of Ermita, with copies of his Appeal Memorandum as prescribed in
Manila—both of whom are not connected with petitioner. J.D. Magpayo and the other cases. The NLRC should not
have proceeded with the adjudication of the case, as this
This mailing list, however, is not a conclusive proof that EDI constitutes grave abuse of discretion.
indeed received a copy of the Appeal Memorandum.
The glaring failure of NLRC to ensure that Gran should have
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the furnished petitioner EDI a copy of the Appeal Memorandum
proof and completeness of service in proceedings before the before rendering judgment reversing the dismissal of Gran's
NLRC: complaint constitutes an evasion of the pertinent NLRC Rules
and established jurisprudence. Worse, this failure deprived EDI
Section 5.32 Proof and completeness of service.—The of procedural due process guaranteed by the Constitution
return is prima facie proof of the facts indicated which can serve as basis for the nullification of proceedings in
therein. Service by registered mail is complete the appeal before the NLRC. One can only surmise the shock
upon receipt by the addressee or his agent; but if and dismay that OAB, EDI, and ESI experienced when they
the addressee fails to claim his mail from the post thought that the dismissal of Gran's complaint became final,
office within five (5) days from the date of first notice only to receive a copy of Gran's Motion for Execution of
of the postmaster, service shall take effect after such Judgment which also informed them that Gran had obtained a
time. (Emphasis supplied.) favorable NLRC Decision. This is not level playing field and
absolutely unfair and discriminatory against the employer and
the job recruiters. The rights of the employers to procedural
Hence, if the service is done through registered mail, it is only
due process cannot be cavalierly disregarded for they too have
deemed complete when the addressee or his agent received
rights assured under the Constitution.
the mail or after five (5) days from the date of first notice of the
However, instead of annulling the dispositions of the NLRC and ART. 277. MISCELLANEOUS PROVISIONS39
remanding the case for further proceedings we will resolve the
petition based on the records before us to avoid a protracted (b) Subject to the constitutional right of workers to
litigation.33 security of tenure and their right to be protected
against dismissal except for a just and authorized
The second and third issues have a common matter—whether cause and without prejudice to the requirement of
there was just cause for Gran's dismissal—hence, they will be notice under Article 283 of this Code, the employer
discussed jointly. shall furnish the worker whose employment is sought
to be terminated a written notice containing a
Second and Third Issues: Whether Gran's dismissal is statement of the causes for termination and shall
justifiable by reason of incompetence, insubordination, afford the latter ample opportunity to be heard and to
and disobedience defend himself with the assistance of his
representative if he so desires in accordance with
In cases involving OFWs, the rights and obligations among and company rules and regulations promulgated pursuant
between the OFW, the local recruiter/agent, and the foreign to guidelines set by the Department of Labor and
employer/principal are governed by the employment contract. Employment. Any decision taken by the employer
A contract freely entered into is considered law between the shall be without prejudice to the right of the workers to
parties; and hence, should be respected. In formulating the contest the validity or legality of his dismissal by filing
contract, the parties may establish such stipulations, clauses, a complaint with the regional branch of the National
terms and conditions as they may deem convenient, provided Labor Relations Commission. The burden of proving
they are not contrary to law, morals, good customs, public that the termination was for a valid or authorized
order, or public policy.34 cause shall rest on the employer. x x x
In the present case, the employment contract signed by Gran In many cases, it has been held that in termination disputes or
specifically states that Saudi Labor Laws will govern matters illegal dismissal cases, the employer has the burden of proving
not provided for in the contract (e.g. specific causes for that the dismissal is for just and valid causes; and failure to do
termination, termination procedures, etc.). Being the law so would necessarily mean that the dismissal was not justified
intended by the parties (lex loci intentiones) to apply to the and therefore illegal.40 Taking into account the character of the
contract, Saudi Labor Laws should govern all matters relating charges and the penalty meted to an employee, the employer
to the termination of the employment of Gran. is bound to adduce clear, accurate, consistent, and convincing
evidence to prove that the dismissal is valid and legal.41 This is
consistent with the principle of security of tenure as guaranteed
In international law, the party who wants to have a foreign law
by the Constitution and reinforced by Article 277 (b) of the
applied to a dispute or case has the burden of proving the
Labor Code of the Philippines.42
foreign law. The foreign law is treated as a question of fact to
be properly pleaded and proved as the judge or labor arbiter
cannot take judicial notice of a foreign law. He is presumed to In the instant case, petitioner claims that private respondent
know only domestic or forum law.35 Gran was validly dismissed for just cause, due to
incompetence and insubordination or disobedience. To prove
its allegations, EDI submitted two letters as evidence. The first
Unfortunately for petitioner, it did not prove the pertinent Saudi
is the July 9, 1994 termination letter,43 addressed to Gran, from
laws on the matter; thus, the International Law doctrine of
Andrea E. Nicolaou, Managing Director of OAB. The second is
presumed-identity approach or processual presumption comes
an unsigned April 11, 1995 letter44 from OAB addressed to EDI
into play.36 Where a foreign law is not pleaded or, even if
and ESI, which outlined the reasons why OAB had terminated
pleaded, is not proved, the presumption is that foreign law is
Gran's employment.
the same as ours.37 Thus, we apply Philippine labor laws in
determining the issues presented before us.
Petitioner claims that Gran was incompetent for the Computer
Specialist position because he had "insufficient knowledge in
Petitioner EDI claims that it had proven that Gran was legally
programming and zero knowledge of [the] ACAD system." 45
dismissed due to incompetence and insubordination or
Petitioner also claims that Gran was justifiably dismissed due
disobedience.
to insubordination or disobedience because he continually
failed to submit the required "Daily Activity Reports."46
This claim has no merit. However, other than the abovementioned letters, no other
evidence was presented to show how and why Gran was
In illegal dismissal cases, it has been established by Philippine considered incompetent, insubordinate, or disobedient.
law and jurisprudence that the employer should prove that the Petitioner EDI had clearly failed to overcome the burden of
dismissal of employees or personnel is legal and just. proving that Gran was validly dismissed.
Section 33 of Article 277 of the Labor Code38 states that: Petitioner's imputation of incompetence on private respondent
due to his "insufficient knowledge in programming and zero
knowledge of the ACAD system" based only on the above In Prieto, this Court ruled that "[i]t is presumed that before their
mentioned letters, without any other evidence, cannot be given deployment, the petitioners were subjected to trade tests
credence. required by law to be conducted by the recruiting agency to
insure employment of only technically qualified workers for the
An allegation of incompetence should have a factual foreign principal."50 The CA, using the ruling in the said case,
foundation. Incompetence may be shown by weighing it ruled that Gran must have passed the test; otherwise, he would
against a standard, benchmark, or criterion. However, EDI not have been hired. Therefore, EDI was at fault when it
failed to establish any such bases to show how petitioner found deployed Gran who was allegedly "incompetent" for the job.
Gran incompetent.
According to petitioner, the Prieto ruling is not applicable
In addition, the elements that must concur for the charge of because in the case at hand, Gran misrepresented himself in
insubordination or willful disobedience to prosper were not his curriculum vitae as a Computer Specialist; thus, he was not
present. qualified for the job for which he was hired.
For willful disobedience to be a valid cause for The CA is correct in applying Prieto. The purpose of the
dismissal, the following twin elements must concur: required trade test is to weed out incompetent applicants from
(1) the employee's assailed conduct must have been the pool of available workers. It is supposed to reveal
willful, that is, characterized by a wrongful and applicants with false educational backgrounds, and expose
perverse attitude; and (2) the order violated must bogus qualifications. Since EDI deployed Gran to Riyadh, it
have been reasonable, lawful, made known to the can be presumed that Gran had passed the required trade test
employee and must pertain to the duties which he had and that Gran is qualified for the job. Even if there was no
been engaged to discharge.47 objective trade test done by EDI, it was still EDI's responsibility
to subject Gran to a trade test; and its failure to do so only
EDI failed to discharge the burden of proving Gran's weakened its position but should not in any way prejudice
insubordination or willful disobedience. As indicated by the Gran. In any case, the issue is rendered moot and academic
second requirement provided for in Micro Sales Operation because Gran's incompetency is unproved.
Network, in order to justify willful disobedience, we must
determine whether the order violated by the employee is Fourth Issue: Gran was not Afforded Due Process
reasonable, lawful, made known to the employee, and pertains
to the duties which he had been engaged to discharge. In the As discussed earlier, in the absence of proof of Saudi laws,
case at bar, petitioner failed to show that the order of the Philippine Labor laws and regulations shall govern the
company which was violated—the submission of "Daily Activity relationship between Gran and EDI. Thus, our laws and rules
Reports"—was part of Gran's duties as a Computer Specialist. on the requisites of due process relating to termination of
Before the Labor Arbiter, EDI should have provided a copy of employment shall apply.
the company policy, Gran's job description, or any other
document that would show that the "Daily Activity Reports" Petitioner EDI claims that private respondent Gran was
were required for submission by the employees, more afforded due process, since he was allowed to work and
particularly by a Computer Specialist. improve his capabilities for five months prior to his
termination.51 EDI also claims that the requirements of due
Even though EDI and/or ESI were merely the local employment process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya
or recruitment agencies and not the foreign employer, they Shipping Services, Inc. v. NLRC,53 cited by the CA in its
should have adduced additional evidence to convincingly show Decision, were properly observed in the present case.
that Gran's employment was validly and legally terminated. The
burden devolves not only upon the foreign-based employer but This position is untenable.
also on the employment or recruitment agency for the latter is
not only an agent of the former, but is also solidarily liable with In Agabon v. NLRC,54 this Court held that:
the foreign principal for any claims or liabilities arising from the
dismissal of the worker.48
Procedurally, (1) if the dismissal is based on a just
cause under Article 282, the employer must give the
Thus, petitioner failed to prove that Gran was justifiably employee two written notices and a hearing or
dismissed due to incompetence, insubordination, or willful opportunity to be heard if requested by the employee
disobedience.
before terminating the employment: a notice
specifying the grounds for which dismissal is sought a
Petitioner also raised the issue that Prieto v. NLRC,49 as used hearing or an opportunity to be heard and after
by the CA in its Decision, is not applicable to the present case. hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based
on authorized causes under Articles 283 and 284, the
employer must give the employee and the In the present case, the employment contract provides that the
Department of Labor and Employment written notices employment contract shall be valid for a period of two (2) years
30 days prior to the effectivity of his separation. from the date the employee starts to work with the employer. 61
Gran arrived in Riyadh, Saudi Arabia and started to work on
Under the twin notice requirement, the employees must be February 7, 1994;62 hence, his employment contract is until
given two (2) notices before their employment could be February 7, 1996. Since he was illegally dismissed on July 9,
terminated: (1) a first notice to apprise the employees of their 1994, before the effectivity of R.A. No. 8042, he is therefore
fault, and (2) a second notice to communicate to the entitled to backwages corresponding to the unexpired portion
employees that their employment is being terminated. In of his contract, which was equivalent to USD 16,150.
between the first and second notice, the employees should be
given a hearing or opportunity to defend themselves personally Petitioner EDI questions the legality of the award of backwages
or by counsel of their choice.55 and mainly relies on the Declaration which is claimed to have
been freely and voluntarily executed by Gran. The relevant
A careful examination of the records revealed that, indeed, portions of the Declaration are as follows:
OAB's manner of dismissing Gran fell short of the two notice
requirement. While it furnished Gran the written notice I, ELEAZAR GRAN (COMPUTER SPECIALIST)
informing him of his dismissal, it failed to furnish Gran the AFTER RECEIVING MY FINAL SETTLEMENT ON
written notice apprising him of the charges against him, as THIS DATE THE AMOUNT OF:
prescribed by the Labor Code.56 Consequently, he was denied
the opportunity to respond to said notice. In addition, OAB did S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND
not schedule a hearing or conference with Gran to defend NINE
himself and adduce evidence in support of his defenses.
Moreover, the July 9, 1994 termination letter was effective on HUNDRED FORTY EIGHT ONLY)
the same day. This shows that OAB had already condemned
Gran to dismissal, even before Gran was furnished the
REPRESENTING COMPLETE PAYMENT
termination letter. It should also be pointed out that OAB failed
(COMPENSATION) FOR THE SERVICES I
to give Gran the chance to be heard and to defend himself with
RENDERED TO OAB ESTABLISHMENT.
the assistance of a representative in accordance with Article
277 of the Labor Code. Clearly, there was no intention to
provide Gran with due process. Summing up, Gran was I HEREBY DECLARE THAT OAB EST. HAS NO
notified and his employment arbitrarily terminated on the same FINANCIAL OBLIGATION IN MY FAVOUR AFTER
day, through the same letter, and for unjustified grounds. RECEIVING THE ABOVE MENTIONED AMOUNT IN
Obviously, Gran was not afforded due process. CASH.
Pursuant to the doctrine laid down in Agabon,57 an employer is I STATE FURTHER THAT OAB EST. HAS NO
liable to pay nominal damages as indemnity for violating the OBLIGATION TOWARDS ME IN WHATEVER FORM.
employee's right to statutory due process. Since OAB was in
breach of the due process requirements under the Labor Code I ATTEST TO THE TRUTHFULNESS OF THIS
and its regulations, OAB, ESI, and EDI, jointly and solidarily, STATEMENT BY AFFIXING MY SIGNATURE
are liable to Gran in the amount of PhP 30,000.00 as VOLUNTARILY.
indemnity.
SIGNED.
Fifth and Last Issue: Gran is Entitled to Backwages ELEAZAR GRAN
We reiterate the rule that with regard to employees hired for a Courts must undertake a meticulous and rigorous review of
fixed period of employment, in cases arising before the quitclaims or waivers, more particularly those executed by
effectivity of R.A. No. 804258 (Migrant Workers and Overseas employees. This requirement was clearly articulated by Chief
Filipinos Act) on August 25, 1995, that when the contract is for Justice Artemio V. Panganiban in Land and Housing
a fixed term and the employees are dismissed without just Development Corporation v. Esquillo:
cause, they are entitled to the payment of their salaries
corresponding to the unexpired portion of their contract. 59 On Quitclaims, releases and other waivers of benefits
the other hand, for cases arising after the effectivity of R.A. No. granted by laws or contracts in favor of workers
8042, when the termination of employment is without just, valid should be strictly scrutinized to protect the weak and
or authorized cause as defined by law or contract, the worker the disadvantaged. The waivers should be carefully
shall be entitled to the full reimbursement of his placement fee examined, in regard not only to the words and
with interest of twelve percent (12%) per annum, plus his terms used, but also the factual circumstances
salaries for the unexpired portion of his employment contract or under which they have been executed.63 (Emphasis
for three (3) months for every year of the unexpired term supplied.)
whichever is less.60
This Court had also outlined in Land and Housing a. On July 9, 1994, Gran received a copy of his letter
Development Corporation, citing Periquet v. NLRC,64 the of termination;
parameters for valid compromise agreements, waivers, and
quitclaims: b. On July 10, 1994, Gran was instructed to depart
Saudi Arabia and required to pay his plane ticket; 65
Not all waivers and quitclaims are invalid as against
public policy. If the agreement was voluntarily entered c. On July 11, 1994, he signed the Declaration;
into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned d. On July 12, 1994, Gran departed from Riyadh,
simply because of a change of mind. It is only where Saudi Arabia; and
there is clear proof that the waiver was wangled from
an unsuspecting or gullible person, or the terms of
e. On July 21, 1994, Gran filed the Complaint before
settlement are unconscionable on its face, that the
the NLRC.
law will step in to annul the questionable transaction.
But where it is shown that the person making the
waiver did so voluntarily, with full understanding The foregoing events readily reveal that Gran was "forced" to
of what he was doing, and the consideration for sign the Declaration and constrained to receive the amount of
the quitclaim is credible and reasonable, the SR 2,948.00 even if it was against his will—since he was told
transaction must be recognized as a valid and binding on July 10, 1994 to leave Riyadh on July 12, 1994. He had no
undertaking. (Emphasis supplied.) other choice but to sign the Declaration as he needed the
amount of SR 2,948.00 for the payment of his ticket. He could
have entertained some apprehensions as to the status of his
Is the waiver and quitclaim labeled a Declaration valid? It is
stay or safety in Saudi Arabia if he would not sign the quitclaim.
not.
It is made clear that the foregoing rules on quitclaim or waiver (1) to reverse the Resolution dated
shall apply only to labor contracts of OFWs in the absence of September 2, 1991 of NLRC in POEA Cases
proof of the laws of the foreign country agreed upon to govern Nos. L-84-06-555, L-85-10-777, L-85-10-799
said contracts. Otherwise, the foreign laws shall apply. and
L-86-05-460 insofar as it: (i) applied the
WHEREFORE, the petition is DENIED. The October 18, 2000 three-year prescriptive period under the
Decision in CA-G.R. SP No. 56120 of the Court of Appeals Labor Code of the Philippines instead of the
affirming the January 15, 1999 Decision and September 30, ten-year prescriptive period under the Civil
1999 Resolution of the NLRC Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the
is AFFIRMED with the MODIFICATION that petitioner EDI- computation of petitioners' overtime pay; and
Staffbuilders International, Inc. shall pay the amount of PhP
30,000.00 to respondent Gran as nominal damages for non- (2) to reverse the Resolution dated March
compliance with statutory due process. No costs. SO 24, 1992 of NLRC, denying the motion for
ORDERED. reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
G.R. No. L-104776 December 5, 1994
The petition in G.R. Nos. 105029-32, entitled "Asia
International Builders Corporation, et. al., v. National Labor
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO
Relations Commission, et. al." was filed under Rule 65 of the
B. EVANGELISTA, and the rest of 1,767 NAMED-
Revised Rules of Court:
COMPLAINANTS, thru and by their Attorney-in-fact, Atty.
GERARDO A. DEL MUNDO vs. PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, (1) to reverse the Resolution dated
NATIONAL LABOR RELATIONS COMMISSION, BROWN & September 2, 1991 of NLRC in POEA Cases
ROOT INTERNATIONAL, INC. AND/OR ASIA Nos. L-84-06-555, L-85-10-777, L-85-10-779
INTERNATIONAL BUILDERS CORPORATION; QUIASON, and
J.: L-86-05-460, insofar as it granted the claims
of 149 claimants; and
The petition in G.R. No. 104776, entitled "Bienvenido M.
Cadalin, et. al. v. Philippine Overseas Employment (2) to reverse the Resolution dated March
Administration's Administrator, et. al.," was filed under Rule 65 21, 1992 of NLRC insofar as it denied the
of the Revised Rules of Court: motions for reconsideration of AIBC and BRII
(Rollo, pp. 2-59; 61-230).
(1) to modify the Resolution dated
September 2, 1991 of the National Labor The Resolution dated September 2, 1991 of NLRC, which
modified the decision of POEA in four labor cases: (1) awarded
monetary benefits only to 149 claimants and (2) directed Labor answers within ten days from receipt of the bill of particulars.
Arbiter Fatima J. Franco to conduct hearings and to receive The POEA Administrator also scheduled a pre-trial conference
evidence on the claims dismissed by the POEA for lack of on July 25, 1984.
substantial evidence or proof of employment.
On July 13, 1984, the claimants submitted their "Compliance
Consolidation of Cases and Manifestation." On July 23, 1984, AIBC filed a "Motion to
Strike Out of the Records", the "Complaint" and the
G.R. Nos. 104776 and 105029-32 were originally raffled to the "Compliance and Manifestation." On July 25, 1984, the
Third Division while G.R. Nos. 104911-14 were raffled to the claimants filed their "Rejoinder and Comments," averring,
Second Division. In the Resolution dated July 26, 1993, the among other matters, the failure of AIBC and BRII to file their
Second Division referred G.R. Nos. 104911-14 to the Third answers and to attend the pre-trial conference on July 25,
Division (G.R. Nos. 104911-14, Rollo, p. 895). 1984. The claimants alleged that AIBC and BRII had waived
their right to present evidence and had defaulted by failing to
In the Resolution dated September 29, 1993, the Third Division file their answers and to attend the pre-trial conference.
granted the motion filed in G.R. Nos. 104911-14 for the
consolidation of said cases with G.R. Nos. 104776 and On October 2, 1984, the POEA Administrator denied the
105029-32, which were assigned to the First Division (G.R. "Motion to Strike Out of the Records" filed by AIBC but required
Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, the claimants to correct the deficiencies in the complaint
Rollo, pp. 369-377, 426-432). In the Resolution dated October pointed out in the order.
27, 1993, the First Division granted the motion to consolidate
G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. On October 10, 1984, claimants asked for time within which to
104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. comply with the Order of October 2, 1984 and filed an "Urgent
1562). Manifestation," praying that the POEA Administrator direct the
parties to submit simultaneously their position papers, after
I which the case should be deemed submitted for decision. On
the same day, Atty. Florante de Castro filed another complaint
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul for the same money claims and benefits in behalf of several
and Donato B. Evangelista, in their own behalf and on behalf of claimants, some of whom were also claimants in POEA Case
728 other overseas contract workers (OCWs) instituted a class No. L-84-06-555 (POEA Case No. 85-10-779).
suit by filing an "Amended Complaint" with the Philippine
Overseas Employment Administration (POEA) for money On October 19, 1984, claimants filed their "Compliance" with
claims arising from their recruitment by AIBC and employment the Order dated October 2, 1984 and an "Urgent
by BRII (POEA Case No. L-84-06-555). The claimants were Manifestation," praying that the POEA direct the parties to
represented by Atty. Gerardo del Mundo. submit simultaneously their position papers after which the
case would be deemed submitted for decision. On the same
BRII is a foreign corporation with headquarters in Houston, day, AIBC asked for time to file its comment on the
Texas, and is engaged in construction; while AIBC is a "Compliance" and "Urgent Manifestation" of claimants. On
domestic corporation licensed as a service contractor to recruit, November 6, 1984, it filed a second motion for extension of
mobilize and deploy Filipino workers for overseas employment time to file the comment.
on behalf of its foreign principals.
On November 8, 1984, the POEA Administrator informed AIBC
The amended complaint principally sought the payment of the that its motion for extension of time was granted.
unexpired portion of the employment contracts, which was
terminated prematurely, and secondarily, the payment of the On November 14, 1984, claimants filed an opposition to the
interest of the earnings of the Travel and Reserved Fund, motions for extension of time and asked that AIBC and BRII be
interest on all the unpaid benefits; area wage and salary declared in default for failure to file their answers.
differential pay; fringe benefits; refund of SSS and premium not
remitted to the SSS; refund of withholding tax not remitted to On November 20, 1984, AIBC and BRII filed a "Comment"
the BIR; penalties for committing prohibited practices; as well praying, among other reliefs, that claimants should be ordered
as the suspension of the license of AIBC and the accreditation to amend their complaint.
of BRII (G.R. No. 104776, Rollo, pp. 13-14).
On December 27, 1984, the POEA Administrator issued an
At the hearing on June 25, 1984, AIBC was furnished a copy of order directing AIBC and BRII to file their answers within ten
the complaint and was given, together with BRII, up to July 5, days from receipt of the order.
1984 to file its answer.
On February 27, 1985, AIBC and BRII appealed to NLRC
On July 3, 1984, POEA Administrator, upon motion of AIBC seeking the reversal of the said order of the POEA
and BRII, ordered the claimants to file a bill of particulars within Administrator. Claimants opposed the appeal, claiming that it
ten days from receipt of the order and the movants to file their
was dilatory and praying that AIBC and BRII be declared in On December 12, 1986, the NLRC dismissed the two appeals
default. filed on February 27, 1985 and September 18, 1985 by AIBC
and BRII.
On April 2, 1985, the original claimants filed an "Amended
Complaint and/or Position Paper" dated March 24, 1985, In narrating the proceedings of the labor cases before the
adding new demands: namely, the payment of overtime pay, POEA Administrator, it is not amiss to mention that two cases
extra night work pay, annual leave differential pay, leave were filed in the Supreme Court by the claimants, namely —
indemnity pay, retirement and savings benefits and their share G.R. No. 72132 on September 26, 1985 and Administrative
of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, Case No. 2858 on March 18, 1986. On May 13, 1987, the
1985, the POEA Administrator directed AIBC to file its answer Supreme Court issued a resolution in Administrative Case No.
to the amended complaint (G.R. No. 104776, Rollo, p. 20). 2858 directing the POEA Administrator to resolve the issues
raised in the motions and oppositions filed in POEA Cases
On May 28, 1985, claimants filed an "Urgent Motion for Nos. L-84-06-555 and L-86-05-460 and to decide the labor
Summary Judgment." On the same day, the POEA issued an cases with deliberate dispatch.
order directing AIBC and BRII to file their answers to the
"Amended Complaint," otherwise, they would be deemed to AIBC also filed a petition in the Supreme Court (G.R. No.
have waived their right to present evidence and the case would 78489), questioning the Order dated September 4, 1985 of the
be resolved on the basis of complainant's evidence. POEA Administrator. Said order required BRII and AIBC to
answer the amended complaint in POEA Case No. L-84-06-
On June 5, 1985, AIBC countered with a "Motion to Dismiss as 555. In a resolution dated November 9, 1987, we dismissed the
Improper Class Suit and Motion for Bill of Particulars Re: petition by informing AIBC that all its technical objections may
Amended Complaint dated March 24, 1985." Claimants properly be resolved in the hearings before the POEA.
opposed the motions.
Complaints were also filed before the Ombudsman. The first
On September 4, 1985, the POEA Administrator reiterated his was filed on September 22, 1988 by claimant Hermie Arguelles
directive to AIBC and BRII to file their answers in POEA Case and 18 co-claimants against the POEA Administrator and
No. L-84-06-555. several NLRC Commissioners. The Ombudsman merely
referred the complaint to the Secretary of Labor and
On September 18, 1985, AIBC filed its second appeal to the Employment with a request for the early disposition of POEA
NLRC, together with a petition for the issuance of a writ of Case No. L-84-06-555. The second was filed on April 28, 1989
injunction. On September 19, 1985, NLRC enjoined the POEA by claimants Emigdio P. Bautista and Rolando R. Lobeta
Administrator from hearing the labor cases and suspended the charging AIBC and BRII for violation of labor and social
period for the filing of the answers of AIBC and BRII. legislations. The third was filed by Jose R. Santos, Maximino
N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.
On September 19, 1985, claimants asked the POEA
Administrator to include additional claimants in the case and to
investigate alleged wrongdoings of BRII, AIBC and their On January 13, 1987, AIBC filed a motion for reconsideration
respective lawyers. of the NLRC Resolution dated December 12, 1986.
On October 10, 1985, Romeo Patag and two co-claimants filed On January 14, 1987, AIBC reiterated before the POEA
a complaint (POEA Case No. L-85-10-777) against AIBC and Administrator its motion for suspension of the period for filing
BRII with the POEA, demanding monetary claims similar to an answer or motion for extension of time to file the same until
those subject of POEA Case No. L-84-06-555. In the same the resolution of its motion for reconsideration of the order of
month, Solomon Reyes also filed his own complaint (POEA the NLRC dismissing the two appeals. On April 28, 1987,
Case No. L-85-10-779) against AIBC and BRII. NLRC en banc denied the motion for reconsideration.
On October 17, 1985, the law firm of Florante M. de Castro & At the hearing on June 19, 1987, AIBC submitted its answer to
Associates asked for the substitution of the original counsel of the complaint. At the same hearing, the parties were given a
record and the cancellation of the special powers of attorney period of 15 days from said date within which to submit their
given the original counsel. respective position papers. On June 24, 1987 claimants filed
their "Urgent Motion to Strike Out Answer," alleging that the
answer was filed out of time. On June 29, 1987, claimants filed
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice
their "Supplement to Urgent Manifestational Motion" to comply
of the claim to enforce attorney's lien.
with the POEA Order of June 19, 1987. On February 24, 1988,
AIBC and BRII submitted their position paper. On March 4,
On May 29, 1986, Atty. De Castro filed a complaint for money 1988, claimants filed their "Ex-Parte Motion to Expunge from
claims (POEA Case No. 86-05-460) in behalf of 11 claimants the Records" the position paper of AIBC and BRII, claiming that
including Bienvenido Cadalin, a claimant in POEA Case No. it was filed out of time.
84-06-555.
On September 1, 1988, the claimants represented by Atty. De 1. The claims of the 94
Castro filed their memorandum in POEA Case No. L-86-05- complainants identified
460. On September 6, 1988, AIBC and BRII submitted their and listed in Annex "A"
Supplemental Memorandum. On September 12, 1988, BRII hereof are dismissed for
filed its "Reply to Complainant's Memorandum." On October having prescribed;
26, 1988, claimants submitted their "Ex-Parte Manifestational
Motion and Counter-Supplemental Motion," together with 446 2. Respondents AIBC and
individual contracts of employments and service records. On Brown & Root are hereby
October 27, 1988, AIBC and BRII filed a "Consolidated Reply." ordered, jointly and
severally, to pay the 149
On January 30, 1989, the POEA Administrator rendered his complainants, identified
decision in POEA Case No. L-84-06-555 and the other and listed in Annex "B"
consolidated cases, which awarded the amount of $824,652.44 hereof, the peso
in favor of only 324 complainants. equivalent, at the time of
payment, of the total
On February 10, 1989, claimants submitted their "Appeal amount in US dollars
Memorandum For Partial Appeal" from the decision of the indicated opposite their
POEA. On the same day, AIBC also filed its motion for respective names;
reconsideration and/or appeal in addition to the "Notice of
Appeal" filed earlier on February 6, 1989 by another counsel 3. The awards given by the
for AIBC. POEA to the 19
complainants classified
On February 17, 1989, claimants filed their "Answer to Appeal," and listed in Annex "C"
praying for the dismissal of the appeal of AIBC and BRII. hereof, who appear to
have worked elsewhere
On March 15, 1989, claimants filed their "Supplement to than in Bahrain are hereby
Complainants' Appeal Memorandum," together with their set aside.
"newly discovered evidence" consisting of payroll records.
4. All claims other than
On April 5, 1989, AIBC and BRII submitted to NLRC their those indicated in Annex
"Manifestation," stating among other matters that there were "B", including those for
only 728 named claimants. On April 20, 1989, the claimants overtime work and
filed their "Counter-Manifestation," alleging that there were favorably granted by the
1,767 of them. POEA, are hereby
dismissed for lack of
substantial evidence in
On July 27, 1989, claimants filed their "Urgent Motion for
support thereof or are
Execution" of the Decision dated January 30, 1989 on the
beyond the competence of
grounds that BRII had failed to appeal on time and AIBC had
this Commission to pass
not posted the supersedeas bond in the amount of
upon.
$824,652.44.
12) Joint Manifestation and Motion involving (1) Employment Position Classification :——
claimant Ricardo C. Dayrit and 2 co- ———————
claimants dated September 7, 1993 (G.R. (Code) :—————————
Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. (2) Company Employment Status :————
104776, Rollo, pp. 1243-1254; G.R. Nos. —————
104911-14, Rollo, pp. 972-984); (3) Date of Employment to Commence on :—
————————
13) Joint Manifestation and Motion involving (4) Basic Working Hours Per Week :———
claimant Dante C. Aceres and 37 co- ——————
claimants dated September 8, 1993 (G.R. (5) Basic Working Hours Per Month :———
No. 104776, Rollo, pp. 1257-1375; G.R. Nos. ——————
104911-14, Rollo, pp. 987-1105; G.R. Nos. (6) Basic Hourly Rate :—————————
105029-32, Rollo, pp. 1280-1397); (7) Overtime Rate Per Hour :———————
——
14) Joint Manifestation and Motion involving (8) Projected Period of Service
Vivencio V. Abella and 27 co-claimants (Subject to C(1) of this [sic]) :———————
dated January 10, 1994 (G.R. Nos. 105029- ——
32, Rollo, Vol. II); Months and/or
Job Completion
15) Joint Manifestation and Motion involving
Domingo B. Solano and six co-claimants xxx xxx xxx
dated August 25, 1994 (G.R. Nos. 105029-
32; G.R. No. 104776; G.R. Nos. 104911-14). 3. HOURS OF WORK AND
COMPENSATION
III
a) The Employee is employed at the hourly
The facts as found by the NLRC are as follows: rate and overtime rate as set out in Part B of
this Document.
We have taken painstaking efforts to sift over
the more than fifty volumes now comprising b) The hours of work shall be those set forth
the records of these cases. From the by the Employer, and Employer may, at his
records, it appears that the complainants- sole option, change or adjust such hours as
appellants allege that they were recruited by maybe deemed necessary from time to time.
respondent-appellant AIBC for its accredited
foreign principal, Brown & Root, on various 4. TERMINATION
dates from 1975 to 1983. They were all
deployed at various projects undertaken by a) Notwithstanding any other terms and
Brown & Root in several countries in the conditions of this agreement, the Employer
Middle East, such as Saudi Arabia, Libya, may, at his sole discretion, terminate
United Arab Emirates and Bahrain, as well employee's service with cause, under this
as in Southeast Asia, in Indonesia and agreement at any time. If the Employer
Malaysia. terminates the services of the Employee
under this Agreement because of the
Having been officially processed as overseas completion or termination, or suspension of
contract workers by the Philippine the work on which the Employee's services
Government, all the individual complainants were being utilized, or because of a
reduction in force due to a decrease in scope extra hour equivalent to his
of such work, or by change in the type of wage entitlement
construction of such work. The Employer will increased by a minimum of
be responsible for his return transportation to twenty-five per centum
his country of origin. Normally on the most thereof for hours worked
expeditious air route, economy class during the day; and by a
accommodation. minimum of fifty per
centum thereof for hours
xxx xxx xxx worked during the night
which shall be deemed to
10. VACATION/SICK LEAVE BENEFITS being from seven o'clock in
the evening until seven
o'clock in the morning. . . .
a) After one (1) year of continuous service
and/or satisfactory completion of contract,
employee shall be entitled to 12-days Art. 80: Friday shall be
vacation leave with pay. This shall be deemed to be a weekly
computed at the basic wage rate. Fractions day of rest on full pay.
of a year's service will be computed on a pro-
rata basis. . . . an employer may
require a worker, with his
b) Sick leave of 15-days shall be granted to consent, to work on his
the employee for every year of service for weekly day of rest if
non-work connected injuries or illness. If the circumstances so require
employee failed to avail of such leave and in respect of which an
benefits, the same shall be forfeited at the additional sum equivalent
end of the year in which said sick leave is to 150% of his normal
granted. wage shall be paid to him.
...
11. BONUS
Art. 81: . . . When
conditions of work require
A bonus of 20% (for offshore work) of gross
the worker to work on any
income will be accrued and payable only
official holiday, he shall be
upon satisfactory completion of this contract.
paid an additional sum
equivalent to 150% of his
12. OFFDAY PAY normal wage.
The seventh day of the week shall be Art. 84: Every worker who
observed as a day of rest with 8 hours has completed one year's
regular pay. If work is performed on this day, continuous service with his
all hours work shall be paid at the premium employer shall be entitled
rate. However, this offday pay provision is to leave on full pay for a
applicable only when the laws of the Host period of not less than 21
Country require payments for rest day. days for each year
increased to a period not
In the State of Bahrain, where some of the less than 28 days after five
individual complainants were deployed, His continuous years of
Majesty Isa Bin Salman Al Kaifa, Amir of service.
Bahrain, issued his Amiri Decree No. 23 on
June 16, 1976, otherwise known as the A worker shall be entitled
Labour Law for the Private Sector (Records, to such leave upon a
Vol. 18). This decree took effect on August quantum meruit in respect
16, 1976. Some of the provisions of Amiri of the proportion of his
Decree No. 23 that are relevant to the claims service in that year.
of the complainants-appellants are as follows
(italics supplied only for emphasis):
Art. 107: A contract of
employment made for a
Art. 79: . . . A worker shall period of indefinite
receive payment for each duration may be
terminated by either party entitled to the above-
thereto after giving the mentioned benefits.
other party thirty days'
prior notice before such (b) Whether or not Art. 44
termination, in writing, in of the same Decree
respect of monthly paid (allegedly prescribing a
workers and fifteen days' more favorable treatment
notice in respect of other of alien employees) bars
workers. The party complainants from
terminating a contract enjoying its benefits.
without giving the required
notice shall pay to the Second: — Assuming that Amiri Decree No.
other party compensation 23 of Bahrain is applicable in these cases,
equivalent to the amount whether or not complainants' claim for the
of wages payable to the benefits provided therein have prescribed.
worker for the period of
such notice or the
Third: — Whether or not the instant cases
unexpired portion thereof.
qualify as a class suit.
b. Interest earnings of Anent the first issue, NLRC set aside Section 1, Rule 129 of
Travel and Reserve Fund; the 1989 Revised Rules on Evidence governing the pleading
and proof of a foreign law and admitted in evidence a simple
c. Retirement and Savings copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour
Plan benefits; Law for the Private Sector). NLRC invoked Article 221 of the
Labor Code of the Philippines, vesting on the Commission
d. War Zone bonus or ample discretion to use every and all reasonable means to
premium pay of at least ascertain the facts in each case without regard to the
100% of basic pay; technicalities of law or procedure. NLRC agreed with the POEA
Administrator that the Amiri Decree No. 23, being more
favorable and beneficial to the workers, should form part of the
e. Area Differential Pay;
overseas employment contract of the complainants.
h. Wage differential pay; On the second issue, NLRC ruled that the prescriptive period
for the filing of the claims of the complainants was three years,
i. Refund of SSS as provided in Article 291 of the Labor Code of the Philippines,
premiums not remitted to and not ten years as provided in Article 1144 of the Civil Code
SSS; of the Philippines nor one year as provided in the Amiri Decree
No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator of their overseas contract was not
that the labor cases cannot be treated as a class suit for the established; and
simple reason that not all the complainants worked in Bahrain
and therefore, the subject matter of the action, the claims (6) that the POEA Administrator has no
arising from the Bahrain law, is not of common or general jurisdiction over the complaint for the
interest to all the complainants. suspension or cancellation of the AIBC's
recruitment license and the cancellation of
On the fourth issue, NLRC found at least three infractions of the accreditation of BRII.
the cardinal rules of administrative due process: namely, (1)
the failure of the POEA Administrator to consider the evidence NLRC passed sub silencio the last issue, the claim that POEA
presented by AIBC and BRII; (2) some findings of fact were not Case No. (L) 86-65-460 should have been dismissed on the
supported by substantial evidence; and (3) some of the ground that the claimants in said case were also claimants in
evidence upon which the decision was based were not POEA Case No. (L) 84-06-555. Instead of dismissing POEA
disclosed to AIBC and BRII during the hearing. Case No. (L) 86-65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In
On the fifth issue, NLRC sustained the ruling of the POEA other words, the POEA did not pass upon the same claims
Administrator that BRII and AIBC are solidarily liable for the twice.
claims of the complainants and held that BRII was the actual
employer of the complainants, or at the very least, the indirect V
employer, with AIBC as the labor contractor.
G.R. No. 104776
NLRC also held that jurisdiction over BRII was acquired by the
POEA Administrator through the summons served on AIBC, its Claimants in G.R. No. 104776 based their petition for certiorari
local agent. on the following grounds:
On the sixth issue, NLRC held that the POEA Administrator (1) that they were deprived by NLRC and the
was correct in denying the Motion to Declare AIBC in default. POEA of their right to a speedy disposition of
their cases as guaranteed by Section 16,
On the seventh issue, which involved other money claims not Article III of the 1987 Constitution. The
based on the Amiri Decree No. 23, NLRC ruled: POEA Administrator allowed private
respondents to file their answers in two years
(1) that the POEA Administrator has no (on June 19, 1987) after the filing of the
jurisdiction over the claims for refund of the original complaint (on April 2, 1985) and
SSS premiums and refund of withholding NLRC, in total disregard of its own rules,
taxes and the claimants should file their affirmed the action of the POEA
claims for said refund with the appropriate Administrator;
government agencies;
(2) that NLRC and the POEA Administrator
(2) the claimants failed to establish that they should have declared AIBC and BRII in
are entitled to the claims which are not default and should have rendered summary
based on the overseas employment judgment on the basis of the pleadings and
contracts nor the Amiri Decree No. 23 of evidence submitted by claimants;
1976;
(3) the NLRC and POEA Administrator erred
(3) that the POEA Administrator has no in not holding that the labor cases filed by
jurisdiction over claims for moral and AIBC and BRII cannot be considered a class
exemplary damages and nonetheless, the suit;
basis for granting said damages was not
established; (4) that the prescriptive period for the filing of
the claims is ten years; and
(4) that the claims for salaries corresponding
to the unexpired portion of their contract may (5) that NLRC and the POEA Administrator
be allowed if filed within the three-year should have dismissed POEA Case No. L-
prescriptive period; 86-05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).
(5) that the allegation that complainants were
prematurely repatriated prior to the expiration AIBC and BRII, commenting on the petition in G.R. No.
104776, argued:
(1) that they were not responsible for the which he was entitled to receive; and that the consent of the
delay in the disposition of the labor cases, claimants to the compromise agreements and quitclaims were
considering the great difficulty of getting all procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In
the records of the more than 1,500 the Resolution dated November 23, 1992, the Court denied the
claimants, the piece-meal filing of the motion to strike out the Joint Manifestations and Motions dated
complaints and the addition of hundreds of September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.
new claimants by petitioners; 608-609).
(2) that considering the number of On December 14, 1992, Atty. Del Mundo filed a "Notice and
complaints and claimants, it was impossible Claim to Enforce Attorney's Lien," alleging that the claimants
to prepare the answers within the ten-day who entered into compromise agreements with AIBC and BRII
period provided in the NLRC Rules, that with the assistance of Atty. De Castro, had all signed a retainer
when the motion to declare AIBC in default agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-
was filed on July 19, 1987, said party had 624; 838-1535).
already filed its answer, and that considering
the staggering amount of the claims (more Contempt of Court
than US$50,000,000.00) and the
complicated issues raised by the parties, the On February 18, 1993, an omnibus motion was filed by Atty.
ten-day rule to answer was not fair and Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for
reasonable; contempt of court and for violation of Canons 1, 15 and 16 of
the Code of Professional Responsibility. The said lawyers
(3) that the claimants failed to refute NLRC's allegedly misled this Court, by making it appear that the
finding that claimants who entered into the compromise agreements were
there was no common or general interest in represented by Atty. De Castro, when in fact they were
the subject matter of the controversy — represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp.
which was the applicability of the Amiri 1560-1614).
Decree No. 23. Likewise, the nature of the
claims varied, some being based on salaries On September 23, 1994, Atty. Del Mundo reiterated his
pertaining to the unexpired portion of the charges against Atty. De Castro for unethical practices and
contracts while others being for pure money moved for the voiding of the quitclaims submitted by some of
claims. Each claimant demanded separate the claimants.
claims peculiar only to himself and
depending upon the particular circumstances
G.R. Nos. 104911-14
obtaining in his case;
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32 (1) Upon a written
contract;
All the petitions raise the common issue of prescription
although they disagreed as to the time that should be (2) Upon an obligation
embraced within the prescriptive period. created by law;
To the POEA Administrator, the prescriptive period was ten Thus, herein money claims of the
years, applying Article 1144 of the Civil Code of the complainants against the respondents shall
Philippines. NLRC believed otherwise, fixing the prescriptive prescribe in ten years from August 16, 1976.
period at three years as provided in Article 291 of the Labor Inasmuch as all claims were filed within the
Code of the Philippines. ten-year prescriptive period, no claim
suffered the infirmity of being prescribed
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, (G.R. No. 104776, Rollo, 89-90).
invoking different grounds, insisted that NLRC erred in ruling
that the prescriptive period applicable to the claims was three In overruling the POEA Administrator, and holding that the
years, instead of ten years, as found by the POEA prescriptive period is three years as provided in Article 291 of
Administrator. the Labor Code of the Philippines, the NLRC argued as
follows:
The Solicitor General expressed his personal view that the
prescriptive period was one year as prescribed by the Amiri The Labor Code provides that "all money
Decree No. 23 of 1976 but he deferred to the ruling of NLRC claims arising from employer-employee
that Article 291 of the Labor Code of the Philippines was the relations . . . shall be filed within three years
operative law. from the time the cause of action accrued;
otherwise they shall be forever barred" (Art.
The POEA Administrator held the view that: 291, Labor Code, as amended). This three-
year prescriptive period shall be the one
applied here and which should be reckoned
These money claims (under Article 291 of
from the date of repatriation of each
the Labor Code) refer to those arising from
individual complainant, considering the fact
the employer's violation of the employee's
that the case is having (sic) filed in this
right as provided by the Labor Code.
country. We do not agree with the POEA
Administrator that this three-year prescriptive
In the instant case, what the respondents period applies only to money claims
violated are not the rights of the workers as specifically recoverable under the Philippine
provided by the Labor Code, but the Labor Code. Article 291 gives no such
provisions of the Amiri Decree No. 23 issued indication. Likewise, We can not consider
in Bahrain, which ipso facto amended the complainants' cause/s of action to have
accrued from a violation of their employment such rights, except certain ones which are
contracts. There was no violation; the claims enumerated in Article 621. And there is
arise from the benefits of the law of the nothing in the record to indicate that the
country where they worked. (G.R. No. Panamanian legislature gave special
104776, Rollo, pp. consideration to the impact of Article 623
90-91). upon the particular rights sought to be
enforced here, as distinguished from the
Anent the applicability of the one-year prescriptive period as other rights to which that Article is also
provided by the Amiri Decree No. 23 of 1976, NLRC opined applicable. Were we confronted with the
that the applicability of said law was one of characterization, question of whether the limitation period of
i.e., whether to characterize the foreign law on prescription or Article 621 (which carves out particular rights
statute of limitation as "substantive" or "procedural." NLRC to be governed by a shorter limitation period)
cited the decision in Bournias v. Atlantic Maritime Company is to be regarded as "substantive" or
(220 F. 2d. 152, 2d Cir. [1955], where the issue was the "procedural" under the rule of "specifity" we
applicability of the Panama Labor Code in a case filed in the might have a different case; but here on the
State of New York for claims arising from said Code. In said surface of things we appear to be dealing
case, the claims would have prescribed under the Panamanian with a "broad," and not a "specific," statute of
Law but not under the Statute of Limitations of New York. The limitations (G.R. No. 104776, Rollo, pp.
U.S. Circuit Court of Appeals held that the Panamanian Law 92-94).
was procedural as it was not "specifically intended to be
substantive," hence, the prescriptive period provided in the law Claimants in G.R. Nos. 104911-14 are of the view that Article
of the forum should apply. The Court observed: 291 of the Labor Code of the Philippines, which was applied by
NLRC, refers only to claims "arising from the employer's
. . . And where, as here, we are dealing with violation of the employee's right as provided by the Labor
a statute of limitations of a foreign country, Code." They assert that their claims are based on the violation
and it is not clear on the face of the statute of their employment contracts, as amended by the Amiri
that its purpose was to limit the Decree No. 23 of 1976 and therefore the claims may be
enforceability, outside as well as within the brought within ten years as provided by Article 1144 of the Civil
foreign country concerned, of the substantive Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
rights to which the statute pertains, we think 18-21). To bolster their contention, they cite PALEA v.
that as a yardstick for determining whether Philippine Airlines, Inc., 70 SCRA 244 (1976).
that was the purpose this test is the most
satisfactory one. It does not lead American AIBC and BRII, insisting that the actions on the claims have
courts into the necessity of examining into prescribed under the Amiri Decree No. 23 of 1976, argue that
the unfamiliar peculiarities and refinements there is in force in the Philippines a "borrowing law," which is
of different foreign legal systems. . . Section 48 of the Code of Civil Procedure and that where such
kind of law exists, it takes precedence over the common-law
The court further noted: conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).
However, the characterization of a statute into a procedural or Having determined that the applicable law on prescription is
substantive law becomes irrelevant when the country of the the Philippine law, the next question is whether the prescriptive
forum has a "borrowing statute." Said statute has the practical period governing the filing of the claims is three years, as
effect of treating the foreign statute of limitation as one of provided by the Labor Code or ten years, as provided by the
substance (Goodrich, Conflict of Laws 152-153 [1938]). A Civil Code of the Philippines.
"borrowing statute" directs the state of the forum to apply the
foreign statute of limitations to the pending claims based on a The claimants are of the view that the applicable provision is
foreign law (Siegel, Conflicts, 183 [1975]). While there are Article 1144 of the Civil Code of the Philippines, which
several kinds of "borrowing statutes," one form provides that an provides:
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
The following actions must be brought within
run against it (Goodrich and Scoles, Conflict of Laws, 152-153
ten years from the time the right of action
[1938]). Section 48 of our Code of Civil Procedure is of this
accrues:
kind. Said Section provides:
9. Refund of SSS premiums not remitted to These cases could have been spared the
Social Security System; long and arduous route towards resolution
had the parties and their counsel been more
10. Refund of Withholding Tax not remitted interested in pursuing the truth and the
to Bureau of Internal Revenue (B.I.R.); merits of the claims rather than exhibiting a
fanatical reliance on technicalities. Parties
11. Fringe Benefits under Brown & Root's "A and counsel have made these cases a
Summary of Employees Benefits consisting litigation of emotion. The intransigence of
of 43 pages (Annex "Q" of Amended parties and counsel is remarkable. As late as
Complaint); last month, this Commission made a last and
final attempt to bring the counsel of all the
12. Moral and Exemplary Damages; parties (this Commission issued a special
order directing respondent Brown & Root's
resident agent/s to appear) to come to a
more conciliatory stance. Even this failed A class suit is proper where the subject matter of the
(Rollo, controversy is one of common or general interest to many and
p. 58). the parties are so numerous that it is impracticable to bring
them all before the court (Revised Rules of Court, Rule 3, Sec.
The squabble between the lawyers of claimants added to the 12).
delay in the disposition of the cases, to the lament of NLRC,
which complained: While all the claims are for benefits granted under the Bahrain
Law, many of the claimants worked outside Bahrain. Some of
It is very evident from the records that the the claimants were deployed in Indonesia and Malaysia under
protagonists in these consolidated cases different terms and conditions of employment.
appear to be not only the individual
complainants, on the one hand, and AIBC NLRC and the POEA Administrator are correct in their stance
and Brown & Root, on the other hand. The that inasmuch as the first requirement of a class suit is not
two lawyers for the complainants, Atty. present (common or general interest based on the Amiri
Gerardo Del Mundo and Atty. Florante De Decree of the State of Bahrain), it is only logical that only those
Castro, have yet to settle the right of who worked in Bahrain shall be entitled to file their claims in a
representation, each one persistently class suit.
claiming to appear in behalf of most of the
complainants. As a result, there are two While there are common defendants (AIBC and BRII) and the
appeals by the complainants. Attempts by nature of the claims is the same (for employee's benefits),
this Commission to resolve counsels' there is no common question of law or fact. While some claims
conflicting claims of their respective authority are based on the Amiri Law of Bahrain, many of the claimants
to represent the complainants prove futile. never worked in that country, but were deployed elsewhere.
The bickerings by these two counsels are Thus, each claimant is interested only in his own demand and
reflected in their pleadings. In the charges not in the claims of the other employees of defendants. The
and countercharges of falsification of named claimants have a special or particular interest in specific
documents and signatures, and in the benefits completely different from the benefits in which the
disbarment proceedings by one against the other named claimants and those included as members of a
other. All these have, to a large extent, "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]).
abetted in confounding the issues raised in It appears that each claimant is only interested in collecting his
these cases, jumble the presentation of own claims. A claimants has no concern in protecting the
evidence, and even derailed the prospects of interests of the other claimants as shown by the fact, that
an amicable settlement. It would not be far- hundreds of them have abandoned their co-claimants and have
fetched to imagine that both counsel, entered into separate compromise settlements of their
unwittingly, perhaps, painted a rainbow for respective claims. A principle basic to the concept of "class
the complainants, with the proverbial pot of suit" is that plaintiffs brought on the record must fairly represent
gold at its end containing more than US$100 and protect the interests of the others (Dimayuga v. Court of
million, the aggregate of the claims in these Industrial Relations, 101 Phil. 590 [1957]). For this matter, the
cases. It is, likewise, not improbable that claimants who worked in Bahrain can not be allowed to sue in
their misplaced zeal and exuberance caused a class suit in a judicial proceeding. The most that can be
them to throw all caution to the wind in the accorded to them under the Rules of Court is to be allowed to
matter of elementary rules of procedure and join as plaintiffs in one complaint (Revised Rules of Court, Rule
evidence (Rollo, pp. 58-59). 3, Sec. 6).
Adding to the confusion in the proceedings before NLRC, is the The Court is extra-cautious in allowing class suits because
listing of some of the complainants in both petitions filed by the they are the exceptions to the condition sine qua non, requiring
two lawyers. As noted by NLRC, "the problem created by this the joinder of all indispensable parties.
situation is that if one of the two petitions is dismissed, then the
parties and the public respondents would not know which claim In an improperly instituted class suit, there would be no
of which petitioner was dismissed and which was not." problem if the decision secured is favorable to the plaintiffs.
The problem arises when the decision is adverse to them, in
B. Claimants insist that all their claims could properly be which case the others who were impleaded by their self-
consolidated in a "class suit" because "all the named appointed representatives, would surely claim denial of due
complainants have similar money claims and similar rights process.
sought irrespective of whether they worked in Bahrain, United
Arab Emirates or in Abu Dhabi, Libya or in any part of the C. The claimants in G.R. No. 104776 also urged that the POEA
Middle East" (Rollo, pp. 35-38). Administrator and NLRC should have declared Atty. Florante
De Castro guilty of "forum shopping, ambulance chasing
activities, falsification, duplicity and other unprofessional
activities" and his appearances as counsel for some of the therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-
claimants as illegal (Rollo, pp. 38-40). 22).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is Claimants presented a Memorandum of the Ministry of Labor of
intended to put a stop to the practice of some parties of filing Bahrain dated April 16, 1983, which in pertinent part states:
multiple petitions and complaints involving the same issues,
with the result that the courts or agencies have to resolve the After the perusal of the memorandum of the
same issues. Said Rule, however, applies only to petitions filed Vice President and the Area Manager,
with the Supreme Court and the Court of Appeals. It is entitled Middle East, of Brown & Root Co. and the
"Additional Requirements For Petitions Filed with the Supreme Summary of the compensation offered by the
Court and the Court of Appeals To Prevent Forum Shopping or Company to the employees in respect of the
Multiple Filing of Petitioners and Complainants." The first difference of pay of the wages of the
sentence of the circular expressly states that said circular overtime and the difference of vacation leave
applies to an governs the filing of petitions in the Supreme and the perusal of the documents attached
Court and the Court of Appeals. thereto i.e., minutes of the meetings between
the Representative of the employees and the
While Administrative Circular No. 04-94 extended the management of the Company, the complaint
application of the anti-forum shopping rule to the lower courts filed by the employees on 14/2/83 where
and administrative agencies, said circular took effect only on they have claimed as hereinabove stated,
April 1, 1994. sample of the Service Contract executed
between one of the employees and the
POEA and NLRC could not have entertained the complaint for company through its agent in (sic)
unethical conduct against Atty. De Castro because NLRC and Philippines, Asia International Builders
POEA have no jurisdiction to investigate charges of unethical Corporation where it has been provided for
conduct of lawyers. 48 hours of work per week and an annual
leave of 12 days and an overtime wage of 1
Attorney's Lien & 1/4 of the normal hourly wage.
The "Notice and Claim to Enforce Attorney's Lien" dated xxx xxx xxx
December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to
protect his claim for attorney's fees for legal services rendered The Company in its computation reached the
in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844). following averages:
A statement of a claim for a charging lien shall be filed with the A. 1. The average duration of the actual
court or administrative agency which renders and executes the service of the employee is 35 months for the
money judgment secured by the lawyer for his clients. The Philippino (sic) employees . . . .
lawyer shall cause written notice thereof to be delivered to his
clients and to the adverse party (Revised Rules of Court, Rule 2. The average wage per hour for the
138, Sec. 37). The statement of the claim for the charging lien Philippino (sic) employee is US$2.69 . . . .
of Atty. Del Mundo should have been filed with the
administrative agency that rendered and executed the 3. The average hours for the overtime is 3
judgment. hours plus in all public holidays and
weekends.
Contempt of Court
4. Payment of US$8.72 per months (sic) of
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. service as compensation for the difference of
Florante De Castro and Atty. Katz Tierra for violation of the the wages of the overtime done for each
Code of Professional Responsibility should be filed in a Philippino (sic) employee . . . (Rollo, p.22).
separate and appropriate proceeding.
BRII and AIBC countered: (1) that the Memorandum was not
G.R. No. 104911-14 prepared by them but by a subordinate official in the Bahrain
Department of Labor; (2) that there was no showing that the
Claimants charge NLRC with grave abuse of discretion in not Bahrain Minister of Labor had approved said memorandum;
accepting their formula of "Three Hours Average Daily and (3) that the offer was made in the course of the negotiation
Overtime" in computing the overtime payments. They claim for an amicable settlement of the claims and therefore it was
that it was BRII itself which proposed the formula during the not admissible in evidence to prove that anything is due to the
negotiations for the settlement of their claims in Bahrain and claimants.
While said document was presented to the POEA without The Employee agrees that while in the
observing the rule on presenting official documents of a foreign employ of the Employer, he will not engage
government as provided in Section 24, Rule 132 of the 1989 in any other business or occupation, nor
Revised Rules on Evidence, it can be admitted in evidence in seek employment with anyone other than the
proceedings before an administrative body. The opposing Employer; that he shall devote his entire time
parties have a copy of the said memorandum, and they could and attention and his best energies, and
easily verify its authenticity and accuracy. abilities to the performance of such duties as
may be assigned to him by the Employer;
The admissibility of the offer of compromise made by BRII as that he shall at all times be subject to the
contained in the memorandum is another matter. Under direction and control of the Employer; and
Section 27, Rule 130 of the 1989 Revised Rules on Evidence, that the benefits provided to Employee
an offer to settle a claim is not an admission that anything is hereunder are substituted for and in lieu of
due. all other benefits provided by any applicable
law, provided of course, that total
Said Rule provides: remuneration and benefits do not fall below
that of the host country regulation or custom,
it being understood that should applicable
Offer of compromise not admissible. — In
laws establish that fringe benefits, or other
civil cases, an offer of compromise is not an
such benefits additional to the compensation
admission of any liability, and is not
herein agreed cannot be waived, Employee
admissible in evidence against the offeror.
agrees that such compensation will be
adjusted downward so that the total
This Rule is not only a rule of procedure to avoid the cluttering compensation hereunder, plus the non-
of the record with unwanted evidence but a statement of public waivable benefits shall be equivalent to the
policy. There is great public interest in having the protagonists compensation herein agreed (Rollo, pp. 352-
settle their differences amicable before these ripen into 353).
litigation. Every effort must be taken to encourage them to
arrive at a settlement. The submission of offers and counter-
The overseas-employment contracts could have been drafted
offers in the negotiation table is a step in the right direction. But
more felicitously. While a part thereof provides that the
to bind a party to his offers, as what claimants would make this
compensation to the employee may be "adjusted downward so
Court do, would defeat the salutary purpose of the Rule.
that the total computation (thereunder) plus the non-waivable
benefits shall be equivalent to the compensation" therein
G.R. Nos. 105029-32 agreed, another part of the same provision categorically states
"that total remuneration and benefits do not fall below that of
A. NLRC applied the Amiri Decree No. 23 of 1976, which the host country regulation and custom."
provides for greater benefits than those stipulated in the
overseas-employment contracts of the claimants. It was of the Any ambiguity in the overseas-employment contracts should
belief that "where the laws of the host country are more be interpreted against AIBC and BRII, the parties that drafted it
favorable and beneficial to the workers, then the laws of the (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93
host country shall form part of the overseas employment SCRA 257 [1979]).
contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the
Article 1377 of the Civil Code of the Philippines provides:
implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor"
(Rollo, pp. 90-94). The interpretation of obscure words or
stipulations in a contract shall not favor the
party who caused the obscurity.
AIBC and BRII claim that NLRC acted capriciously and
whimsically when it refused to enforce the overseas-
employment contracts, which became the law of the parties. Said rule of interpretation is applicable to contracts of adhesion
They contend that the principle that a law is deemed to be a where there is already a prepared form containing the
part of a contract applies only to provisions of Philippine law in stipulations of the employment contract and the employees
relation to contracts executed in the Philippines. merely "take it or leave it." The presumption is that there was
an imposition by one party against the other and that the
employees signed the contracts out of necessity that reduced
The overseas-employment contracts, which were prepared by
their bargaining power (Fieldmen's Insurance Co., Inc. v.
AIBC and BRII themselves, provided that the laws of the host
Songco, 25 SCRA 70 [1968]).
country became applicable to said contracts if they offer terms
and conditions more favorable that those stipulated therein. It
was stipulated in said contracts that: Applying the said legal precepts, we read the overseas-
employment contracts in question as adopting the provisions of
the Amiri Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be B. AIBC and BRII claim that they were denied by NLRC of their
governed (Cheshire, Private International Law, 187 [7th ed.]). right to due process when said administrative agency granted
In such a case, the foreign law is adopted as a "system" to Friday-pay differential, holiday-pay differential, annual-leave
regulate the relations of the parties, including questions of their differential and leave indemnity pay to the claimants listed in
capacity to enter into the contract, the formalities to be Annex B of the Resolution. At first, NLRC reversed the
observed by them, matters of performance, and so forth (16 resolution of the POEA Administrator granting these benefits
Am Jur 2d, on a finding that the POEA Administrator failed to consider the
150-161). evidence presented by AIBC and BRII, that some findings of
fact of the POEA Administrator were not supported by the
Instead of adopting the entire mass of the foreign law, the evidence, and that some of the evidence were not disclosed to
parties may just agree that specific provisions of a foreign AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of
statute shall be deemed incorporated into their contract "as a remanding the case to the POEA Administrator for a new
set of terms." By such reference to the provisions of the foreign hearing, which means further delay in the termination of the
law, the contract does not become a foreign contract to be case, NLRC decided to pass upon the validity of the claims
governed by the foreign law. The said law does not operate as itself. It is this procedure that AIBC and BRII complain of as
a statute but as a set of contractual terms deemed written in being irregular and a "reversible error."
the contract (Anton, Private International Law, 197 [1967];
Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]). They pointed out that NLRC took into consideration evidence
submitted on appeal, the same evidence which NLRC found to
A basic policy of contract is to protect the expectation of the have been "unilaterally submitted by the claimants and not
parties (Reese, Choice of Law in Torts and Contracts, 16 disclosed to the adverse parties" (Rollo, pp. 37-39).
Columbia Journal of Transnational Law 1, 21 [1977]). Such
party expectation is protected by giving effect to the parties' NLRC noted that so many pieces of evidentiary matters were
own choice of the applicable law (Fricke v. Isbrandtsen Co., submitted to the POEA administrator by the claimants after the
Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, cases were deemed submitted for resolution and which were
however, bear some relationship to the parties or their taken cognizance of by the POEA Administrator in resolving
transaction (Scoles and Hayes, Conflict of Law 644-647 the cases. While AIBC and BRII had no opportunity to refute
[1982]). There is no question that the contracts sought to be said evidence of the claimants before the POEA Administrator,
enforced by claimants have a direct connection with the they had all the opportunity to rebut said evidence and to
Bahrain law because the services were rendered in that present their
country. counter-evidence before NLRC. As a matter of fact, AIBC and
BRII themselves were able to present before NLRC additional
In Norse Management Co. (PTE) v. National Seamen Board, evidence which they failed to present before the POEA
117 SCRA 486 (1982), the "Employment Agreement," between Administrator.
Norse Management Co. and the late husband of the private
respondent, expressly provided that in the event of illness or Under Article 221 of the Labor Code of the Philippines, NLRC
injury to the employee arising out of and in the course of his is enjoined to "use every and all reasonable means to ascertain
employment and not due to his own misconduct, the facts in each case speedily and objectively and without
"compensation shall be paid to employee in accordance with regard to technicalities of law or procedure, all in the interest of
and subject to the limitation of the Workmen's Compensation due process."
Act of the Republic of the Philippines or the Worker's Insurance
Act of registry of the vessel, whichever is greater." Since the In deciding to resolve the validity of certain claims on the basis
laws of Singapore, the place of registry of the vessel in which of the evidence of both parties submitted before the POEA
the late husband of private respondent served at the time of his Administrator and NLRC, the latter considered that it was not
death, granted a better compensation package, we applied expedient to remand the cases to the POEA Administrator for
said foreign law in preference to the terms of the contract. that would only prolong the already protracted legal
controversies.
The case of Bagong Filipinas Overseas Corporation v. National
Labor Relations Commission, 135 SCRA 278 (1985), relied Even the Supreme Court has decided appealed cases on the
upon by AIBC and BRII is inapposite to the facts of the cases merits instead of remanding them to the trial court for the
at bench. The issue in that case was whether the amount of reception of evidence, where the same can be readily
the death compensation of a Filipino seaman should be determined from the uncontroverted facts on record
determined under the shipboard employment contract (Development Bank of the Philippines v. Intermediate Appellate
executed in the Philippines or the Hongkong law. Holding that Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor
the shipboard employment contract was controlling, the court Relations Commission, 127 SCRA 463 [1984]).
differentiated said case from Norse Management Co. in that in
the latter case there was an express stipulation in the C. AIBC and BRII charge NLRC with grave abuse of discretion
employment contract that the foreign law would be applicable if when it ordered the POEA Administrator to hold new hearings
it afforded greater compensation. for 683 claimants listed in Annex D of the Resolution dated
September 2, 1991 whose claims had been denied by the 5. DURATION OF EMPLOYMENT AND
POEA Administrator "for lack of proof" and for 69 claimants PENALTY
listed in Annex E of the same Resolution, whose claims had
been found by NLRC itself as not "supported by evidence" This agreement is for a period of three (3)
(Rollo, pp. 41-45). years, but can be extended by the mutual
consent of the parties.
NLRC based its ruling on Article 218(c) of the Labor Code of
the Philippines, which empowers it "[to] conduct investigation xxx xxx xxx
for the determination of a question, matter or controversy,
within its jurisdiction, . . . ." 6. TERMINATION
It is the posture of AIBC and BRII that NLRC has no authority xxx xxx xxx
under Article 218(c) to remand a case involving claims which
had already been dismissed because such provision
Notwithstanding anything to contrary as
contemplates only situations where there is still a question or
herein provided, PIA reserves the right to
controversy to be resolved (Rollo, pp. 41-42).
terminate this agreement at any time by
giving the EMPLOYEE notice in writing in
A principle well embedded in Administrative Law is that the advance one month before the intended
technical rules of procedure and evidence do not apply to the termination or in lieu thereof, by paying the
proceedings conducted by administrative agencies (First Asian EMPLOYEE wages equivalent to one
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 month's salary.
[1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA
219 [1987]). This principle is enshrined in Article 221 of the
xxx xxx xxx
Labor Code of the Philippines and is now the bedrock of
proceedings before NLRC.
10. APPLICABLE LAW:
Notwithstanding the non-applicability of technical rules of
procedure and evidence in administrative proceedings, there This agreement shall be construed and
are cardinal rules which must be observed by the hearing governed under and by the laws of Pakistan,
officers in order to comply with the due process requirements and only the Courts of Karachi, Pakistan
of the Constitution. These cardinal rules are collated in Ang shall have the jurisdiction to consider any
Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940). matter arising out of or under this agreement.
b) In England, in its High Court of Justice, Queens Bench c) Under English Law, which is the governing law under the
Division, Commercial Court (1992-Folio No. 2245) against El principal agreements, the mortgagee does not lose its security
Challenger S.A., Espriona Shipping Company S.A., Eduardo interest by filing civil actions for sums of money.
Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;
On 14 December 1993, private respondent filed a motion for
c) In Hongkong, in the Supreme Court of Hongkong High Court suspension of the redemption period on the ground that it
(Action No. 4039 of 1992) against Eshley Compania Naviera cannot exercise said right of redemption without at the same
S.A., El Challenger S.A., Espriona Shipping Company S.A. time waiving or contradicting its contentions in the case that the
Pacific Navigators Corporation, Eddie Navigation Corporation foreclosure of the mortgage on its properties is legally improper
S.A., Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan and therefore invalid.
Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19,
1992; and In an order dated 28 January 1994, the trial court granted the
private respondents motion for suspension after which a copy
d) In Hongkong, in the Supreme Court of Hongkong High Court of said order was duly received by the Register of Deeds of
(Action No. 4040 of 1992) against Eshley Compania Naviera Meycauayan, Bulacan.
S.A., El Challenger S.A., Espriona Shipping Company, S.A.,
Pacific Navigators Corporation, Eddie Navigation Corporation On 07 February 1994, ICCS, the purchaser of the mortgaged
S.A., Litonjua Chartering (Edyship) Co., Jr. and Eduardo properties at the foreclosure sale, consolidated its ownership
Katipunan Litonjua on November 21, 1992. over the real properties, resulting to the issuance of Transfer
Certificate of Title Nos. T-18627, T-186272, T-186273, T-
In the civil suits instituted before the foreign courts, private 16471 and T-16472 in its name.
respondent ARC, being a third party mortgagor, was not
impleaded as party-defendant. On 18 March 1994, after the consolidation of ownership in its
favor, ICCS sold the real properties to Stateland Investment
On 16 December 1992, petitioner BANTSA filed before the Corporation for the amount of Thirty Nine Million Pesos
Office of the Provincial Sheriff of Bulacan, Philippines, an (P39,000,000.00). Accordingly, Transfer Certificate of Title
application for extrajudicial foreclosure of real estate mortgage. Nos. T-187781(m), T-187782(m), T-187783(m), T-16653P(m)
and T-16652P(m) were issued in the latters name.
On 22 January 1993, after due publication and notice, the
mortgaged real properties were sold at public auction in an After trial, the lower court rendered a decision in favor of
extrajudicial foreclosure sale, with Integrated Credit and private respondent ARC dated 12 May 1993, the decretal
Corporation Services Co. (ICCS) as the highest bidder for the portion of which reads:
sum of Twenty Four Million Pesos (P24,000,000.00).
WHEREFORE, judgment is hereby rendered declaring that the
On 12 February 1993, private respondent filed before the Pasig filing in foreign courts by the defendant of collection suits
Regional Trial Court, Branch 159, an action for damages
against the principal debtors operated as a waiver of the The petition is bereft of merit.
security of the mortgages. Consequently, the plaintiffs rights as
owner and possessor of the properties then covered by First, as to the issue of availability of remedies, petitioner
Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, submits that a waiver of the remedy of foreclosure requires the
T-78760 and T-78761, all of the Register of Deeds of concurrence of two requisites: an ordinary civil action for
Meycauayan, Bulacan, Philippines, were violated when the collection should be filed and subsequently a final judgment be
defendant caused the extrajudicial foreclosure of the correspondingly rendered therein.
mortgages constituted thereon.
According to petitioner, the mere filing of a personal action to
Accordingly, the defendant is hereby ordered to pay the plaintiff collect the principal loan does not suffice; a final judgment must
the following sums, all with legal interest thereon from the date be secured and obtained in the personal action so that waiver
of the filing of the complaint up to the date of actual payment: of the remedy of foreclosure may be appreciated. To put it
differently, absent any of the two requisites, the mortgagee-
1) Actual or compensatory damages in the amount of Ninety creditor is deemed not to have waived the remedy of
Nine Million Pesos (P99,000,000.00); foreclosure.
1. Whether or not the petitioners act of filing a collection suit In Danao vs. Court of Appeals, this Court, reiterating
against the principal debtors for the recovery of the loan before jurisprudence enunciated in Manila Trading and Supply Co.
foreign courts constituted a waiver of the remedy of vs. Co Kimand Movido vs. RFC, invariably held:
foreclosure.
x x x The rule is now settled that a mortgage creditor may elect
2. Whether or not the award by the lower court of actual and to waive his security and bring, instead, an ordinary action to
exemplary damages in favor of private respondent ARC, as recover the indebtedness with the right to execute a judgment
third-party mortgagor, is proper. thereon on all the properties of the debtor, including the subject
matter of the mortgage x x x, subject to the qualification that if Contrary to petitioners arguments, we therefore reiterate the
he fails in the remedy by him elected, he cannot pursue further rule, for clarity and emphasis, that the mere act of filing of an
the remedy he has waived. (Underscoring Ours) ordinary action for collection operates as a waiver of the
mortgage-creditors remedy to foreclose the mortgage. By the
Anent real properties in particular, the Court has laid down the mere filing of the ordinary action for collection against the
rule that a mortgage creditor may institute against the principal debtors, the petitioner in the present case is deemed
mortgage debtor either a personal action for debt or a real to have elected a remedy, as a result of which a waiver of the
action to foreclose the mortgage. other necessarily must arise. Corollarily, no final judgment in
the collection suit is required for the rule on waiver to apply.
In our jurisdiction, the remedies available to the mortgage
creditor are deemed alternative and not cumulative. Notably, Hence, in Caltex Philippines, Inc. vs. Intermediate
an election of one remedy operates as a waiver of the other. Appellate Court, a case relied upon by petitioner, supposedly
For this purpose, a remedy is deemed chosen upon the filing of to buttress its contention, this Court had occasion to rule that
the suit for collection or upon the filing of the complaint in an the mere act of filing a collection suit for the recovery of a debt
action for foreclosure of mortgage, pursuant to the provision of secured by a mortgage constitutes waiver of the other remedy
Rule 68 of the 1997 Rules of Civil Procedure. As to of foreclosure.
extrajudicial foreclosure, such remedy is deemed elected by
the mortgage creditor upon filing of the petition not with any In the case at bar, petitioner BANTSA only has one cause of
court of justice but with the Office of the Sheriff of the province action which is non-payment of the debt. Nevertheless,
where the sale is to be made, in accordance with the alternative remedies are available for its enjoyment and
provisions of Act No. 3135, as amended by Act No. 4118. exercise. Petitioner then may opt to exercise only one of two
remedies so as not to violate the rule against splitting a cause
In the case at bench, private respondent ARC constituted real of action.
estate mortgages over its properties as security for the debt of
the principal debtors. By doing so, private respondent As elucidated by this Court in the landmark case of Bachrach
subjected itself to the liabilities of a third party mortgagor. Motor Co., Inc. vs. Icarangal.
Under the law, third persons who are not parties to a loan may
secure the latter by pledging or mortgaging their own property. For non-payment of a note secured by mortgage, the creditor
has a single cause of action against the debtor. This single
Notwithstanding, there is no legal provision nor jurisprudence cause of action consists in the recovery of the credit with
in our jurisdiction which makes a third person who secures the execution of the security. In other words, the creditor in his
fulfillment of anothers obligation by mortgaging his own action may make two demands, the payment of the debt and
property, to be solidarily bound with the principal obligor. The the foreclosure of his mortgage. But both demands arise from
signatory to the principal contractloanremains to be primarily the same cause, the non-payment of the debt, and for that
bound. It is only upon default of the latter that the creditor may reason, they constitute a single cause of action. Though the
have recourse on the mortgagors by foreclosing the mortgaged debt and the mortgage constitute separate agreements, the
properties in lieu of an action for the recovery of the amount of latter is subsidiary to the former, and both refer to one and the
the loan. same obligation. Consequently, there exists only one cause of
action for a single breach of that obligation. Plaintiff, then, by
In the instant case, petitioners contention that the requisites of applying the rules above stated, cannot split up his single
filing the action for collection and rendition of final judgment cause of action by filing a complaint for payment of the debt,
therein should concur, is untenable. and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar
Thus, in Cerna vs. Court of Appeals, we agreed with the the subsequent complaint. By allowing the creditor to file two
petitioner in said case, that the filing of a collection suit barred separate complaints simultaneously or successively, one to
the foreclosure of the mortgage: 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
A mortgagee who files a suit for collection abandons the
much vexation and oppression to the debtor.
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 Petitioner further faults the Court of Appeals for allegedly
collection suit. disregarding the doctrine enunciated in Caltex, wherein this
High Court relaxed the application of the general rules to wit:
Moreover, petitioner attempts to mislead this Court by citing the In a long line of decisions, this Court adopted the well-
case of PCIB vs. IAC. Again, petitioner tried to fit a square peg imbedded principle in our jurisdiction that there is no judicial
in a round hole. It must be stressed that far from overturning notice of any foreign law. A foreign law must be properly
the doctrine laid down in Bachrach, this Court in PCIB pleaded and proved as a fact. Thus, if the foreign law involved
buttressed its firm stand on this issue by declaring: is not properly pleaded and proved, our courts will presume
that the foreign law is the same as our local or domestic or
While the law allows a mortgage creditor to either institute a internal law. This is what we refer to as the doctrine of
personal action for the debt or a real action to foreclosure the processual presumption.
mortgage, he cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case. In the instant case, assuming arguendo that the English Law
on the matter were properly pleaded and proved in accordance
xxxxxxxxx with Section 24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales,
Thus, when the PCIB filed Civil Case No. 29392 to enforce said foreign law would still not find applicability.
payment of the 1.3 million promissory note secured by real
Thus, when the foreign law, judgment or contract is contrary to report, as the records would readily show, was corroborated by
a sound and established public policy of the forum, the said the testimony of Mr. Reynaldo Flores, witness for private
foreign law, judgment or order shall not be applied. respondent.
Additionally, prohibitive laws concerning persons, their acts or On this matter, the trial court observed:
property, and those which have for their object public order,
public policy and good customs shall not be rendered The record herein reveals that plaintiff-appellee formally
ineffective by laws or judgments promulgated, or by offered as evidence the appraisal report dated March 29, 1993
determinations or conventions agreed upon in a foreign (Exhibit J, Records, p. 409), consisting of twenty three (23)
country. 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 public policy sought to be protected in the instant case is the amount of P99,986,592.00 (TSN, ibid., p. 5), together with
the principle imbedded in our jurisdiction proscribing the the corroborative testimony of one Mr. Reynaldo F. Flores, an
splitting up of a single cause of action. appraiser and director of Philippine Appraisal Company, Inc.
(TSN, ibid., p. 3). The latters testimony was subjected to
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is extensive cross-examination by counsel for defendant-
pertinent - appellant (TSN, April 22, 1994, pp. 6-22).
If two or more suits are instituted on the basis of the same In the matter of credibility of witnesses, the Court reiterates the
cause of action, the filing of one or a judgment upon the merits familiar and well-entrenched rule that the factual findings of the
in any one is available as a ground for the dismissal of the trial court should be respected. The time-tested jurisprudence
others. is that the findings and conclusions of the trial court on the
credibility of witnesses enjoy a badge of respect for the reason
Moreover, foreign law should not be applied when its that trial courts have the advantage of observing the demeanor
application would work undeniable injustice to the citizens or of witnesses as they testify.
residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is This Court will not alter the findings of the trial court on the
obviously unjust negates the fundamental principles of Conflict credibility of witnesses, principally because they are in a better
of Laws. position to assess the same than the appellate court. Besides,
trial courts are in a better position to examine real evidence as
Clearly then, English Law is not applicable. well as observe the demeanor of witnesses.
As to the second pivotal issue, we hold that the private Similarly, the appreciation of evidence and the assessment of
respondent is entitled to the award of actual or compensatory the credibility of witnesses rest primarily with the trial court. In
damages inasmuch as the act of petitioner BANTSA in the case at bar, we see no reason that would justify this Court
extrajudicially foreclosing the real estate mortgages constituted to disturb the factual findings of the trial court, as affirmed by
a clear violation of the rights of herein private respondent ARC, the Court of Appeals, with regard to the award of actual
as third-party mortgagor. damages.
Actual or compensatory damages are those recoverable In arriving at the amount of actual damages, the trial court
because of pecuniary loss in business, trade, property, justified the award by presenting the following ratiocination in
profession, job or occupation and the same must be proved, its assailed decision, to wit:
otherwise if the proof is flimsy and non-substantial, no
damages will be given. Indeed, the question of the value of Indeed, the Court has its own mind in the matter of valuation.
property is always a difficult one to settle as valuation of real The size of the subject real properties are (sic) set forth in their
property is an imprecise process since real estate has no individual titles, and the Court itself has seen the character and
inherent value readily ascertainable by an appraiser or by the nature of said properties during the ocular inspection it
court. The opinions of men vary so much concerning the real conducted. Based principally on the foregoing, the Court
value of property that the best the courts can do is hear all of makes the following observations:
the witnesses which the respective parties desire to present,
and then, by carefully weighing that testimony, arrive at a 1. The properties consist of about 39 hectares in Bo. Sto.
conclusion which is just and equitable. Cristo, San Jose del Monte, Bulacan, which is (sic) not distant
from Metro Manila the biggest urban center in the Philippines
In the instant case, petitioner assails the Court of Appeals for and are easily accessible through well-paved roads;
relying heavily on the valuation made by Philippine Appraisal
Company. In effect, BANTSA questions the act of the appellate 2. The properties are suitable for development into a
court in giving due weight to the appraisal report composed of subdivision for low cost housing, as admitted by defendants
twenty three pages, signed by Mr. Lauro Marquez and own appraiser (TSN, May 30, 1994, p. 31);
submitted as evidence by private respondent. The appraisal
3. The pigpens which used to exist in the property have already Further, petitioner ascribes error to the lower court for awarding
been demolished. Houses of strong materials are found in the an amount allegedly not asked nor prayed for in private
vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a respondents complaint.
growing community. It has even been shown that the house of
the Barangay Chairman is located adjacent to the property in Notwithstanding the fact that the award of actual and
question (Exh. 27), and the only remaining piggery (named compensatory damages by the lower court exceeded that
Cherry Farm) in the vicinity is about 2 kilometers away from the prayed for in the complaint, the same is nonetheless valid,
western boundary of the property in question (TSN, November subject to certain qualifications.
19, p. 3);
On this issue, Rule 10, Section 5 of the Rules of Court is
4. It will not be hard to find interested buyers of the property, as pertinent:
indubitably shown by the fact that on March 18, 1994, ICCS
(the buyer during the foreclosure sale) sold the consolidated SEC. 5. Amendment to conform to or authorize presentation of
real estate properties to Stateland Investment Corporation, in evidence. When issues not raised by the pleadings are tried
whose favor new titles were issued, i.e., TCT Nos. T- with the express or implied consent of the parties, they shall be
187781(m); T-187782(m), T-187783(m); T-16653P(m) and T- treated in all respects as if they had been raised in the
166521(m) by the Register of Deeds of Meycauayan (sic), pleadings. Such amendment of the pleadings as may be
Bulacan; necessary to cause them to conform to the evidence and to
raise these issues may be made upon motion of any party at
5. The fact that ICCS was able to sell the subject properties to any time, even after judgement; but failure to amend does not
Stateland Investment Corporation for Thirty Nine Million affect the result of the trial of these issues. If evidence is
(P39,000,000.00) Pesos, which is more than triple defendants objected to at the trial on the ground that it is not within the
appraisal (Exh. 2) clearly shows that the Court cannot rely on issues made by the pleadings, the court may allow the
defendants aforesaid estimate (Decision, Records, p. 603). pleadings to be amended and shall do so with liberality if the
presentation of the merits of the action and the ends of
It is a fundamental legal aphorism that the conclusions of the substantial justice will be subserved thereby. The court may
trial judge on the credibility of witnesses command great grant a continuance to enable the amendment to be made.
respect and consideration especially when the conclusions are
supported by the evidence on record. Applying the foregoing The jurisprudence enunciated in Talisay-Silay Milling Co.,
principle, we therefore hold that the trial court committed no Inc. vs. Asociacion de Agricultures de Talisay-Silay, Inc.
palpable error in giving credence to the testimony of Reynaldo citing Northern Cement Corporation vs. Intermediate
Flores, who according to the records, is a licensed real estate Appellate Court is enlightening:
broker, appraiser and director of Philippine Appraisal
Company, Inc. since 1990. As the records show, Flores had There have been instances where the Court has held that even
been with the company for 26 years at the time of his without the necessary amendment, the amount proved at the
testimony. trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil.
106), where we said that if the facts shown entitled plaintiff to
Of equal importance is the fact that the trial court did not relief other than that asked for, no amendment to the complaint
confine itself to the appraisal report dated 29 March 1993, and was necessary, especially where defendant had himself raised
the testimony given by Mr. Reynaldo Flores, in determining the the point on which recovery was based. The appellate court
fair market value of the real property. Above all these, the could treat the pleading as amended to conform to the
record would likewise show that the trial judge in order to evidence although the pleadings were actually not amended.
appraise himself of the characteristics and condition of the Amendment is also unnecessary when only clerical error or
property, conducted an ocular inspection where the opposing non substantial matters are involved, as we held in Bank of the
parties appeared and were duly represented. Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs.
Diaz (75 Phil. 672), we stressed that the rule on amendment
Based on these considerations and the evidence submitted, we need not be applied rigidly, particularly where no surprise or
affirm the ruling of the trial court as regards the valuation of the prejudice is caused the objecting party. And in the recent case
property of National Power Corporation vs. Court of Appeals (113 SCRA
556), we held that where there is a variance in the defendants
x x x a valuation of Ninety Nine Million Pesos (P99,000,000.00) pleadings and the evidence adduced by it at the trial, the Court
for the 39-hectare properties (sic) translates to just about Two may treat the pleading as amended to conform with the
Hundred Fifty Four Pesos (P254.00) per square meter. This evidence.
appears to be, as the court so holds, a better approximation of
the fair market value of the subject properties. This is the It is the view of the Court that pursuant to the above-mentioned
amount which should be restituted by the defendant to the rule and in light of the decisions cited, the trial court should not
plaintiff by way of actual or compensatory damages x x x. 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, our view, an award of P50,000.00 as exemplary damages in
with full opportunity on the part of the opposing parties to the present case qualifies the test of reasonableness.
support their respective contentions and to refute each others
evidence. WHEREFORE, premises considered, the instant petition is
DENIED for lack of merit. The decision of the Court of Appeals
The failure of a party to amend a pleading to conform to the is hereby AFFIRMED with MODIFICATION of the amount
evidence adduced during trial does not preclude an awarded as exemplary damages. Accordingly, petitioner is
adjudication by the court on the basis of such evidence which hereby ordered to pay private respondent the sum of
may embody new issues not raised in the pleadings, or serve P99,000,000.00 as actual or compensatory damages;
as a basis for a higher award of damages. Although the P50,000.00 as exemplary damage and the costs of suit. SO
pleading may not have been amended to conform to the ORDERED.
evidence submitted during trial, judgment may nonetheless be
rendered, not simply on the basis of the issues alleged but also
SOORAJMULL NAGARMULL vs. BINALBAGAN-ISABELA
on the basis of issues discussed and the assertions of fact
SUGAR COMPANY, INC., defendant-appellant.; G.R. No. L-
proved in the course of trial. The court may treat the pleading
22470 May 28, 1970; DIZON, J.:
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: Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from
the decision of the Court of First Instance of Manila in Civil
Case No. 41103 entitled Soorajmull Nagarmull vs. Binalbagan-
`When evidence is presented by one party, with the expressed
Isabela Sugar Company, Inc." of the following tenor:
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 IN VIEW OF ALL THE FOREGOING,
been raised in the pleadings. There is implied consent to the judgment is hereby rendered in favor of the
evidence thus presented when the adverse party fails to object plaintiff, Soorajmull Nagarmull, ordering the
thereto. defendant, Binalbagan-Isabela Sugar Co.,
Inc. to pay said plaintiff the sum of 18,562
rupees and 8 annas, with reservation for the
Clearly, a court may rule and render judgment on the basis of
plaintiff to prove its equivalent in Philippine
the evidence before it even though the relevant pleading had
pesos on the date of the filing of the
not been previously amended, so long as no surprise or
complaint, plus the costs of suit.
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 The parties submitted to the trial court the following, stipulation
of facts:
support their respective contentions and to object to or refute
each others evidence, the court may validly treat the pleadings
as if they had been amended to conform to the evidence and 1. Under Contract G/14370 dated May 6,
proceed to adjudicate on the basis of all the evidence before it. 1949, plaintiff, a foreign corporation with
offices at No. 8 Dalhousie Square (East)
In the instant case, inasmuch as the petitioner was afforded the Calcutta, India, agreed to sell to defendant, a
opportunity to refute and object to the evidence, both domestic corporation with offices at the
documentary and testimonial, formally offered by private Chronicle Building, Aduana Street, Manila,
respondent, the rudiments of fair play are deemed satisfied. In 1,700,000 pieces of Hessian bags at $26.20
per 100 bags, C.I.F. Iloilo. Shipment of these
fact, the testimony of Reynaldo Flores was put under scrutiny
during the course of the cross-examination. Under these bags was to be made in equal installments of
circumstances, the court acted within the bounds of its 425,000 pcs. or 425 bales (1,000 pcs. to a
jurisdiction and committed no reversible error in awarding bale during each of the months of July,
actual damages the amount of which is higher than that prayed August, September and October, 1949. A
for. Verily, the lower courts actuations are sanctioned by the copy of this contract marked Annex 'A' and
Rules and supported by jurisprudence. the Calcutta Jute Fabrics Shippers
Association Form 1935 which was made a
part of the contract and marked as Annex 'A-
Similarly, we affirm the grant of exemplary damages although
l' are hereto attached.
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 2. This agreement was confirmed in a letter
correction for the public good, in addition to the moral, by the plaintiff to the defendant on May 7,
temperate, liquidated or compensatory damages. Considering 1949, copy of which is attached hereto and
made a part hereof as Annex 'B'; .
its purpose, it must be fair and reasonable in every case and
should not be awarded to unjustly enrich a prevailing party. In
3. On September 8, 1949, plaintiff advised 1949. A copy of said letter is attached hereto
defendant that of the 850 bales scheduled as Annex 'H';
for shipment in July and August, the former
was able to ship only 310 bales owing to the 10. On February 6, 1951, defendant received
alleged failure of the Adamjee Jute Mills to notification from the Bengal Chamber of
supply the goods in due time. Copy of Commerce Tribunal of Arbitration in Calcutta,
plaintiff's letter is attached hereto as Annex India, advising it that on December 28, 1950,
'C' and made an integral part hereof; "4. In a Plaintiff applied to said Tribunal for
letter dated September 29, 1949, defendant arbitration regarding their claim. The Tribunal
requested plaintiff to ship 100 bales of the requested the defendant to send them its
540 bales defaulted from the July and version of the case. This, defendant did on
August shipments. A copy of this letter March 1, 1951, thru the then Government
marked Annex 'D' is hereto attached. In this Corporate Counsel, former Justice Pompeyo
connection, it may also be mentioned that of Diaz. A copy of the letter of authority is
the 425 bales scheduled for shipment in attached as Annex 'I';
September, 54 bales were likewise defaulted
resulting in a total of 154 bales which is now 11. The case was heard by the Tribunal of
the object of the controversy. Arbitration on July 5, 1951. Having
previously requested the Secretary Foreign
5. Defendant requested plaintiff to pay 5% of Affairs for Assistance, defendant was
the value of the 154 bales defaulted as represented at the hearing by the Philippine
penalty which plaintiff did. Consulate General in Calcutta, India, by
Consul Jose Moreno. A copy of the authority,
6. Meanwhile, on October 1, 1949, the consisting of the letter of Government
Government of India increased the export Corporate Counsel Pompeyo Diaz, dated
duty of jute bags from 80 to 350 rupees per March 1, 1951, and 1st Indorsement thereon,
ton, and on October 5, 1949, plaintiff dated March 2, 1951, are attached hereto as
requested defendant to increase its letter of Annexes 'J' and 'J-1';
credit to cover the enhanced rate of export
duty imposed upon the goods that were to be 12. As presented to the Tribunal of
shipped in October, reminding the latter that Arbitration, the whole case revolved on the
under their agreement, any alteration in question of whether or not defendant is liable
export duty was to be for the buyer's to the plaintiff for the payment of increased
account. Copy of plaintiff's letter is attached export taxes imposed by the Indian
hereto as Annex 'E'; Government on the shipments of jute sacks.
Defendant contended that if the jute sacks in
7. On October 25, 1949, defendant, in question were delivered by plaintiff in the
compliance with plaintiff's request, increased months of July, August, and September,
the amount of its letter of credit by 1949, pursuant to the terms of the contract,
$10,986.25 to cover the increase in export then there would have been no increased
duty on 425 bales scheduled under the export taxes to pay because said increased
contract for the shipment in October, 1949. A taxes became effective only on October 1,
copy of defendants letter marked Annex 'F' is 1949, while on the other hand, plaintiff
hereto attached; argued that the contract between the parties
and all papers and documents made parts
8. On October 27, 1949, plaintiff wrote to thereto should prevail, including defendant's
defendant for a further increase of $4,000.00 letter of September 29, 1949;
in its letter of credit to cover the shipment of
154 bales which under the contract should 13. The Bengal Chamber of Commerce,
have been included in the July, August and Tribunal of Arbitration, refused to sustain
September shipments. A copy of said letter defendant's contention and decided in favor
is attached hereto as Annex 'G'; of the plaintiff, ordering the defendant to pay
to the plaintiff the sum of 18,562 rupees and
9. On November 17, 1949, plaintiff wrote 8 annas. This award was thereafter referred
defendant a letter reiterating its claim for to the Calcutta High Court which issued a
$4,000.00 corresponding to the increased decree affirming the award;
export taxes on the 154 bales delivered to
defendant from the defaulted shipments for 14. For about two years, the plaintiff
the months of July, August and September, attempted to enforce the said award through
the Philippine Charge de'Affaires in Calcutta, Indian currency. The record does not disclose any evidence
the Indian Legation here in the Philippines, presented for that purpose subsequent to the rendition of
and the Department of Foreign Affairs. On judgment.
September 22, 1952, plaintiff, thru the
Department of Foreign Affairs, sought to To secure a reversal of the appealed decision appellant claims
enforce its claim to which letter defendant that the lower court committed the following errors:
replied on August 11, 1952, saying that they
are not bound by the decision of the Bengal I. THE LOWER COURT ERRED IN HOLDING
Chamber of Commerce and consequently THAT PLAINTIFF-APPELLEE, A FOREIGN
are not obligated to pay the claim in CORPORATION NOT LICENSED TO
question. Copies of said letters are attached TRANSACT BUSINESS IN THE PHILIPPINES,
hereto as Annexes 'K' and 'L', respectively; HAS THE RIGHT TO SUE IN PHILIPPINE
COURTS.
15. For more than three years thereafter, no II. THE LOWER COURT ERRED WHEN IT FAILED
communication was received by defendant TO CONSIDER PLAINTIFF-APPELLEE'S
from the plaintiff regarding their claim until DEFAULT, AND INSTEAD RELIED SOLELY ON
January 26, 1956, when Atty. S. Emiliano THE AWARD OF THE BENGAL CHAMBER OF
Calma wrote the defendant a letter of COMMERCE TRIBUNAL OF ARBITRATION.
demand, copy of which is attached hereto as III. THE LOWER COURT ERRED WHEN IT HELD
Annex 'M'; THAT PLAINTIFF-APPELLEE WAS NOT
GUILTY OF LACHES.
16. On February 3, 1956, defendant's
counsel replied informing Atty. S. Emiliano The main issue to be resolved is whether or not the decision of
Calma that it refuses to pay plaintiff's claim the Tribunal of Arbitration of the Bengal Chamber of
because the same has no foundation in law Commerce, as affirmed by the High Court of Judicature of
and in fact. A copy of this letter is attached Calcutta, is enforceable in the Philippines.
hereto as Annex 'N';
For the purpose of this decision We shall assume that appellee
17. Thereafter, no communication was — contrary to appellant's contention — has the right to sue in
received by defendant from plaintiff or its Philippine courts and that, as far as the instant case is
lawyers regarding their claim until June, concerned, it is not guilty of laches. This notwithstanding, We
1959, when the present complaint was filed. are constrained to reverse the appealed decision upon the
ground that it is based upon a clear mistake of law and its
FINALLY, parties thru their respective enforcement will give rise to a patent injustice.
counsel, state that much as they have
endeavored to agree on all matters of fact, It is true that under the provisions of Section 50 of Rule 39,
they have failed to do so on certain points. It Rules of Court, a judgment for a sum of money rendered by a
is, therefore respectfully prayed of this foreign court "is presumptive evidence of a right as between
Honorable Court that parties be allowed to the parties and their successors in interest by a subsequent
present evidence on the disputed facts. title", but when suit for its enforcement is brought in a
Philippine court, said judgment "may be repelled by evidence
Thereafter the parties submitted additional evidence pursuant of a want of jurisdiction, want of notice to the party, collusion,
to the reservation they made in the above stipulation. fraud, or clear mistake of law or fact" (Emphasis supplied.)
The appeal was elevated to the Court of Appeals but the latter, Upon the facts of record, We are constrained to hold that the
by its resolution of January 27, 1964, elevated it to this Court decision sought to be enforced was rendered upon a "clear
because the additional documents and oral evidence mistake of law" and because of that it makes appellant — an
presented by the parties did not raise any factual issue, and innocent party — suffer the consequences of the default or
said court further found that "the three assigned errors quoted breach of contract committed by appellee.
above all pose questions of law."
There is no question at all that appellee was guilty of a breach
As may be gathered from the pleadings and the facts of contract when it failed to deliver one-hundred fifty-four
stipulated, the action below was for the enforcement of a Hessian bales which, according to the contract entered into
foreign judgment: the decision rendered by the Tribunal of with appellant, should have been delivered to the latter in the
Arbitration of the Bengal Chamber of Commerce in Calcutta, months of July, August and September, all of the year 1949. It
India, as affirmed by the High Court of Judicature of Calcutta. is equally clear beyond doubt that had these one-hundred fifty-
The appealed decision provides for its enforcement subject to four bales been delivered in accordance with the contract
the right reserved to appellee to present evidence on the aforesaid, the increase in the export tax due upon them would
equivalent in Philippine currency of the amount adjudged in
not have been imposed because said increased export tax (hereinafter SHARP), a corporation incorporated under
became effective only on October 1, 1949. Philippine laws.
To avoid its liability for the aforesaid increase in the export tax, As found by the Court of Appeals in the challenged decision of
appellee claims that appellant should be held liable therefor on 10 November 1993, 1 the following are the factual and
the strength of its letter of September 29, 1949 asking appellee procedural antecedents of this controversy:
to ship the shortage. This argument is unavailing because it is
not only illogical but contrary to known principles of fairness On May 9, 1974, plaintiff Northwest Airlines
and justice. When appellant demanded that appellee deliver and defendant C.F. Sharp & Company,
the shortage of 154 bales it did nothing more than to demand through its Japan branch, entered into an
that to which it was entitled as a matter of right. The breach of International Passenger Sales Agency
contract committed by appellee gave appellant, under the law Agreement, whereby the former authorized
and even under general principles of fairness, the right to the latter to sell its air transportation tickets.
rescind the contract or to ask for its specific performance, in Unable to remit the proceeds of the ticket
either case with right to demand damages. Part of the sales made by defendant on behalf of the
damages appellant was clearly entitled to recover from plaintiff under the said agreement, plaintiff on
appellee growing out of the latter's breach of the contract March 25, 1980 sued defendant in Tokyo,
consists precisely of the amount of the increase decreed in the Japan, for collection of the unremitted
export tax due on the shortage — which, because of appellee's proceeds of the ticket sales, with claim for
fault, had to be delivered after the effectivity of the increased damages.
export tax.
On April 11, 1980, a writ of summons was
To the extent, therefore, that the decisions of the Tribunal of issued by the 36th Civil Department, Tokyo
Arbitration of the Bengal Chamber of Commerce and of the District Court of Japan against defendant at
High Court of Judicature of Calcutta fail to apply to the facts of its office at the Taiheiyo Building, 3rd floor,
this case fundamental principles of contract, the same may be 132, Yamashita-cho, Naka-ku, Yokohoma,
impeached, as they have been sufficiently impeached by Kanagawa Prefecture. The attempt to serve
appellant, on the ground of "clear mistake of law". We agree in the summons was unsuccessful because the
this regard with the majority opinion in Ingenohl vs. Walter E. bailiff was advised by a person in the office
Olsen & Co. (47 Phil. 189), although its view was reversed by that Mr. Dinozo, the person believed to be
the Supreme Court of the United States (273 U.S. 541, 71 L. authorized to receive court processes was in
ed. 762) which at that time had jurisdiction to review by Manila and would be back on April 24, 1980.
certiorari decisions of this Court. We can not sanction a clear
mistake of law that would work an obvious injustice upon On April 24, 1980, bailiff returned to the
appellant. defendant's office to serve the summons. Mr.
Dinozo refused to accept the same claiming
WHEREFORE, the appealed judgment is reversed and set that he was no longer an employee of the
aside, with costs. defendant.
NORTHWEST ORIENT AIRLINES, INC After the two attempts of service were
vs. COURT OF APPEALS and C.F. SHARP & COMPANY unsuccessful, the judge of the Tokyo District
INC.; G.R. No. 112573 February 9, 1995; PADILLA, JR., J.: Court decided to have the complaint and the
writs of summons served at the head office
This petition for review on certiorari seeks to set aside the of the defendant in Manila. On July 11, 1980,
decision of the Court of Appeals affirming the dismissal of the the Director of the Tokyo District Court
petitioner's complaint to enforce the judgment of a Japanese requested the Supreme Court of Japan to
court. The principal issue here is whether a Japanese court serve the summons through diplomatic
can acquire jurisdiction over a Philippine corporation doing channels upon the defendant's head office in
business in Japan by serving summons through diplomatic Manila.
channels on the Philippine corporation at its principal office in
Manila after prior attempts to serve summons in Japan had On August 28, 1980, defendant received
failed. from Deputy Sheriff Rolando Balingit the writ
of summons (p. 276, Records). Despite
Petitioner Northwest Orient Airlines, Inc. (hereinafter receipt of the same, defendant failed to
NORTHWEST), a corporation organized under the laws of the appear at the scheduled hearing. Thus, the
State of Minnesota, U.S.A., sought to enforce in Civil Case No. Tokyo Court proceeded to hear the plaintiff's
83-17637 of the Regional Trial Court (RTC), Branch 54, complaint and on [January 29, 1981],
Manila, a judgment rendered in its favor by a Japanese court rendered judgment ordering the defendant to
against private respondent C.F. Sharp & Company, Inc., pay the plaintiff the sum of 83,158,195 Yen
and damages for delay at the rate of 6% per jurisdiction over it, the
annum from August 28, 1980 up to and until process of the Court in
payment is completed (pp. 12-14, Records). Japan sent to the
Philippines which is
On March 24, 1981, defendant received from outside Japanese
Deputy Sheriff Balingit copy of the judgment. jurisdiction cannot confer
Defendant not having appealed the jurisdiction over the
judgment, the same became final and defendant in the case
executory. before the Japanese Court
of the case at bar.
Plaintiff was unable to execute the decision Boudard versus Tait 67
in Japan, hence, on May 20, 1983, a suit for Phil. 170. The plaintiff
enforcement of the judgment was filed by contends that the
plaintiff before the Regional Trial Court of Japanese Court acquired
Manila Branch 54.2 jurisdiction because the
defendant is a resident of
Japan, having four (4)
On July 16, 1983, defendant filed its answer
branches doing business
averring that the judgment of the Japanese
therein and in fact had a
Court sought to be enforced is null and void
permit from the Japanese
and unenforceable in this jurisdiction having
government to conduct
been rendered without due and proper notice
business in Japan (citing
to the defendant and/or with collusion or
the exhibits presented by
fraud and/or upon a clear mistake of law and
the plaintiff); if this is so
fact (pp. 41-45, Rec.).
then service of summons
should have been made
Unable to settle the case amicably, the case upon the defendant in
was tried on the merits. After the plaintiff Japan in any of these
rested its case, defendant on April 21, 1989, alleged four branches; as
filed a Motion for Judgment on a Demurrer to admitted by the plaintiff the
Evidence based on two grounds: service of the summons
(1) the foreign judgment sought to be issued by the Japanese
enforced is null and void for want of Court was made in the
jurisdiction and (2) the said judgment is Philippines thru a
contrary to Philippine law and public policy Philippine Sheriff. This
and rendered without due process of law. Court agrees that if the
Plaintiff filed its opposition after which the defendant in a foreign
court a quo rendered the now assailed court is a resident in the
decision dated June 21, 1989 granting the court of that foreign court
demurrer motion and dismissing the such court could acquire
complaint (Decision, pp. 376-378, Records). jurisdiction over the person
In granting the demurrer motion, the trial of the defendant but it
court held that: must be served upon the
defendant in the territorial
The foreign judgment in jurisdiction of the foreign
the Japanese Court sought court. Such is not the case
in this action is null and here because the
void for want of jurisdiction defendant was served with
over the person of the summons in the
defendant considering that Philippines and not in
this is an action in Japan.
personam; the Japanese
Court did not acquire Unable to accept the said decision, plaintiff
jurisdiction over the person on July 11, 1989 moved for reconsideration
of the defendant because of the decision, filing at the same time a
jurisprudence requires that conditional Notice of Appeal, asking the court
the defendant be served to treat the said notice of appeal "as in effect
with summons in Japan in after and upon issuance of the court's denial
order for the Japanese of the motion for reconsideration."
Court to acquire
Defendant opposed the motion for 1912 D680). There must be actual service
reconsideration to which a Reply dated within the proper territorial limits on
August 28, 1989 was filed by the plaintiff. defendant or someone authorized to accept
service for him. Thus, a defendant, whether
On October 16, 1989, the lower court a resident or not in the forum where the
disregarded the Motion for Reconsideration action is filed, must be served with summons
and gave due course to the plaintiff's Notice within that forum.
of Appeal. 3
But even assuming a distinction between a
In its decision, the Court of Appeals sustained the trial court. It resident defendant and non-resident
agreed with the latter in its reliance upon Boudard vs. Tait 4 defendant were to be adopted, such
wherein it was held that "the process of the court has no distinction applies only to natural persons
extraterritorial effect and no jurisdiction is acquired over the and not in the corporations. This finds
person of the defendant by serving him beyond the boundaries support in the concept that "a corporation
of the state." To support its position, the Court of Appeals has no home or residence in the sense in
further stated: which those terms are applied to natural
persons" (Claude Neon Lights vs. Phil.
In an action strictly in personam, such as the Advertising Corp., 57 Phil. 607). Thus, as
instant case, personal service of summons cited by the defendant-appellee in its brief:
within the forum is required for the court to
acquire jurisdiction over the defendant Residence is said to be an attribute of a
(Magdalena Estate Inc. vs. Nieto, 125 SCRA natural person, and can be predicated on an
230). To confer jurisdiction on the court, artificial being only by more or less imperfect
personal or substituted service of summons analogy. Strictly speaking, therefore, a
on the defendant not extraterritorial service is corporation can have no local residence or
necessary (Dial Corp vs. Soriano, 161 SCRA habitation. It has been said that a corporation
739). is a mere ideal existence, subsisting only in
contemplation of law — an invisible being
But while plaintiff-appellant concedes that which can have, in fact, no locality and can
the collection suit filed is an action in occupy no space, and therefore cannot have
personam, it is its theory that a distinction a dwelling place. (18 Am. Jur. 2d, p. 693
must be made between an action in citing Kimmerle v. Topeka, 88 370, 128 p.
personam against a resident defendant and 367; Wood v. Hartfold F. Ins. Co., 13 Conn
an action in personam against a non-resident 202)
defendant. Jurisdiction is acquired over a
non-resident defendant only if he is served Jurisprudence so holds that the foreign or
personally within the jurisdiction of the court domestic character of a corporation is to be
and over a resident defendant if by personal, determined by the place of its origin where
substituted or constructive service its charter was granted and not by the
conformably to statutory authorization. location of its business activities (Jennings v.
Plaintiff-appellant argues that since the Idaho Rail Light & P. Co., 26 Idaho 703, 146
defendant-appellee maintains branches in p. 101), A corporation is a "resident" and an
Japan it is considered a resident defendant. inhabitant of the state in which it is
Corollarily, personal, substituted or incorporated and no other (36 Am. Jur. 2d, p.
constructive service of summons when made 49).
in compliance with the procedural rules is
sufficient to give the court jurisdiction to Defendant-appellee is a Philippine
render judgment in personam. Corporation duly organized under the
Philippine laws. Clearly, its residence is the
Such an argument does not persuade. Philippines, the place of its incorporation,
and not Japan. While defendant-appellee
It is a general rule that processes of the court maintains branches in Japan, this will not
cannot lawfully be served outside the make it a resident of Japan. A corporation
territorial limits of the jurisdiction of the court does not become a resident of another by
from which it issues (Carter vs. Carter; 41 engaging in business there even though
S.E. 2d 532, 201) and this is regardless of licensed by that state and in terms given all
the residence or citizenship of the party thus the rights and privileges of a domestic
served (Iowa-Rahr vs. Rahr, 129 NW 494, corporation (Galveston H. & S.A.R. Co. vs.
150 Iowa 511, 35 LRC, NS, 292, Am. Case
Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. upon SHARP to present evidence as to what that Japanese
401). procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
On this premise, defendant appellee is a presumption of validity and regularity of the service of
non-resident corporation. As such, court summons and the decision thereafter rendered by the
processes must be served upon it at a place Japanese court must stand.
within the state in which the action is brought
and not elsewhere (St. Clair vs. Cox, 106 US Alternatively in the light of the absence of proof regarding
350, 27 L ed. 222, 1 S. Ct. 354).5 Japanese
law, the presumption of identity or similarity or the so-called
It then concluded that the service of summons effected in processual presumption 10 may be invoked. Applying it, the
Manila or beyond the territorial boundaries of Japan was null Japanese law on the matter is presumed to be similar with the
and did not confer jurisdiction upon the Tokyo District Court Philippine law on service of summons on a private foreign
over the person of SHARP; hence, its decision was void. corporation doing business in the Philippines. Section 14, Rule
14 of the Rules of Court provides that if the defendant is a
Unable to obtain a reconsideration of the decision, foreign corporation doing business in the Philippines, service
NORTHWEST elevated the case to this Court contending that may be made: (1) on its resident agent designated in
the respondent court erred in holding that SHARP was not a accordance with law for that purpose, or, (2) if there is no such
resident of Japan and that summons on SHARP could only be resident agent, on the government official designated by law to
validly served within that country. that effect; or (3) on any of its officers or agents within the
Philippines.
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, We will deal with these contentions in the order in which they
while the defendants are Philsec, the Ayala International are made.
Finance Ltd. (BPI-IFLs former name) and the Athona Holdings,
NV. The case at bar involves the same parties. The transaction First. It is important to note in connection with the first point that
sued upon by the parties, in both cases is the Warranty Deed while the present case was pending in the Court of Appeals,
executed by and between Athona Holdings and 1488 Inc. In the United States District Court for the Southern District of
the U.S. case, breach of contract and the promissory note are Texas rendered judgment in the case before it. The judgment,
sued upon by 1488 Inc., which likewise alleges fraud employed which was in favor of private respondents, was affirmed on
by herein appellants, on the marketability of Ducats securities appeal by the Circuit Court of Appeals. Thus, the principal
given in exchange for the Texas property. The recovery of a issue to be resolved in this case is whether Civil Case No.
sum of money and damages, for fraud purportedly committed 16536 is barred by the judgment of the U.S. court.
by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from Private respondents contend that for a foreign judgment to be
the same Warranty Deed. pleaded as res judicata, a judgment admitting the foreign
decision is not necessary. On the other hand, petitioners argue
The Court of Appeals also held that Civil Case No. 16563 was that the foreign judgment cannot be given the effect of res
an action in personam for the recovery of a sum of money for judicata without giving them an opportunity to impeach it on
alleged tortious acts, so that service of summons by publication grounds stated in Rule 39, 50 of the Rules of Court, to wit:
did not vest the trial court with jurisdiction over 1488, Inc. and want of jurisdiction, want of notice to the party, collusion, fraud,
Drago Daic. The dismissal of Civil Case No. 16563 on the or clear mistake of law or fact.
ground of forum non conveniens was likewise affirmed by the
Court of Appeals on the ground that the case can be better Petitioners contention is meritorious. While this Court has given
tried and decided by the U.S. court: the effect of res judicata to foreign judgments in several cases,
it was after the parties opposed to the judgment had been
The U.S. case and the case at bar arose from only one main given ample opportunity to repel them on grounds allowed
transaction, and involve foreign elements, to wit: 1) the under the law. It is not necessary for this purpose to initiate a
property subject matter of the sale is situated in Texas, U.S.A.; separate action or proceeding for enforcement of the foreign
2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) judgment. What is essential is that there is opportunity to
although the buyer, Athona Holdings, a foreign corporation challenge the foreign judgment, in order for the court to
which does not claim to be doing business in the Philippines, is properly determine its efficacy. This is because in this
wholly owned by Philsec, a domestic corporation, Athona jurisdiction, with respect to actions in personam, as
Holdings is also owned by BPI-IFL, also a foreign corporation; distinguished from actions in rem, a foreign judgment merely
4) the Warranty Deed was executed in Texas, U.S.A. constitutes prima facie evidence of the justness of the claim of
a party and, as such, is subject to proof to the contrary. Rule
In their present appeal, petitioners contend that: 39, 50 provides:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION SEC. 50. Effect of foreign judgments. - The effect of a
BETWEEN THE SAME PARTIES FOR THE SAME CAUSE judgment of a tribunal of a foreign country, having jurisdiction
(LITIS PENDENTIA) RELIED UPON BY THE COURT OF to pronounce the judgment is as follows:
APPEALS IN AFFIRMING THE TRIAL COURTS DISMISSAL
OF THE CIVIL ACTION IS NOT APPLICABLE. (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 judgment constitutes res judicata and is a bar to the claim of
presumptive evidence of a right as between the parties and petitioners would effectively preclude petitioners from repelling
their successors in interest by a subsequent title; but the the judgment in the case for enforcement. An absurdity could
judgment may be repelled by evidence of a want of jurisdiction, then arise: a foreign judgment is not subject to challenge by the
want of notice to the party, collusion, fraud, or clear mistake of plaintiff against whom it is invoked, if it is pleaded to resist a
law or fact. claim as in this case, but it may be opposed by the defendant if
the foreign judgment is sought to be enforced against him in a
Thus, in the case of General Corporation of the Philippines v. separate proceeding. This is plainly untenable. It has been held
Union Insurance Society of Canton, Ltd., which private therefore that:
respondents invoke for claiming conclusive effect for the
foreign judgment in their favor, the foreign judgment was [A] foreign judgment may not be enforced if it is not recognized
considered res judicata because this Court found from the in the jurisdiction where affirmative relief is being sought.
evidence as well as from appellants own pleadings that the Hence, in the interest of justice, the complaint should be
foreign court did not make a clear mistake of law or fact or that considered as a petition for the recognition of the Hongkong
its judgment was void for want of jurisdiction or because of judgment under Section 50 (b), Rule 39 of the Rules of Court in
fraud or collusion by the defendants. Trial had been previously order that the defendant, private respondent herein, may
held in the lower court and only afterward was a decision present evidence of lack of jurisdiction, notice, collusion, fraud
rendered, declaring the judgment of the Supreme Court of the or clear mistake of fact and law, if applicable.
State of Washington to have the effect of res judicata in the
case before the lower court. In the same vein, in Philippine Accordingly, to insure the orderly administration of justice, this
International Shipping Corp. v. Court of Appeals, this Court case and Civil Case No. 92-1070 should be consolidated. After
held that the foreign judgment was valid and enforceable in the all, the two have been filed in the Regional Trial Court of
Philippines there being no showing that it was vitiated by want Makati, albeit in different salas, this case being assigned to
of notice to the party, collusion, fraud or clear mistake of law or Branch 56 (Judge Fernando V. Gorospe), while Civil Case No.
fact. The prima facie presumption under the Rule had not been 92-1070 is pending in Branch 134 of Judge Ignacio Capulong.
rebutted. In such proceedings, petitioners should have the burden of
impeaching the foreign judgment and only in the event they
In the case at bar, it cannot be said that petitioners were given succeed in doing so may they proceed with their action against
the opportunity to challenge the judgment of the U.S. court as private respondents.
basis for declaring it res judicata or conclusive of the rights of
private respondents. The proceedings in the trial court were Second. Nor is the trial courts refusal to take cognizance of the
summary. Neither the trial court nor the appellate court was case justifiable under the principle of forum non conveniens.
even furnished copies of the pleadings in the U.S. court or First, a motion to dismiss is limited to the grounds under Rule
apprised of the evidence presented thereat, to assure a proper 16, 1, which does not include forum non conveniens. The
determination of whether the issues then being litigated in the propriety of dismissing a case based on this principle requires
U.S. court were exactly the issues raised in this case such that a factual determination, hence, it is more properly considered a
the judgment that might be rendered would constitute res matter of defense. Second, while it is within the discretion of
judicata. As the trial court stated in its disputed order dated the trial court to abstain from assuming jurisdiction on this
March 9, 1988: ground, it should do so only after vital facts are established, to
determine whether special circumstances require the courts
On the plaintiffs claim in its Opposition that the causes desistance.
of action of this case and the pending case in the
United States are not identical, precisely the Order of In this case, the trial court abstained from taking jurisdiction
January 26, 1988 never found that the causes of solely on the basis of the pleadings filed by private
action of this case and the case pending before the respondents in connection with the motion to dismiss. It failed
USA Court, were identical. (emphasis added) to consider that one of the plaintiffs (PHILSEC) is a domestic
corporation and one of the defendants (Ventura Ducat) is a
It was error therefore for the Court of Appeals to summarily rule Filipino, and that it was the extinguishment of the latters debt
that petitioners action is barred by the principle of res judicata. which was the object of the transaction under litigation. The
Petitioners in fact questioned the jurisdiction of the U.S. court trial court arbitrarily dismissed the case even after finding that
over their persons, but their claim was brushed aside by both Ducat was not a party in the U.S. case.
the trial court and the Court of Appeals.
Third. It was error we think for the Court of Appeals and the
Moreover, the Court notes that on April 22, 1992, 1488, Inc. trial court to hold that jurisdiction over 1488, Inc. and Daic
and Daic filed a petition for the enforcement of judgment in the could not be obtained because this is an action in personam
Regional Trial Court of Makati, where it was docketed as Civil and summons were served by extraterritorial service. Rule 14,
Case No. 92-1070 and assigned to Branch 134, although the 17 on extraterritorial service provides that service of summons
proceedings were suspended because of the pendency of this on a non-resident defendant may be effected out of the
case. To sustain the appellate courts ruling that the foreign Philippines by leave of Court where, among others, the
property of the defendant has been attached within the vehicles, resulting in risk of damage or bodily injury to
Philippines. It is not disputed that the properties, real and consumers arising from possible shattering of the wheels;
personal, of the private respondents had been attached prior to
service of summons under the Order of the trial court dated "C. many of the wheels did not have an indication as to
April 20, 1987. which models of automobile they would fit;
Fourth. As for the temporary restraining order issued by the "D. many of the wheels did not fit the model automobiles
Court on June 29, 1994, to suspend the proceedings in Civil for which they were purportedly designed;
Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-
called Rule 11 sanctions imposed on the petitioners by the "E. some of the wheels did not fit any model
U.S. court, the Court finds that the judgment sought to be automobile in use in the United States;
enforced is severable from the main judgment under
consideration in Civil Case No. 16563. The separability of
"F. most of the boxes in which the wheels were
Guevarras claim is not only admitted by petitioners, it appears
packed indicated that the wheels were approved by the
from the pleadings that petitioners only belatedly impleaded
Specialty Equipment Manufacturer's Association (hereafter,
Guevarra as defendant in Civil Case No. 16563. Hence, the
`SEMA'); in fact no SEMA approval has been obtained and this
TRO should be lifted and Civil Case No. 92-1445 allowed to
indication was therefore false and could result in fraud upon
proceed.
retail customers purchasing the wheels."
"B. the wheels did not have weight load limits stamped on "B) Second L/C - it will be issued in June 1980 payable 90
them as required to avoid mounting on excessively heavy days thereafter
"C) Third L/C - it will be issued in August 1980 payable 90 "(ii) on or before September 1, 1980, a documentary letter
days thereafter of credit in the amount of (a) Sixty-Seven Thousand, Seven
Hundred Ninety-Three Dollars and Sixty-Seven Cents
"D) Fourth L/C - it will be issued in November 1980 ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and
payable 90 days thereafter 00/100 Dollars ($2,940.00), plus (c) interest at an annual rate
equal to the prime rate of Crocker Bank, San Francisco, in
"We understand your situation regarding the lease of your effect from time to time, plus two percent on the amount in (a)
warehouse. For this reason, we are willing to defray the extra from January 1, 1980 until December 21, 1980, and on the
storage charges resulting from this new schedule. If you cannot amount set forth in (b) from May 1, 1980 until December 21,
renew the lease [of] your present warehouse, perhaps you can 1980, payable ninety days after the date of the bill of lading
arrange to transfer to another warehouse and storage charges under the letter of credit;
transfer thereon will be for our account. We hope you
understand our position. The delay and the revised schedules "(iii) on or before November 1, 1980, a documentary letter
were caused by circumstances totally beyond our control." of credit in the amount of (a) Sixty-Seven Thousand, Seven
Hundred Ninety-Three Dollars and Sixty-Seven Cents
On 21 April 1980, again through a telex message, PAWI ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and
informed FASGI that it was impossible to open a letter of credit 00/100 Dollars ($2,490.00), plus (c) interest at an annual rate
on or before April 1980 but assured that it would do its best to equal to the prime rate of Crocker Bank, San Francisco, in
comply with the suggested schedule of payments. In its telex effect from time to time, plus two percent on the amount in (a)
reply of 29 April 1980, FASGI insisted that PAWI should meet from January 1, 1980 until February 21, 1981, and on the
the terms of the proposed schedule of payments, specifically amount set forth in (b) from May 1, 1980 until February 21,
its undertaking to open the first LC within April of 1980, and 1981, payable ninety days after the date of the bill of lading
that "If the letter of credit is not opened by April 30, 1980, then under the latter of credit;
x x x [it would] immediately take all necessary legal action to
protect [its] position." "(iv) on or before January 1, 1981, a documentary letter of
credit in the amount of (a) Sixty-Seven Thousand, Seven
Despite its assurances, and FASGI's insistence, PAWI failed to Hundred Ninety-Three Dollars and Sixty-Seven Cents
open the first LC in April 1980 allegedly due to Central Bank ($67,793.67) plus (b) Five Thousand, Eight Hundred Eighty
"inquiries and restrictions," prompting FASGI to pursue its and 00/100 Dollars ($5,880.00), plus (c) interest at an annual
complaint for damages against PAWI before the California rate equal to the prime rate of Crocker Bank, San Francisco, in
district court. Pre-trial conference was held on 24 November effect from time to time, plus two percent on the amount in (a)
1980. In the interim, the parties, realizing the protracted from January 1, 1980 until April 21, 1981, and on the amount
process of litigation, resolved to enter into another set forth in (b) from May 1, 1980 until April 21, 1981, payable
arrangement, this time entitled "Supplemental Settlement ninety days after the date of the bill of lading under the latter of
Agreement," on 26 November 1980. In substance, the credit."
covenant provided that FASGI would deliver to PAWI a
container of wheels for every LC opened and paid by PAWI: Anent the wheels still in the custody of FASGI, the
supplemental settlement agreement provided that -
"3. Agreement
"3.4 (a) Upon execution of this Supplemental
"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Settlement Agreement, the obligations of FASGI to store or
Thousand, Seven Hundred Fifty and 00/100 Dollars maintain the Containers and Wheels shall be limited to (i)
($268,750.00), plus interest and storage costs as described storing the Wheels and Containers in their present warehouse
below. Sellers shall pay such amount by delivering to FASGI location and (ii) maintaining in effect FASGI's current insurance
the following four (4) irrevocable letters of credit, confirmed by in favor of FASGI, insuring against usual commercial risks for
Crocker Bank, Main Branch, Fresno, California, as set forth such storage in the principal amount of the Letters of Credit
below: described in Paragraph 3.1. FASGI shall bear no liability,
responsibility or risk for uninsurable risks or casualties to the
Containers or Wheels.
"(i) on or before June 30, 1980, a documentary letter of
credit in the amount of (a) Sixty-Five Thousand, Three
Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b) plus "x x x xxx xxx
interest on that amount at the annual rate of 16.25% from
January 1, 1980 until July 31, 1980, (c) plus Two Thousand "(e) From and after February 28, 1981, unless delivery of
Nine Hundred Forty Dollars and 00/100 ($2,940.00) and (d) the Letters of Credit are delayed past such date pursuant to the
with interest on that sum at the annual rate of 16.25% from penultimate Paragraph 3.1, in which case from and after such
May 1, 1980 to July 31, 1980, payable on or after August 31, later date, FASGI shall have no obligation to maintain, store or
1980; deliver any of the Containers or Wheels."
The deal allowed FASGI to enter before the California court the 1980, and each to be paid ninety (90) days after the date of the
foregoing stipulations in the event of the failure of PAWI to bill of lading under the LC. As so expressed in their affidavits,
make good the scheduled payments; thus - FASGI counsel Frank Ker and FASGI president Elena
Buholzer were more inclined to believe that PAWI's failure to
"3.5 Concurrently with execution and delivery hereof, the pay was due not to any restriction by the Central Bank or any
parties have executed and delivered a Mutual Release (the other cause than its inability to pay. These doubts were based
`Mutual Release'), and a Stipulation for Judgment (the on the telex message of PAWI president Romeo Rojas who
`Stipulation for Judgment') with respect to the Action. In the attached a copy of a communication from the Central Bank
event of breach of this Supplemental Settlement Agreement by notifying PAWI of the bank's approval of PAWI's request to
Sellers, FASGI shall have the right to apply immediately to the open LCs to cover payment for the re-importation of the
Court for entry of Judgment pursuant to the Stipulation for wheels. The communication having been sent to FASGI before
Judgment in the full amount thereof, less credit for any the supplemental settlement agreement was executed, FASGI
payments made by Sellers pursuant to this Supplemental speculated that at the time PAWI subsequently entered into the
Settlement Agreement. FASGI shall have the right thereafter to supplemental settlement agreement, its request to open LCs
enforce the Judgment against PAWI and FPS in the United had already been approved by the Central Bank. Irked by
States and in any other country where assets of FPS or PAWI PAWI's persistent default, FASGI filed with the US District
may be located, and FPS and PAWI hereby waive all defenses Court of the Central District of California the following
in any such country to execution or enforcement of the stipulation for judgment against PAWI.
Judgment by FASGI. Specifically, FPS and PAWI each
consent to the jurisdiction of the Italian and Philippine courts in "PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M.
any action brought by FASGI to seek a judgment in those in the Courtroom of the Honorable Laughlin E. Waters of the
countries based upon a judgment against FPS or PAWI in the above Court, plaintiff FASGI ENTERPRISES, INC. (hereinafter
Action." `FASGI') will move the Court for entry of Judgment against
defendant PHILIPPINE ALUMINUM WHEELS, INC.
In accordance with the aforementioned paragraph 3.5 of the (hereinafter `PAWI'), pursuant to the Stipulation for Judgment
agreement, the parties made the following stipulation before filed concurrently herewith, executed on behalf of FASGI and
the California court: PAWI by their respective attorneys, acting as their authorized
agents.
"The undersigned parties hereto, having entered into a
Supplemental Settlement Agreement in this action, "Judgment will be sought in the total amount of P252,850.60,
including principal and interest accrued through May 17, 1982,
"IT IS HEREBY STIPULATED by and between plaintiff FASGI plus the sum of $17,500.00 as reasonable attorneys' fees for
Enterprises, Inc. (`FASGI') and defendants Philippine plaintiff in prosecuting this action.
Aluminum Wheels, Inc., (`PAWI'), and each of them, that
judgment may be entered in favor of plaintiff FASGI and "The Motion will be made under Rule 54 of the Federal Rules
against PAWI, in the amount of Two Hundred Eighty Three of Civil Procedure, pursuant to and based upon the Stipulation
Thousand Four Hundred Eighty And 01/100ths Dollars for Judgment, the Supplemental Settlement Agreement filed
($283,480.01). herein on or about November 21, 1980, the Memorandum of
Points and Authorities and Affidavits of Elena Buholzer, Franck
"Plaintiff FASGI shall also be entitled to its costs of suit, and to G. Ker and Stan Cornwell all filed herewith, and upon all the
reasonable attorneys' fees as determined by the Court added records, files and pleadings in this action.
to the above judgment amount."
"The Motion is made on the grounds that defendant PAWI has
The foregoing supplemental settlement agreement, as well as breached its obligations as set forth in the Supplemental
the motion for the entry of judgment, was executed by FASGI Settlement Agreement, and that the Supplemental Settlement
president Elena Buholzer and PAWI counsel Mr. Thomas Agreement expressly permits FASGI to enter the Stipulation for
Ready. Judgment in the event that PAWI has not performed under the
Supplemental Settlement Agreement."
Hence, the instant petition. x x x HOLDING THAT [THE BANKS] PROOF OF FACTS TO
SUPPORT ITS MOTION FOR SUMMARY JUDGMENT MAY
The Ruling of the Court of Appeals NOT BE GIVEN BY AFFIDAVIT;
The Court of Appeals sustained the RTC orders denying the x x x HOLDING THAT [THE BANKS] AFFIDAVIT, WHICH
motion for partial summary judgment. The Court of Appeals PROVES FOREIGN LAW AS A FACT, IS HEARSAY AND
ruled that the Walden affidavit does not serve as proof of the THEREBY CANNOT SERVE AS PROOF OF THE NEW YORK
New York law and jurisprudence relied on by the Bank to LAW RELIED UPON BY PETITIONERS IN THEIR MOTION
support its motion. The Court of Appeals considered the New FOR SUMMARY JUDGMENT x x x.
York law and jurisprudence as public documents defined in
Section 19, Rule 132 of the Rules on Evidence, as follows: First, the Bank argues that in moving for partial summary
judgment, it was entitled to use the Walden affidavit to prove
SEC. 19. Classes of Documents. For the purpose of their that the stipulated foreign law bars the claims for
presentation in evidence, documents are either public or consequential, moral, temperate, nominal and exemplary
private. damages and attorneys fees. Consequently, outright dismissal
by summary judgment of these claims is warranted.
Public documents are:
Second, the Bank claims that the Court of Appeals mixed up
(a) The written official acts, or records of the official the requirements of Rule 35 on summary judgments and those
acts of the sovereign authority, official bodies of a trial on the merits in considering the Walden affidavit as
and tribunals, and public officers, whether of hearsay. The Bank points out that the Walden affidavit is not
the Philippines, or of a foreign country; hearsay since Rule 35 expressly permits the use of affidavits.
Lastly, the Bank argues that since Guerrero did not submit any parties are disputed and there are substantial triable issues
opposing affidavit to refute the facts contained in the Walden necessitating a formal trial.
affidavit, he failed to show the need for a trial on his claims for
damages other than actual. There can be no summary judgment where questions of fact
are in issue or where material allegations of the pleadings are
The Courts Ruling in dispute. The resolution of whether a foreign law allows only
the recovery of actual damages is a question of fact as far as
The petition is devoid of merit. the trial court is concerned since foreign laws do not prove
themselves in our courts. Foreign laws are not a matter of
The Bank filed its motion for partial summary judgment judicial notice. Like any other fact, they must be alleged and
pursuant to Section 2, Rule 34 of the old Rules of Court which proven. Certainly, the conflicting allegations as to whether New
reads: York law or Philippine law applies to Guerreros claims present
a clear dispute on material allegations which can be resolved
only by a trial on the merits.
Section 2. Summary judgment for defending party. A party
against whom a claim, counterclaim, or cross-claim is asserted
or a declaratory relief is sought may, at any time, move with Under Section 24 of Rule 132, the record of public documents
supporting affidavits for a summary judgment in his favor as to of a sovereign authority or tribunal may be proved by (1) an
all or any part thereof. official publication thereof or (2) a copy attested by the
officer having the legal custody thereof. Such official
publication or copy must be accompanied, if the record is not
A court may grant a summary judgment to settle expeditiously
kept in the Philippines, with a certificate that the attesting
a case if, on motion of either party, there appears from the
officer has the legal custody thereof. The certificate may be
pleadings, depositions, admissions, and affidavits that no
issued by any of the authorized Philippine embassy or consular
important issues of fact are involved, except the amount of
officials stationed in the foreign country in which the record is
damages. In such event, the moving party is entitled to a
kept, and authenticated by the seal of his office. The attestation
judgment as a matter of law.
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
In a motion for summary judgment, the crucial question is: are must be under the official seal of the attesting officer.
the issues raised in the pleadings genuine, sham or fictitious,
as shown by affidavits, depositions or admissions
Certain exceptions to this rule were recognized in Asiavest
accompanying the motion?
Limited v. Court of Appeals which held that:
5. The Uniform Commercial Code (UCC) governs many 11. Under New York law, a plaintiff is not entitled to attorneys
aspects of a Banks relationship with its depositors. In this case, fees unless they are provided by contract or statute. E.g., Geler
it governs Guerreros claim arising out of the non-payment of v. National Westminster Bank, 770 F. Supp. 210, 213
the $18,000 check. Guerrero claims that this was a wrongful (S.D.N.Y. 1991); Camatron Sewing Mach, Inc. v. F.M. Ring
dishonor. However, the UCC states that justifiable refusal to Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d 396 (1st Dept
pay or accept as opposed to dishonor, occurs when a bank 1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577
refuses to pay a check for reasons such as a missing N.Y.S.2d 280, 281 (1st Dept 1991). There is no statute that
indorsement, a missing or illegible signature or a forgery, 3- permits attorneys fees in a case of this type.
510, Official Comment 2. .. to the Complaint, MHT returned the
check because it had no signature card on . and could not 12. Exemplary, or punitive damages are not allowed for a
verify Guerreros signature. In my opinion, consistent with the breach of contract, even where the plaintiff claims the
UCC, that is a legitimate and justifiable reason not to pay. defendant acted with malice. Geler v. National Westminster
Bank, 770 F.Supp. 210, 215 (S.D.N.Y. 1991); Catalogue
6. Consequential damages are not available in the ordinary Service of chester_v. Insurance Co. of North America, 74
case of a justifiable refusal to pay. UCC 1-106 provides that A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dept 1980);
neither consequential or special or punitive damages may be Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833,
had except as specifically provided in the Act or by other rule of 488 N.Y.S.2d 241, 242 (2d Dept 1985).
law. UCC 4-103 further provides that consequential damages
can be recovered only where there is bad faith. This is more 13. Exemplary or punitive damages may be recovered only
restrictive than the New York common law, which may allow where it is alleged and proven that the wrong supposedly
committed by defendant amounts to a fraud aimed at the public
generally and involves a high moral culpability. Walker v. the Walden affidavit. The Bank still had the burden of proving
Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223 N.Y.S.2d 488 New York law and jurisprudence even if Guerrero did not
(1961). present an opposing affidavit. As the party moving for summary
judgment, the Bank has the burden of clearly demonstrating
14. Furthermore, it has been consistently held under New York the absence of any genuine issue of fact and that any doubt as
law that exemplary damages are not available for a mere to the existence of such issue is resolved against the movant.
breach of contract for in such a case, as a matter of law, only a
private wrong and not a public right is involved. Thaler v. The Moreover, it would have been redundant and pointless for
North Insurance Company, 63 A.D.2d 921, 406 N.Y.S.2d 66 Guerrero to submit an opposing affidavit considering that what
(1st Dept 1978). the Bank seeks to be opposed is the very subject matter of the
complaint. Guerrero need not file an opposing affidavit to the
The Walden affidavit states conclusions from the affiants Walden affidavit because his complaint itself controverts the
personal interpretation and opinion of the facts of the case vis matters set forth in the Banks motion and the Walden affidavit.
a vis the alleged laws and jurisprudence without citing any law A party should not be made to deny matters already averred in
in particular. The citations in the Walden affidavit of various his complaint.
U.S. court decisions do not constitute proof of the official
records or decisions of the U.S. courts. While the Bank There being substantial triable issues between the parties, the
attached copies of some of the U.S. court decisions cited in the courts a quo correctly denied the Banks motion for partial
Walden affidavit, these copies do not comply with Section 24 of summary judgment. There is a need to determine by
Rule 132 on proof of official records or decisions of foreign presentation of evidence in a regular trial if the Bank is guilty of
courts. any wrongdoing and if it is liable for damages under the
applicable laws.
The Banks intention in presenting the Walden affidavit is to
prove New York law and jurisprudence. However, because of This case has been delayed long enough by the Banks resort
the failure to comply with Section 24 of Rule 132 on how to to a motion for partial summary judgment. Ironically, the Bank
prove a foreign law and decisions of foreign courts, the Walden has successfully defeated the very purpose for which summary
affidavit did not prove the current state of New York law and judgments were devised in our rules, which is, to aid parties in
jurisprudence. Thus, the Bank has only alleged, but has not avoiding the expense and loss of time involved in a trial.
proved, what New York law and jurisprudence are on the
matters at issue. WHEREFORE, the petition is DENIED for lack of merit. The
Decision dated August 24, 1998 and the Resolution dated
Next, the Bank makes much of Guerreros failure to submit an December 14, 1998 of the Court of Appeals in CA-G.R. SP No.
opposing affidavit to the Walden affidavit. However, the 42310 is AFFIRMED. SO ORDERED.
pertinent provision of Section 3, Rule 35 of the old Rules of
Court did not make the submission of an opposing affidavit
ST. AVIATION SERVICES CO., PTE., LTD., -versus- GRAND
mandatory, thus:
INTERNATIONAL AIRWAYS, INC.,; G.R. No. 140288;
October 23, 2006; SANDOVAL-GUTIERREZ, J.:
SEC. 3. Motion and proceedings thereon. The motion shall be
served at least ten (10) days before the time specified for the
Challenged in the instant Petition for Review on
hearing. The adverse party prior to the day of hearing may
Certiorari are the Decision of the Court of Appeals dated July
serve opposing affidavits. After the hearing, the judgment
30, 1999 and its Resolution dated September 29, 1999 in CA-
sought shall be rendered forthwith if the pleadings, depositions
G.R. SP No. 51134 setting aside the Orders dated October 30,
and admissions on file, together with the affidavits, show that,
1998 and December 16, 1998 of the Regional Trial Court
except as to the amount of damages, there is no genuine issue
(RTC), Branch 117, Pasay City in Civil Case No. 98-1389.
as to any material fact and that the moving party is entitled to a
judgment as a matter of law. (Emphasis supplied)
It is axiomatic that the term may as used in remedial law, is St. Aviation Services Co., Pte., Ltd., petitioner, is a
only permissive and not mandatory. foreign corporation based in Singapore. It is engaged in the
manufacture, repair, and maintenance of airplanes and
aircrafts. Grand International Airways, Inc., respondent, is a
Guerrero cannot be said to have admitted the averments in the
domestic corporation engaged in airline operations.
Banks motion for partial summary judgment and the Walden
affidavit just because he failed to file an opposing affidavit.
Guerrero opposed the motion for partial summary judgment,
although he did not present an opposing affidavit. Guerrero Sometime in January 1996, petitioner and respondent
may not have presented an opposing affidavit, as there was no executed an Agreement for the Maintenance and Modification
need for one, because the Walden affidavit did not establish of Airbus A 300 B4-103 Aircraft Registration No. RP-C8882
what the Bank intended to prove. Certainly, Guerrero did not (First Agreement). Under this stipulation, petitioner agreed to
admit, expressly or impliedly, the veracity of the statements in undertake maintenance and modification works on
respondents aircraft. The parties agreed on the mode and (of Grand) is among the grounds for a motion to dismiss under
manner of payment by respondent of the contract price, Rule 16 of the 1997 Rules of Civil Procedure.
including interest in case of default. They also agreed that the
construction, validity and performance thereof shall be
governed by the laws of Singapore. They further agreed to
Respondent filed a motion for reconsideration but was
submit any suit arising from their agreement to the non-
denied by the RTC in its Order dated December 16, 1998.
exclusive jurisdiction of the Singapore courts.
On August 4, 1998, petitioner filed with the RTC, Petitioner seasonably filed a motion for
Branch 117, Pasay City, a Petition for Enforcement of reconsideration but it was denied on September 29, 1999.
Judgment, docketed as Civil Case No. 98-1389.
On July 9, 1998, PGSMC filed an opposition to the After KOGIES filed a Supplemental Memorandum
TRO arguing that KOGIES was not entitled to the TRO since with Motion to Dismiss answering PGSMCs memorandum of
Art. 15, the arbitration clause, was null and void for being July 22, 1998 and seeking dismissal of PGSMCs
against public policy as it ousts the local courts of jurisdiction counterclaims, KOGIES, on August 4, 1998, filed its Motion for
over the instant controversy. Reconsideration of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was
On July 17, 1998, PGSMC filed its Answer with not merely for machinery and facilities worth USD 1,224,000
Compulsory Counterclaim asserting that it had the full right to but was for the sale of an LPG manufacturing plant consisting
dismantle and transfer the machineries and equipment of supply of all the machinery and facilities and transfer of
because it had paid for them in full as stipulated in the contract; technology for a total contract price of USD 1,530,000 such
that KOGIES was not entitled to the PhP 9,000,000 covered by that the dismantling and transfer of the machinery and facilities
the checks for failing to completely install and make the plant would result in the dismantling and transfer of the very plant
operational; and that KOGIES was liable for damages itself to the great prejudice of KOGIES as the still unpaid
amounting to PhP 4,500,000 for altering the quantity and owner/seller of the plant. Moreover, KOGIES points out that the
lowering the quality of the machineries and equipment. arbitration clause under Art. 15 of the Contract as amended
Moreover, PGSMC averred that it has already paid PhP was a valid arbitration stipulation under Art. 2044 of the Civil
2,257,920 in rent (covering January to July 1998) to Worth and Code and as held by this Court in Chung Fu Industries (Phils.),
it was not willing to further shoulder the cost of renting the Inc.
premises of the plant considering that the LPG cylinder
manufacturing plant never became operational. In the meantime, PGSMC filed a Motion for Inspection
of Things to determine whether there was indeed alteration of
After the parties submitted their Memoranda, on July the quantity and lowering of quality of the machineries and
23, 1998, the RTC issued an Order denying the application for equipment, and whether these were properly installed.
a writ of preliminary injunction, reasoning that PGSMC had KOGIES opposed the motion positing that the queries and
paid KOGIES USD 1,224,000, the value of the machineries issues raised in the motion for inspection fell under the
and equipment as shown in the contract such that KOGIES no coverage of the arbitration clause in their contract.
longer had proprietary rights over them. And finally, the RTC
held that Art. 15 of the Contract as amended was invalid as it On September 21, 1998, the trial court issued an
tended to oust the trial court or any other court jurisdiction over Order (1) granting PGSMCs motion for inspection; (2) denying
any dispute that may arise between the parties. KOGIES KOGIES motion for reconsideration of the July 23, 1998 RTC
prayer for an injunctive writ was denied. The dispositive portion Order; and (3) denying KOGIES motion to dismiss PGSMCs
of the Order stated: compulsory counterclaims as these counterclaims fell within
the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion On the issue of nonpayment of docket fees and non-
for Reconsideration of the September 21, 1998 RTC Order attachment of a certificate of non-forum shopping by PGSMC,
granting inspection of the plant and denying dismissal of the CA held that the counterclaims of PGSMC were
PGSMCs compulsory counterclaims. compulsory ones and payment of docket fees was not required
since the Answer with counterclaim was not an initiatory
Ten days after, on October 12, 1998, without waiting pleading. For the same reason, the CA said a certificate of
for the resolution of its October 2, 1998 urgent motion for non-forum shopping was also not required.
reconsideration, KOGIES filed before the Court of Appeals
(CA) a petition for certiorari docketed as CA-G.R. SP No. Furthermore, the CA held that the petition for certiorari
49249, seeking annulment of the July 23, 1998 and September had been filed prematurely since KOGIES did not wait for the
21, 1998 RTC Orders and praying for the issuance of writs of resolution of its urgent motion for reconsideration of the
prohibition, mandamus, and preliminary injunction to enjoin the September 21, 1998 RTC Order which was the plain, speedy,
RTC and PGSMC from inspecting, dismantling, and and adequate remedy available. According to the CA, the RTC
transferring the machineries and equipment in the Carmona must be given the opportunity to correct any alleged error it has
plant, and to direct the RTC to enforce the specific agreement committed, and that since the assailed orders were
on arbitration to resolve the dispute. interlocutory, these cannot be the subject of a petition for
certiorari.
In the meantime, on October 19, 1998, the RTC
denied KOGIES urgent motion for reconsideration and directed Hence, we have this Petition for Review on Certiorari
the Branch Sheriff to proceed with the inspection of the under Rule 45
machineries and equipment in the plant on October 28, 1998.
The Issues
Thereafter, KOGIES filed a Supplement to the Petition
in CA-G.R. SP No. 49249 informing the CA about the October Petitioner posits that the appellate court committed
19, 1998 RTC Order. It also reiterated its prayer for the the following errors:
issuance of the writs of prohibition, mandamus and preliminary
injunction which was not acted upon by the CA. KOGIES a. PRONOUNCING THE QUESTION
asserted that the Branch Sheriff did not have the technical OF OWNERSHIP OVER THE MACHINERY
expertise to ascertain whether or not the machineries and AND FACILITIES AS A QUESTION OF
equipment conformed to the specifications in the contract and FACT BEYOND THE AMBIT OF A
were properly installed. PETITION FOR CERTIORARI INTENDED
ONLY FOR CORRECTION OF ERRORS OF
On November 11, 1998, the Branch Sheriff filed his JURISDICTION OR GRAVE ABUSE OF
Sheriffs Report finding that the enumerated machineries and DISCRETION AMOUNTING TO LACK OF
equipment were not fully and properly installed. (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURTS
The Court of Appeals affirmed the trial court and declared FINDING ON THE SAME QUESTION WAS
the arbitration clause against public policy IMPROPERLY RAISED IN THE PETITION
BELOW;
On May 30, 2000, the CA rendered the assailed
Decision affirming the RTC Orders and dismissing the petition b. DECLARING AS NULL AND VOID
for certiorari filed by KOGIES. The CA found that the RTC did THE ARBITRATION CLAUSE IN ARTICLE
not gravely abuse its discretion in issuing the assailed July 23, 15 OF THE CONTRACT BETWEEN THE
1998 and September 21, 1998 Orders. Moreover, the CA PARTIES FOR BEING CONTRARY TO
reasoned that KOGIES contention that the total contract price PUBLIC POLICY AND FOR OUSTING THE
for USD 1,530,000 was for the whole plant and had not been COURTS OF JURISDICTION;
fully paid was contrary to the finding of the RTC that PGSMC
fully paid the price of USD 1,224,000, which was for all the c. DECREEING PRIVATE
machineries and equipment. According to the CA, this RESPONDENTS COUNTERCLAIMS TO BE
determination by the RTC was a factual finding beyond the ALL COMPULSORY NOT NECESSITATING
ambit of a petition for certiorari. PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM
On the issue of the validity of the arbitration clause, SHOPPING;
the CA agreed with the lower court that an arbitration clause
which provided for a final determination of the legal rights of d. RULING THAT THE PETITION
the parties to the contract by arbitration was against public WAS FILED PREMATURELY WITHOUT
policy. WAITING FOR THE RESOLUTION OF THE
MOTION FOR RECONSIDERATION OF
THE ORDER DATED SEPTEMBER 21,
1998 OR WITHOUT GIVING THE TRIAL Interlocutory orders proper subject of certiorari
COURT AN OPPORTUNITY TO CORRECT
ITSELF; Citing Gamboa v. Cruz, the CA also pronounced that
certiorari and Prohibition are neither the remedies to question
e. PROCLAIMING THE TWO the propriety of an interlocutory order of the trial court. The CA
ORDERS DATED JULY 23 AND erred on its reliance on Gamboa. Gamboa involved the denial
SEPTEMBER 21, 1998 NOT TO BE of a motion to acquit in a criminal case which was not
PROPER SUBJECTS OF CERTIORARI assailable in an action for certiorari since the denial of a motion
AND PROHIBITION FOR BEING to quash required the accused to plead and to continue with
INTERLOCUTORY IN NATURE; the trial, and whatever objections the accused had in his
motion to quash can then be used as part of his defense and
f. NOT GRANTING THE subsequently can be raised as errors on his appeal if the
RELIEFS AND REMEDIES PRAYED FOR judgment of the trial court is adverse to him. The general rule is
IN HE (SIC) PETITION AND, INSTEAD, that interlocutory orders cannot be challenged by an appeal.
DISMISSING THE SAME FOR ALLEGEDLY Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we
WITHOUT MERIT. held:
As aptly ruled by the CA, the counterclaims of Also, appeals from interlocutory orders would open
PGSMC were incorporated in its Answer with Compulsory the floodgates to endless occasions for dilatory motions. Thus,
Counterclaim dated July 17, 1998 in accordance with Section 8 where the interlocutory order was issued without or in excess
of Rule 11, 1997 Revised Rules of Civil Procedure, the rule of jurisdiction or with grave abuse of discretion, the remedy is
that was effective at the time the Answer with Counterclaim certiorari.
was filed. Sec. 8 on existing counterclaim or cross-claim states,
A compulsory counterclaim or a cross-claim that a defending
The alleged grave abuse of discretion of the
party has at the time he files his answer shall be contained
respondent court equivalent to lack of jurisdiction in the
therein.
issuance of the two assailed orders coupled with the fact that
there is no plain, speedy, and adequate remedy in the ordinary
On July 17, 1998, at the time PGSMC filed its Answer course of law amply provides the basis for allowing the resort
incorporating its counterclaims against KOGIES, it was not to a petition for certiorari under Rule 65.
liable to pay filing fees for said counterclaims being compulsory
in nature. We stress, however, that effective August 16, 2004
Prematurity of the petition before the CA
under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC,
docket fees are now required to be paid in compulsory
counterclaim or cross-claims. Neither do we think that KOGIES was guilty of forum
shopping in filing the petition for certiorari. Note that KOGIES
motion for reconsideration of the July 23, 1998 RTC Order
As to the failure to submit a certificate of forum
which denied the issuance of the injunctive writ had already
shopping, PGSMCs Answer is not an initiatory pleading which
been denied. Thus, KOGIES only remedy was to assail the
requires a certification against forum shopping under Sec. 5 of
RTCs interlocutory order via a petition for certiorari under Rule
Rule 7, 1997 Revised Rules of Civil Procedure. It is a
65.
responsive pleading, hence, the courts a quo did not commit
reversible error in denying KOGIES motion to dismiss
PGSMCs compulsory counterclaims.
While the October 2, 1998 motion for reconsideration Arts. 2038, 2039, and 2040 abovecited refer to
of KOGIES of the September 21, 1998 RTC Order relating to instances where a compromise or an arbitral award, as applied
the inspection of things, and the allowance of the compulsory to Art. 2044 pursuant to Art. 2043, may be voided, rescinded,
counterclaims has not yet been resolved, the circumstances in or annulled, but these would not denigrate the finality of the
this case would allow an exception to the rule that before arbitral award.
certiorari may be availed of, the petitioner must have filed a
motion for reconsideration and said motion should have been The arbitration clause was mutually and voluntarily
first resolved by the court a quo. The reason behind the rule is agreed upon by the parties. It has not been shown to be
to enable the lower court, in the first instance, to pass upon contrary to any law, or against morals, good customs, public
and correct its mistakes without the intervention of the higher order, or public policy. There has been no showing that the
court. parties have not dealt with each other on equal footing. We find
no reason why the arbitration clause should not be respected
The September 21, 1998 RTC Order directing the and complied with by both parties. In Gonzales v. Climax
branch sheriff to inspect the plant, equipment, and facilities Mining Ltd., we held that submission to arbitration is a contract
when he is not competent and knowledgeable on said matters and that a clause in a contract providing that all matters in
is evidently flawed and devoid of any legal support. Moreover, dispute between the parties shall be referred to arbitration is a
there is an urgent necessity to resolve the issue on the contract. Again in Del Monte Corporation-USA v. Court of
dismantling of the facilities and any further delay would Appeals, we likewise ruled that [t]he provision to submit to
prejudice the interests of KOGIES. Indeed, there is real and arbitration any dispute arising therefrom and the relationship of
imminent threat of irreparable destruction or substantial the parties is part of that contract and is itself a contract.
damage to KOGIES equipment and machineries. We find the
resort to certiorari based on the gravely abusive orders of the Arbitration clause not contrary to public policy
trial court sans the ruling on the October 2, 1998 motion for
reconsideration to be proper.
The arbitration clause which stipulates that the
arbitration must be done in Seoul, Korea in accordance with
The Core Issue: Article 15 of the Contract the Commercial Arbitration Rules of the KCAB, and that the
arbitral award is final and binding, is not contrary to public
We now go to the core issue of the validity of Art. 15 policy. This Court has sanctioned the validity of arbitration
of the Contract, the arbitration clause. It provides: clauses in a catena of cases. In the 1957 case of Eastboard
Navigation Ltd. v. Juan Ysmael and Co., Inc., this Court had
Article 15. Arbitration.All disputes, occasion to rule that an arbitration clause to resolve differences
controversies, or differences which may arise and breaches of mutually agreed contractual terms is valid. In
between the parties, out of or in relation to or BF Corporation v. Court of Appeals, we held that [i]n this
in connection with this Contract or for the jurisdiction, arbitration has been held valid and constitutional.
breach thereof, shall finally be settled by Even before the approval on June 19, 1953 of Republic Act No.
arbitration in Seoul, Korea in accordance 876, this Court has countenanced the settlement of disputes
with the Commercial Arbitration Rules of the through arbitration. Republic Act No. 876 was adopted to
Korean Commercial Arbitration Board. The supplement the New Civil Codes provisions on arbitration. And
award rendered by the arbitration(s) shall in LM Power Engineering Corporation v. Capitol Industrial
be final and binding upon both parties Construction Groups, Inc., we declared that:
concerned. (Emphasis supplied.)
Being an inexpensive, speedy and
Petitioner claims the RTC and the CA erred in ruling amicable method of settling disputes,
that the arbitration clause is null and void. arbitrationalong with mediation, conciliation
and negotiationis encouraged by the
Petitioner is correct. Supreme Court. Aside from unclogging
judicial dockets, arbitration also hastens the
resolution of disputes, especially of the
Established in this jurisdiction is the rule that the law
commercial kind. It is thus regarded as the
of the place where the contract is made governs. Lex loci
wave of the future in international civil and
contractus. The contract in this case was perfected here in the
commercial disputes. Brushing aside a
Philippines. Therefore, our laws ought to govern. Nonetheless,
contractual agreement calling for arbitration
Art. 2044 of the Civil Code sanctions the validity of mutually
between the parties would be a step
agreed arbitral clause or the finality and binding effect of an
backward.
arbitral award. Art. 2044 provides, Any stipulation that the
arbitrators award or decision shall be final, is valid, without
Consistent with the above-
prejudice to Articles 2038, 2039 and 2040. (Emphasis
mentioned policy of encouraging alternative
supplied.)
dispute resolution methods, courts should
liberally construe arbitration clauses.
Provided such clause is susceptible of an 1985 entitled, International Commercial
interpretation that covers the asserted Arbitration: Analytical Commentary on Draft
dispute, an order to arbitrate should be Trade identified by reference number A/CN.
granted. Any doubt should be resolved in 9/264.
favor of arbitration.
While RA 9285 was passed only in 2004, it
Having said that the instant arbitration clause nonetheless applies in the instant case since it is a procedural
is not against public policy, we come to the question law which has a retroactive effect. Likewise, KOGIES filed its
on what governs an arbitration clause specifying that application for arbitration before the KCAB on July 1, 1998 and
in case of any dispute arising from the contract, an it is still pending because no arbitral award has yet been
arbitral panel will be constituted in a foreign country rendered. Thus, RA 9285 is applicable to the instant case.
and the arbitration rules of the foreign country would Well-settled is the rule that procedural laws are construed to be
govern and its award shall be final and binding. applicable to actions pending and undetermined at the time of
their passage, and are deemed retroactive in that sense and to
RA 9285 incorporated the UNCITRAL Model law to which that extent. As a general rule, the retroactive application of
we are a signatory procedural laws does not violate any personal rights because
no vested right has yet attached nor arisen from them.
For domestic arbitration proceedings, we have
particular agencies to arbitrate disputes arising from Among the pertinent features of RA 9285 applying
contractual relations. In case a foreign arbitral body is chosen and incorporating the UNCITRAL Model Law are the following:
by the parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the Arbitration (1) The RTC must refer to arbitration in proper cases
Rules of the UNCITRAL Model Law on International
Commercial Arbitration of the United Nations Commission on Under Sec. 24, the RTC does not have jurisdiction
International Trade Law (UNCITRAL) in the New York over disputes that are properly the subject of arbitration
Convention on June 21, 1985, the Philippines committed itself pursuant to an arbitration clause, and mandates the referral to
to be bound by the Model Law. We have even incorporated the arbitration in such cases, thus:
Model Law in Republic Act No. (RA) 9285, otherwise known as
the Alternative Dispute Resolution Act of 2004 entitled An Act
SEC. 24. Referral to Arbitration.A
to Institutionalize the Use of an Alternative Dispute Resolution
court before which an action is brought in a
System in the Philippines and to Establish the Office for
matter which is the subject matter of an
Alternative Dispute Resolution, and for Other Purposes,
arbitration agreement shall, if at least one
promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of
party so requests not later than the pre-trial
the Model Law are the pertinent provisions:
conference, or upon the request of both
parties thereafter, refer the parties to
CHAPTER 4 - INTERNATIONAL arbitration unless it finds that the arbitration
COMMERCIAL ARBITRATION agreement is null and void, inoperative or
incapable of being performed.
SEC. 19. Adoption of the Model
Law on International Commercial
(2) Foreign arbitral awards must be confirmed by the
Arbitration.International commercial
RTC
arbitration shall be governed by the Model
Law on International Commercial Arbitration
(the Model Law) adopted by the United Foreign arbitral awards while mutually stipulated by
Nations Commission on International Trade the parties in the arbitration clause to be final and binding are
Law on June 21, 1985 (United Nations not immediately enforceable or cannot be implemented
Document A/40/17) and recommended for immediately. Sec. 35 of the UNCITRAL Model Law stipulates
enactment by the General Assembly in the requirement for the arbitral award to be recognized by a
Resolution No. 40/72 approved on competent court for enforcement, which court under Sec. 36 of
December 11, 1985, copy of which is hereto the UNCITRAL Model Law may refuse recognition or
attached as Appendix A. enforcement on the grounds provided for. RA 9285
incorporated these provisos to Secs. 42, 43, and 44 relative to
SEC. 20. Interpretation of Model Secs. 47 and 48, thus:
Law.In interpreting the Model Law, regard
shall be had to its international origin and to SEC. 42. Application of the New
the need for uniformity in its interpretation York Convention.The New York Convention
and resort may be made to the travaux shall govern the recognition and enforcement
preparatories and the report of the Secretary of arbitral awards covered by said
General of the United Nations Commission Convention.
on International Trade Law dated March 25,
The recognition and enforcement of of the parties to the dispute resides or has
such arbitral awards shall be filed with the his place of business; or (iv) in the National
Regional Trial Court in accordance with the Judicial Capital Region, at the option of the
rules of procedure to be promulgated by the applicant.
Supreme Court. Said procedural rules shall
provide that the party relying on the award or SEC. 48. Notice of Proceeding to
applying for its enforcement shall file with the Parties.In a special proceeding for
court the original or authenticated copy of the recognition and enforcement of an arbitral
award and the arbitration agreement. If the award, the Court shall send notice to the
award or agreement is not made in any of parties at their address of record in the
the official languages, the party shall supply arbitration, or if any part cannot be served
a duly certified translation thereof into any of notice at such address, at such partys last
such languages. known address. The notice shall be sent al
least fifteen (15) days before the date set for
The applicant shall establish that the initial hearing of the application.
the country in which foreign arbitration award
was made in party to the New York It is now clear that foreign arbitral awards when
Convention. confirmed by the RTC are deemed not as a judgment of a
foreign court but as a foreign arbitral award, and when
xxxx confirmed, are enforced as final and executory decisions of our
courts of law.
SEC. 43. Recognition and
Enforcement of Foreign Arbitral Awards Not Thus, it can be gleaned that the concept of a final and
Covered by the New York Convention.The binding arbitral award is similar to judgments or awards given
recognition and enforcement of foreign by some of our quasi-judicial bodies, like the National Labor
arbitral awards not covered by the New York Relations Commission and Mines Adjudication Board, whose
Convention shall be done in accordance with final judgments are stipulated to be final and binding, but not
procedural rules to be promulgated by the immediately executory in the sense that they may still be
Supreme Court. The Court may, on grounds judicially reviewed, upon the instance of any party. Therefore,
of comity and reciprocity, recognize and the final foreign arbitral awards are similarly situated in that
enforce a non-convention award as a they need first to be confirmed by the RTC.
convention award.
(3) The RTC has jurisdiction to review foreign arbitral
SEC. 44. Foreign Arbitral Award
awards
Not Foreign Judgment.A foreign arbitral
award when confirmed by a court of a foreign
country, shall be recognized and enforced as Sec. 42 in relation to Sec. 45 of RA 9285 designated
a foreign arbitral award and not as a and vested the RTC with specific authority and jurisdiction to
judgment of a foreign court. set aside, reject, or vacate a foreign arbitral award on grounds
provided under Art. 34(2) of the UNCITRAL Model Law. Secs.
A foreign arbitral award, when 42 and 45 provide:
confirmed by the Regional Trial Court, shall
be enforced in the same manner as final and SEC. 42. Application of the New
executory decisions of courts of law of the York Convention.The New York Convention
Philippines shall govern the recognition and enforcement
of arbitral awards covered by said
xxxx Convention.
Thus, while the RTC does not have jurisdiction over Thereafter, the CA decision may further be appealed
disputes governed by arbitration mutually agreed upon by the or reviewed before this Court through a petition for review
parties, still the foreign arbitral award is subject to judicial under Rule 45 of the Rules of Court.
review by the RTC which can set aside, reject, or vacate it. In
this sense, what this Court held in Chung Fu Industries (Phils.), PGSMC has remedies to protect its interests
Inc. relied upon by KOGIES is applicable insofar as the foreign
arbitral awards, while final and binding, do not oust courts of
Thus, based on the foregoing features of RA 9285,
jurisdiction since these arbitral awards are not absolute and
PGSMC must submit to the foreign arbitration as it bound itself
without exceptions as they are still judicially reviewable.
through the subject contract. While it may have misgivings on
Chapter 7 of RA 9285 has made it clear that all arbitral awards,
the foreign arbitration done in Korea by the KCAB, it has
whether domestic or foreign, are subject to judicial review on
available remedies under RA 9285. Its interests are duly
specific grounds provided for.
protected by the law which requires that the arbitral award that
may be rendered by KCAB must be confirmed here by the RTC
(4) Grounds for judicial review different in domestic before it can be enforced.
and foreign arbitral awards
Thirdly, and of greater import is the reason that GERBERT R. CORPUZ - versus -DAISYLYN TIROL STO.
maintaining the equipment and machineries in Worths property TOMAS and The SOLICITOR GENERAL,; G.R. No.
is not to the best interest of PGSMC due to the prohibitive rent 186571; August 11, 2010; BRION, J.
while the LPG plant as set-up is not operational. PGSMC was
losing PhP322,560 as monthly rentals or PhP3.87M for 1998
Before the Court is a direct appeal from the decision
alone without considering the 10% annual rent increment in
of the Regional Trial Court (RTC) of Laoag City, Branch 11,
maintaining the plant.
elevated via a petition for review on certiorari under Rule 45 of
the Rules of Court (present petition).
Fourthly, and corollarily, while the KCAB can rule on
motions or petitions relating to the preservation or transfer of
Petitioner Gerbert R. Corpuz was a former Filipino
the equipment and machineries as an interim measure, yet on
citizen who acquired Canadian citizenship through
hindsight, the July 23, 1998 Order of the RTC allowing the
naturalization on November 29, 2000. On January 18, 2005,
transfer of the equipment and machineries given the non-
Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina,
recognition by the lower courts of the arbitral clause, has
in Pasig City. Due to work and other professional
accorded an interim measure of protection to PGSMC which
commitments, Gerbert left for Canada soon after the wedding.
would otherwise been irreparably damaged.
He returned to the Philippines sometime in April 2005 to
surprise Daisylyn, but was shocked to discover that his wife
Fifth, KOGIES is not unjustly prejudiced as it has was having an affair with another man. Hurt and disappointed,
already been paid a substantial amount based on the contract. Gerbert returned to Canada and filed a petition for divorce. The
Moreover, KOGIES is amply protected by the arbitral action it Superior Court of Justice, Windsor, Ontario, Canada granted
has instituted before the KCAB, the award of which can be Gerberts petition for divorce on December 8, 2005. The divorce
enforced in our jurisdiction through the RTC. Besides, by our decree took effect a month later, on January 8, 2006.
decision, PGSMC is compelled to submit to arbitration
pursuant to the valid arbitration clause of its contract with
Two years after the divorce, Gerbert has moved on
KOGIES.
and has found another Filipina to love. Desirous of marrying his
new Filipina fiance in the Philippines, Gerbert went to the Pasig
PGSMC to preserve the subject equipment and City Civil Registry Office and registered the Canadian divorce
machineries decree on his and Daisylyns marriage certificate. Despite the
registration of the divorce decree, an official of the National
Finally, while PGSMC may have been granted the Statistics Office (NSO) informed Gerbert that the marriage
right to dismantle and transfer the subject equipment and between him and Daisylyn still subsists under Philippine law; to
machineries, it does not have the right to convey or dispose of be enforceable, the foreign divorce decree must first be
the same considering the pending arbitral proceedings to settle judicially recognized by a competent Philippine court, pursuant
the differences of the parties. PGSMC therefore must preserve to NSO Circular No. 4, series of 1982.
and maintain the subject equipment and machineries with the
diligence of a good father of a family until final resolution of the Accordingly, Gerbert filed a petition for judicial
arbitral proceedings and enforcement of the award, if any. recognition of foreign divorce and/or declaration of
marriage as dissolved (petition) with the RTC. Although
WHEREFORE, this petition is PARTLY GRANTED, in summoned, Daisylyn did not file any responsive pleading but
that: submitted instead a notarized letter/manifestation to the trial
court. She offered no opposition to Gerberts petition and, in
(1) The May 30, 2000 CA Decision in CA-G.R. fact, alleged her desire to file a similar case herself but was
SP No. 49249 is REVERSED and SET ASIDE; prevented by financial and personal circumstances. She, thus,
requested that she be considered as a party-in-interest with a
(2) The September 21, 1998 and October 19, similar prayer to Gerberts.
1998 RTC Orders in Civil Case No. 98-117 are REVERSED
and SET ASIDE; In its October 30, 2008 decision, the RTC denied
Gerberts petition. The RTC concluded that Gerbert was not
(3) The parties are hereby ORDERED to submit the proper party to institute the action for judicial recognition of
themselves to the arbitration of their dispute and differences the foreign divorce decree as he is a naturalized Canadian
arising from the subject Contract before the KCAB; and citizen. It ruled that only the Filipino spouse can avail of the
remedy, under the second paragraph of Article 26 of the Family
Code, in order for him or her to be able to remarry under
(4) PGSMC is hereby ALLOWED to dismantle
Philippine law. Article 26 of the Family Code reads:
and transfer the equipment and machineries, if it had not done
Art. 26. All marriages solemnized substantive right it establishes is in favor of the Filipino
outside the Philippines, in accordance with spouse
the laws in force in the country where they
were solemnized, and valid there as such, The resolution of the issue requires a review of the
shall also be valid in this country, except legislative history and intent behind the second paragraph of
those prohibited under Articles 35(1), (4), (5) Article 26 of the Family Code.
and (6), 36, 37 and 38.
The Family Code recognizes only two types of
Where a marriage between a
defective marriages void and voidable marriages. In both
Filipino citizen and a foreigner is validly
cases, the basis for the judicial declaration of absolute nullity or
celebrated and a divorce is thereafter
annulment of the marriage exists before or at the time of the
validly obtained abroad by the alien
marriage. Divorce, on the other hand, contemplates the
spouse capacitating him or her to
dissolution of the lawful union for cause arising after the
remarry, the Filipino spouse shall
marriage. Our family laws do not recognize absolute divorce
likewise have capacity to remarry under
between Filipino citizens.
Philippine law.
Essentially, the petition raises the issue of whether To maintain x x x that, under our
the second paragraph of Article 26 of the Family Code laws, [the Filipino spouse] has to be
extends to aliens the right to petition a court of this considered still married to [the alien
jurisdiction for the recognition of a foreign divorce decree. spouse] and still subject to a wife's
obligations x x x cannot be just. [The
THE COURTS RULING Filipino spouse] should not be obliged to live
together with, observe respect and fidelity,
The alien spouse can claim no right under the second and render support to [the alien spouse]. The
paragraph of Article 26 of the Family Code as the latter should not continue to be one of her
heirs with possible rights to conjugal the recognition of his foreign divorce decree. The foreign
property. She should not be discriminated divorce decree itself, after its authenticity and conformity with
against in her own country if the ends of the aliens national law have been duly proven according to our
justice are to be served. rules of evidence, serves as a presumptive evidence of right in
favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules
As the RTC correctly stated, the provision was of Court which provides for the effect of foreign judgments.
included in the law to avoid the absurd situation where the This Section states:
Filipino spouse remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the Filipino spouse. SEC. 48. Effect of foreign
The legislative intent is for the benefit of the Filipino spouse, by judgments or final orders.The effect of a
clarifying his or her marital status, settling the doubts created judgment or final order of a tribunal of a
by the divorce decree. Essentially, the second paragraph of foreign country, having jurisdiction to
Article 26 of the Family Code provided the Filipino spouse render the judgment or final order is as
a substantive right to have his or her marriage to the alien follows:
spouse considered as dissolved, capacitating him or her
to remarry. Without the second paragraph of Article 26 of the (a) In case of a judgment or
Family Code, the judicial recognition of the foreign decree of final order upon a specific
divorce, whether in a proceeding instituted precisely for that thing, the judgment or final
purpose or as a related issue in another proceeding, would be order is conclusive upon
of no significance to the Filipino spouse since our laws do not the title of the thing; and
recognize divorce as a mode of severing the marital bond;
Article 17 of the Civil Code provides that the policy against (b) In case of a judgment or
absolute divorces cannot be subverted by judgments final order against a
promulgated in a foreign country. The inclusion of the second person, the judgment or
paragraph in Article 26 of the Family Code provides the direct final order is
exception to this rule and serves as basis for recognizing the presumptive evidence of
dissolution of the marriage between the Filipino spouse and his a right as between the
or her alien spouse. parties and their
successors in interest by
a subsequent title.
Additionally, an action based on the second
paragraph of Article 26 of the Family Code is not limited to the In either case, the judgment or final
recognition of the foreign divorce decree. If the court finds that order may be repelled by evidence of a want
the decree capacitated the alien spouse to remarry, the courts of jurisdiction, want of notice to the party,
can declare that the Filipino spouse is likewise capacitated to collusion, fraud, or clear mistake of law or
contract another marriage. No court in this jurisdiction, fact.
however, can make a similar declaration for the alien spouse
(other than that already established by the decree), whose
To our mind, direct involvement or being the subject of the
status and legal capacity are generally governed by his
foreign judgment is sufficient to clothe a party with the requisite
national law.
interest to institute an action before our courts for the
recognition of the foreign judgment. In a divorce situation, we
Given the rationale and intent behind the enactment, have declared, no less, that the divorce obtained by an alien
and the purpose of the second paragraph of Article 26 of the abroad may be recognized in the Philippines, provided the
Family Code, the RTC was correct in limiting the applicability of divorce is valid according to his or her national law.
the provision for the benefit of the Filipino spouse. In other
words, only the Filipino spouse can invoke the second
The starting point in any recognition of a foreign
paragraph of Article 26 of the Family Code; the alien spouse
divorce judgment is the acknowledgment that our courts do not
can claim no right under this provision.
take judicial notice of foreign judgments and laws. Justice
Herrera explained that, as a rule, no sovereign is bound to give
The foreign divorce decree is presumptive evidence of a effect within its dominion to a judgment rendered by a tribunal
right that clothes the party with legal interest to petition of another country. This means that the foreign judgment and
for its recognition in this jurisdiction its authenticity must be proven as facts under our rules on
evidence, together with the aliens applicable national law to
We qualify our above conclusion i.e., that the second show the effect of the judgment on the alien himself or herself.
paragraph of Article 26 of the Family Code bestows no rights in The recognition may be made in an action instituted specifically
favor of aliens with the complementary statement that this for the purpose or in another action where a party invokes the
conclusion is not sufficient basis to dismiss Gerberts petition foreign decree as an integral aspect of his claim or defense.
before the RTC. In other words, the unavailability of the second
paragraph of Article 26 of the Family Code to aliens does not In Gerberts case, since both the foreign divorce
necessarily strip Gerbert of legal interest to petition the RTC for decree and the national law of the alien, recognizing his or her
capacity to obtain a divorce, purport to be official acts of a status, i.e., those affecting all his personal qualities and
sovereign authority, Section 24, Rule 132 of the Rules of Court relations, more or less permanent in nature, not ordinarily
comes into play. This Section requires proof, either by (1) terminable at his own will, such as his being legitimate or
official publications or (2) copies attested by the officer having illegitimate, or his being married or not.
legal custody of the documents. If the copies of official records
are not kept in the Philippines, these must be (a) accompanied A judgment of divorce is a judicial decree, although a
by a certificate issued by the proper diplomatic or consular foreign one, affecting a persons legal capacity and status that
officer in the Philippine foreign service stationed in the foreign must be recorded. In fact, Act No. 3753 or the Law on Registry
country in which the record is kept and (b) authenticated by the of Civil Status specifically requires the registration of divorce
seal of his office. decrees in the civil registry:
The records show that Gerbert attached to his petition Sec. 1. Civil Register. A civil register is
a copy of the divorce decree, as well as the required established for recording the civil status
certificates proving its authenticity, but failed to include a copy of persons, in which shall be entered:
of the Canadian law on divorce. Under this situation, we can, at
this point, simply dismiss the petition for insufficiency of (a) births;
supporting evidence, unless we deem it more appropriate to (b) deaths;
remand the case to the RTC to determine whether the divorce (c) marriages;
decree is consistent with the Canadian divorce law. (d) annulments of marriages;
(e) divorces;
(f) legitimations;
We deem it more appropriate to take this latter course (g) adoptions;
of action, given the Article 26 interests that will be served and (h) acknowledgment of natural
the Filipina wifes (Daisylyn’s) obvious conformity with the children;
petition. A remand, at the same time, will allow other interested (i) naturalization; and
(j) changes of name.
parties to oppose the foreign judgment and overcome a
petitioners presumptive evidence of a right by proving want of
jurisdiction, want of notice to a party, collusion, fraud, or clear xxxx
mistake of law or fact. Needless to state, every precaution
must be taken to ensure conformity with our laws before a Sec. 4. Civil Register Books. The local
recognition is made, as the foreign judgment, once recognized, registrars shall keep and preserve in
shall have the effect of res judicata between the parties, as their offices the following books, in
provided in Section 48, Rule 39 of the Rules of Court. which they shall, respectively make the
proper entries concerning the civil status
In fact, more than the principle of comity that is served of persons:
by the practice of reciprocal recognition of foreign judgments
between nations, the res judicata effect of the foreign (1) Birth and death register;
judgments of divorce serves as the deeper basis for extending (2) Marriage register, in which
judicial recognition and for considering the alien spouse bound shall be entered not only the
by its terms. This same effect, as discussed above, will not marriages solemnized but also
obtain for the Filipino spouse were it not for the substantive divorces and dissolved
rule that the second paragraph of Article 26 of the Family Code marriages.
provides. (3) Legitimation, acknowledgment,
adoption, change of name and
naturalization register.
Considerations beyond the recognition of the foreign
divorce decree
But while the law requires the entry of the divorce decree in the
civil registry, the law and the submission of the decree by
As a matter of housekeeping concern, we note that
themselves do not ipso facto authorize the decrees
the Pasig City Civil Registry Office has already recorded
registration. The law should be read in relation with the
the divorce decree on Gerbert and Daisylyn’s marriage
requirement of a judicial recognition of the foreign judgment
certificate based on the mere presentation of the decree.
before it can be given res judicata effect. In the context of the
We consider the recording to be legally improper; hence, the
present case, no judicial order as yet exists recognizing the
need to draw attention of the bench and the bar to what had
foreign divorce decree. Thus, the Pasig City Civil Registry
been done.
Office acted totally out of turn and without authority of law
when it annotated the Canadian divorce decree on Gerbert and
Article 407 of the Civil Code states that [a]cts, events
Daisylyns marriage certificate, on the strength alone of the
and judicial decrees concerning the civil status of persons shall
foreign decree presented by Gerbert.
be recorded in the civil register. The law requires the entry in
the civil registry of judicial decrees that produce legal
consequences touching upon a persons legal capacity and
Evidently, the Pasig City Civil Registry Office was ruling above. Let a copy of this Decision be furnished the Civil
aware of the requirement of a court recognition, as it cited NSO Registrar General. No costs. SO ORDERED.
Circular No. 4, series of 1982, and Department of Justice
Opinion No. 181, series of 1982 both of which required a final
LANDOIL RESOURCES CORPORATION, PETITIONER, VS.
order from a competent Philippine court before a foreign
AL RABIAH LIGHTING COMPANY; G.R. No. 174720:
judgment, dissolving a marriage, can be registered in the civil
September 07, 2011; PERALTA, J.:
registry, but it, nonetheless, allowed the registration of the
decree. For being contrary to law, the registration of the foreign
Assailed in the instant petition for review on certiorari filed by
divorce decree without the requisite judicial recognition is
petitioner are the Decision dated August 14, 2003 and the
patently void and cannot produce any legal effect.
Resolution dated August 29, 2006 of the Court of Appeals
issued in CA-G.R. CV No. 52003.
Another point we wish to draw attention to is that the
recognition that the RTC may extend to the Canadian divorce The facts, as borne by the records, are as follows:
decree does not, by itself, authorize the cancellation of the
entry in the civil registry. A petition for recognition of a foreign Respondent Al Rabiah Lighting Company (Al Rabiah) is a
judgment is not the proper proceeding, contemplated under the foreign corporation existing under the laws of Kuwait.
Rules of Court, for the cancellation of entries in the civil Defendant Construction Consortium, Inc. (CCI) and petitioner
registry. Landoil Resources Corporation (Landoil) are both domestic
corporations organized under the Philippines Laws.
Article 412 of the Civil Code declares that no entry in
a civil register shall be changed or corrected, without judicial On December 20, 1981, CCI and respondent Al Rabiah
order. The Rules of Court supplements Article 412 of the Civil entered into a Sub-Contract Agreement wherein respondent
Code by specifically providing for a special remedial was assigned to carry out the electrical works of Kuwait Oil
proceeding by which entries in the civil registry may be Company's New Industrial Training Centre project in Ahmadi,
judicially cancelled or corrected. Rule 108 of the Rules of Court Kuwait in the total amount of Three Hundred Forty- Three
sets in detail the jurisdictional and procedural requirements that Thousand Five Hundred Kuwaiti Dinar. Respondent started
must be complied with before a judgment, authorizing the carrying out its work as agreed upon. Later, the project owner
cancellation or correction, may be annotated in the civil had withdrawn the principal contract which led to the
registry. It also requires, among others, that the verified petition termination of petitioner's and CCI's services. Consequently,
must be filed with the RTC of the province where the respondent's works were stopped before being completed.
corresponding civil registry is located; that the civil registrar
and all persons who have or claim any interest must be made On September 12, 1982, petitioner, through its Regional
parties to the proceedings; and that the time and place for Managing Director for Operations Robert J. Brown, sent a letter
hearing must be published in a newspaper of general to respondent through Mr. Said Y. Al Imam, confirming that
circulation. As these basic jurisdictional requirements have not based on the July progress billing, petitioner owed respondent
been met in the present case, we cannot consider the petition the sum of KD 21,930,317 which was already due and
Gerbert filed with the RTC as one filed under Rule 108 of the proposed the payment of 12% interest on the overdue account
Rules of Court. until payment has been made.
We hasten to point out, however, that this ruling In a letter dated June 4, 1983, petitioner informed respondent
should not be construed as requiring two separate proceedings that the Prime Contractor Al Fahd Company had already
for the registration of a foreign divorce decree in the civil terminated its contract; that petitioner agreed to pay
registry one for recognition of the foreign decree and another respondent 12% interest per year on the unpaid bills of
specifically for cancellation of the entry under Rule 108 of the completed works. The letter was signed by both Robert Brown
Rules of Court. The recognition of the foreign divorce decree and Gerald Love.
may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of On June 9, 1983, petitioner acknowledged its indebtedness to
Court) is precisely to establish the status or right of a party or a respondent in the amount of KD 91,580.059, plus general
particular fact. Moreover, Rule 108 of the Rules of Court can overtime pay of KD 8,126 and promised to pay it in
serve as the appropriate adversarial proceeding by which the installments.
applicability of the foreign judgment can be measured and
tested in terms of jurisdictional infirmities, want of notice to the As petitioner failed to pay respondent any part of the amount
party, collusion, fraud, or clear mistake of law or fact. due, together with the contractual interest of 12%, the latter
referred their dispute to the Commercial Kully Court of Kuwait
WHEREFORE, we GRANT the petition for review on for arbitration as provided under the Sub-Contract Agreement.
certiorari, and REVERSE the October 30, 2008 decision of the The parties were duly notified of the scheduled sessions of
Regional Trial Court of Laoag City, Branch 11, as well as its arbitration, but only respondent and its counsel appeared
February 17, 2009 order. We order the REMAND of the case thereat.
to the trial court for further proceedings in accordance with our
On April 14, 1984, the Arbitrator rendered its award as follows:
The court decides that Land Oil Resources Company claiming that they were not parties to the Sub-Contract
(Construction Consortium Incorporation) is indebted to Agreement. Petitioner's Answer alleged that it admitted the
[Al] Rabiah Lighting Company by KD 108,368.860 and existence of the sub-contract agreement, although claimed that
that it is compelled to pay this sum in settlement of the "it has no knowledge as to its genuineness and due execution";
account of the contract concluded between them on that such lack of knowledge was belied or negated by
20th December, 1981. The said sum includes also the petitioner's own allegations in its Answer acknowledging
contractual interest until the date of issue of this indebtedness to respondent. The RTC found that petitioner's
Award. letter dated September 12, 1982 to respondent confirmed that
it owed respondent the sum of KD 21,930,317 and anticipated
Respondent then filed with the Regional Trial Court (RTC) of that payment would be made in early October 1982, together
Makati, an action for Enforcement of Foreign Judgment Plus with the other due accounts. This letter was submitted as
Damages against defendant CCI and petitioner. The case was respondent's Exhibit "C" and the RTC noted that this letter was
raffled off to Branch 64 and was docketed as Civil Case No. among the documents submitted by respondent to the foreign
11578. arbitrator in support of its claim against petitioner and CCI.
In its Answer, petitioner admitted the existence of the Sub- The RTC said that while it appeared in the Sub-Contract
Contract Agreement, but claimed to have no knowledge as to Agreement that the contracting parties were CCI and
its genuineness and due execution. By way of Special and respondent, however, in paragraph VIII thereof, petitioner
Affirmative Defenses, petitioner argued among others that Landoil appeared together with CCI as the First Party to whom
respondent had no cause of action; respondent's claims had notices shall be sent. The RTC then concluded that the
been paid, set-off or extinguished; the Commercial Kully Court inclusion of petitioner as first party to whom the notices shall be
of Kuwait did not acquire jurisdiction over petitioner; and the sent and the conduct exhibited by petitioner led to the
arbitral award was contrary to public policy, hence, illegal. inevitable conclusion that the two defendants, petitioner and
Petitioner also alleged that since it had not been paid by its CCI, were the parties with whom respondent entered into the
principal contractor the value of the corresponding sub-contract agreement; and that this conclusion was even
accomplishments done by respondent, respondent's cause of strengthened by the fact that as between the two defendants,
action had not yet accrued; and that the termination of the petitioner and CCI, there existed a "pooling agreement" for
contract by the primary contractor occurred without the fault or undertaking projects abroad pursuant to Presidential Decree
negligence of petitioner and defendant CCI, nor were they (PD) 929. Since petitioner and CCI were the parties with whom
responsible for force majeure under the contract. respondent contracted, they were bound by the terms of the
agreement, including the referral of their dispute to arbitration
On the other hand, defendant CCI, in its Answer, specifically in accordance with the Rules and Regulations of the State of
denied the Sub-Contract Agreement for lack of knowledge, Kuwait.
claiming that it was not a party to the contract and that G.W.
Love was not an employee nor authorized to act for and in Dissatisfied, petitioner appealed the RTC Decision to the CA.
behalf of CCI; and that the Commercial Kully Court of Kuwait After the submission of the parties' respective briefs, the case
did not acquire jurisdiction over it and the arbitral award was was submitted for resolution.
contrary to public policy.
On August 14, 2003, the CA issued its assailed Decision which
After trial, the RTC rendered its Decision dated July 31, 1995, dismissed the appeal and affirmed the RTC decision.
the dispositive portion of which reads:
The CA ruled, among others, that petitioner was already
WHEREFORE, in view of the foregoing, this Court estopped from claiming that it was not a party to the Sub-
finds the petition of plaintiff AL RABIAH Company to Contract Agreement as the agreement itself mentioned
be well-taken, and judgment is hereby rendered petitioner Landoil as one of the contracting parties and that
finding defendants Landoil Resources Corporation petitioner had made representations in the past, binding itself
and Construction Consortium solidarily liable to for the overdue accounts in favor of respondent.
plaintiff Al Rabiah Lighting Company in the sum
indicated in Arbitral Award with legal interest thereon Petitioner's motion for reconsideration was denied in a
from July 1984 (Certification of Non-occurrence of Resolution dated August 29, 2006.
Appeal) until payment is made. Defendants are
likewise ordered to pay to plaintiff the sum of Hence, this petition wherein petitioner raises the following
P250,000.00 as attorney's fees and P100,000.00 as issues:
exemplary damages. SO ORDERED.
(a) whether a Philippine Court, in enforcing a foreign judgment
In resolving the main issue of whether the RTC can validly set that has become final and executory, has the jurisdiction to
aside the foreign arbitral award rendered against petitioner and alter, amend or expand such final foreign judgment;
defendant CCI on the bases of the defenses raised in the
parties' respective Answers, the RTC ruled in the negative. The (b) Whether a foreign judgment may be enforced against a
RTC found that petitioner and CCI were estopped from party other than the party decreed and held liable therein; and
issue but we also frown upon the apparent self-
(c) Whether Estoppel was properly appreciated in this case. contradiction. We note that the defendant had, in the
course of this case, repeatedly affirmed that it was the
Petitioner contends that as appearing in the dispositive portion same party as the defendant against whom the
of the foreign arbitral award, there is only one defendant foreign judgment had been rendered. In its Answer to
adjudged liable to respondent, i.e., Land Oil Resources the Complaint, it stated that:
Company (Construction Consortium Incorporation); thus, the
party against whom the Writ of Execution may be directed. 12. The award directs the Landoil to pay and
Petitioner claims that it is not the same as Land Oil Resources makes Construction Consortium Incorporated liable. x
Company (Construction Consortium Incorporation) as its xx
Articles of Incorporation does not indicate any such appellation; Likewise, in its appeal brief, it also
that it was not a party to the proceedings before the foreign acknowledged being the defendant against whom the
arbitrator as it is a different entity. Thus, enforcing an award arbitral award was being enforced, thuswise:
against a non-party such as petitioner would be executing on
properties owned by a third person other than the judgment x x x the foreign judgment subject of the case before
debtor; and that to allow the same would amount to a the court a quo is an arbitral award rendered by the
deprivation of property without due process of law. Petitioner Commercial Kully Court of the State of Kuwait on April
avers that the RTC and the CA erred and committed grave 14, 1984, compelling defendant CCI and defendant
abuse of discretion in amending and modifying the foreign appellant to pay the sum of KD 108,368.860 in
arbitral award so as to include petitioner which is a corporation settlement of the contract allegedly concluded
different from the entity adjudged liable in the foreign arbitral between them and plaintiff-appellee, which included a
award. 10% contractual interest until the time of said award.
We are not convinced. Indeed, petitioner had never claimed in the RTC that it was not
the party referred to in the foreign arbitral award. On the
As correctly found by the CA, petitioner's argument that the contrary, petitioner's Answer with Counterclaim filed in the RTC
party adjudged liable under the foreign arbitral award was a even established its knowledge and participation in the Sub-
different entity from it was only raised for the first time in Contract Agreement. Under the heading of Special and
petitioner's motion for reconsideration filed with it; thus, could Affirmative Defenses, petitioner alleged, among others that:
not be entertained. We quote with approval what the CA said
when it denied petitioner's motion for reconsideration in this 6. plaintiff's claims have been paid, set-off, or extinguished.
wise:
xxxx
The defendant mainly argues that it was never a party
to the subcontract agreement. We find its argument
14. That under the Sub-Contract, Annex "A" of the complaint, it
meritless, because it is now too late for the defendant
is provided as follows:
to claim that the party adjudged liable under the
foreign arbitral award was a different entity. Moreover,
14.1 FIRST PARTY agrees to pay SECOND PARTY at
we note that this is the first time that the defendant
monthly intervals based on actual monthly progress
raises such defense. It is settled in jurisprudence that
accomplishment, plus 50% on material on Site less 5%
an issue cannot be raised for the first time on appeal.
retention and less advance payments, to be paid within 15
With more reason should we disallow and disregard
days of FIRST PARTY'S receipt from Client subject to any
the issue if it is initially raised in a motion for
changes imposed by the Client in approving the monthly
reconsideration of the decision of the appellate court.
Valuation Certificate. Details of any such modifications will be
available to the Sub-Contractor insofar as they affect his
From the outset of the case, the defendant's stance
previously agreed valuation amount.
has always been to deny any participation in the sub-
contract agreement between Construction Consortium
Defendant has not been paid by its principal contractor the
Inc. and the plaintiff and, in the alternative, to bewail
payment/value of the corresponding accomplishments done by
the failure of the arbitral award to spell out the factual
plaintiff and that, therefore, plaintiff's cause of action against
distinctions between its liability and that of the
answering defendant has not accrued;
Construction Consortium Inc. for they were separate
and distinct entities. Thus, this is the first time that it
15. That in any event, the alleged claim was discharged on
asserts that it was not the defendant in the case
September 12, 1983 by assignment to plaintiff in the full
before the Commercial Kully Court of the State of
amount of the true and actual measure and valuation
Kuwait. The defendant thus asserts the existence of a
calculated upon termination of the contract by the Primary
third corporation against whom the arbitral award was
Contractor;
supposedly rendered, Landoil Resources Company
(Construction Consortium Incorporated). Not only is
16. In any event, the termination of the contract of the primary
the Court precluded from entertaining such first-time
contractor occurred without the fault or negligence of the
defendants; neither was it responsible for the force majeure Project Office of Ahmadi
under the terms of the contract."
SECONDARY PARTY: AL RABIAH LIGHTING COMPANY
Moreover, in petitioner's Memorandum of Authorities on the W.L.I.
Invalidity and Unenforceability of the Foreign Judgment filed P.O. Box 22015 Sarat
with the RTC, it again made admission that it was the party Kuwait
referred to in the foreign arbitral award, thus: For the attention of Or delivered
To: Mr. Said Y. Al Imam
xxxx
4. Loss of interest suffered by claimant Without responding to the above communication, the foreign
from 21.6.83 to 23.7.88 -- court refused to admit the private respondents objections for
- US $ 417,169.95 failure to pay the required filing fees, and thereafter issued an
Order on February 7, 1990, to wit:
Total amount of award - - - US $ 899,603.77
ORDER
In addition to the above, the respondent would also be liable to
pay to the claimant the interest at the rate of 6% on the above Since objections filed by defendant have been rejected through
amount, with effect from 24.7.1988 upto the actual date of Misc. Suit No. 5 on 7.2.90, therefore, award should be made
payment by the Respondent in full settlement of the claim as Rule of the Court.
awarded or the date of the decree, whichever is earlier.
ORDER
I determine the cost at Rs. 70,000/- equivalent to US $5,000
towards the expenses on Arbitration, legal expenses, stamps Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
duly incurred by the claimant. The cost will be shared by the Court. On the basis of conditions of award decree is passed.
parties in equal proportion. Award Paper No. 3/B-1 shall be a part of the decree. The
plaintiff shall also be entitled to get from defendant (US$ 899,
Pronounced at Dehra Dun to-day, the 23rd of July 1988. 603.77 (US$ Eight Lakhs ninety nine thousand six hundred and
three point seventy seven only) alongwith 9% interest per
To enable the petitioner to execute the above award in its annum till the last date of realisation.
favor, it filed a Petition before the Court of the Civil Judge in
Dehra Dun, India (hereinafter referred to as the foreign court Despite notice sent to the private respondent of the foregoing
for brevity), praying that the decision of the arbitrator be made order and several demands by the petitioner for compliance
the Rule of Court in India. The foreign court issued notices to therewith, the private respondent refused to pay the amount
the private respondent for filing objections to the petition. The adjudged by the foreign court as owing to the petitioner.
private respondent complied and sent its objections dated Accordingly, the petitioner filed a complaint with Branch 30 of
January 16, 1989. Subsequently, the said court directed the the Regional Trial Court (RTC) of Surigao City for the
private respondent to pay the filing fees in order that the latters enforcement of the aforementioned judgment of the foreign
objections could be given consideration. Instead of paying the court. The private respondent moved to dismiss the complaint
required filing fees, the private respondent sent the following on the following grounds: (1) plaintiffs lack of legal capacity to
communication addressed to the Civil Judge of Dehra Dun: sue; (2) lack of cause of action; and (3) plaintiffs claim or
demand has been waived, abandoned, or otherwise
The Civil Judge extinguished. The petitioner filed its opposition to the said
Dehra Dun (U.P.) India motion to dismiss, and the private respondent, its rejoinder
Re: Misc. Case No. 5 of 1989 thereto. On January 3, 1992, the RTC issued an order
M/S Pacific Cement Co., upholding the petitioners legal capacity to sue, albeit
Inc. vs. ONGC Case dismissing the complaint for lack of a valid cause of action. The
RTC held that the rule prohibiting foreign corporations
Sir: transacting business in the Philippines without a license from
maintaining a suit in Philippine courts admits of an exception,
that is, when the foreign corporation is suing on an isolated
1. We received your letter dated 28 April 1989
transaction as in this case. Anent the issue of the sufficiency of
only last 18 May 1989.
the petitioners cause of action, however, the RTC found the
referral of the dispute between the parties to the arbitrator
2. Please inform us how much is the court fee under Clause 16 of their contract erroneous. According to the
to be paid. Your letter did not mention the RTC,
amount to be paid.
[a] perusal of the above-quoted clause (Clause 16) readily
3. Kindly give us 15 days from receipt of your shows that the matter covered by its terms is limited to ALL
letter advising us how much to pay to QUESTIONS AND DISPUTES, RELATING TO THE MEANING
comply with the same. OF THE SPECIFICATION, DESIGNS, DRAWINGS AND
INSTRUCTIONS HEREIN BEFORE MENTIONED and as to
Thank you for your kind consideration. the QUALITY OF WORKMANSHIP OF THE ITEMS
ORDERED or as to any other questions, claim, right or thing A. THE NON-DELIVERY OF THE CARGO WAS A
whatsoever, but qualified to IN ANY WAY ARISING OR MATTER PROPERLY COGNIZABLE BY THE
RELATING TO THE SUPPLY ORDER/CONTRACT, DESIGN, PROVISIONS OF CLAUSE 16 OF THE CONTRACT;
DRAWING, SPECIFICATION, etc., repeating the enumeration
B. THE JUDGMENT OF THE CIVIL COURT OF
in the opening sentence of the clause.
DEHRADUN, INDIA WAS AN AFFIRMATION OF THE
FACTUAL AND LEGAL FINDINGS OF THE
The court is inclined to go along with the observation of the
ARBITRATOR AND THEREFORE ENFORCEABLE IN
defendant that the breach, consisting of the non-delivery of the
THIS JURISDICTION;
purchased materials, should have been properly litigated
before a court of law, pursuant to Clause No. 15 of the C. EVIDENCE MUST BE RECEIVED TO REPEL THE
Contract/Supply Order, herein quoted, to wit: EFFECT OF A PRESUMPTIVE RIGHT UNDER A
FOREIGN JUDGMENT.
JURISDICTION
The threshold issue is whether or not the arbitrator had
All questions, disputes and differences, arising under out of or jurisdiction over the dispute between the petitioner and the
in connection with this supply order, shall be subject to the private respondent under Clause 16 of the contract. To
EXCLUSIVE JURISDICTION OF THE COURT, within the local reiterate, Clause 16 provides as follows:
limits of whose jurisdiction and the place from which this supply
order is situated. Except where otherwise provided in the supply order/contract
all questions and disputes, relating to the meaning of the
The RTC characterized the erroneous submission of the specification designs, drawings and instructions herein before
dispute to the arbitrator as a mistake of law or fact amounting mentioned and as to quality of workmanship of the items
to want of jurisdiction. Consequently, the proceedings had ordered or as to any other question, claim, right or thing
before the arbitrator were null and void and the foreign court whatsoever, in any way arising out of or relating to the supply
had therefore, adopted no legal award which could be the order/contract design, drawing, specification, instruction or
source of an enforceable right. these conditions or otherwise concerning the materials or the
execution or failure to execute the same during
The petitioner then appealed to the respondent Court of stipulated/extended period or after the
Appeals which affirmed the dismissal of the complaint. In its completion/abandonment thereof shall be referred to the sole
decision, the appellate court concurred with the RTCs ruling arbitration of the persons appointed by Member of the
that the arbitrator did not have jurisdiction over the dispute Commission at the time of dispute. It will be no objection to any
between the parties, thus, the foreign court could not validly such appointment that the arbitrator so appointed is a
adopt the arbitrators award. In addition, the appellate court Commission employer (sic) that he had to deal with the matter
observed that the full text of the judgment of the foreign court to which the supply or contract relates and that in the course of
contains the dispositive portion only and indicates no findings his duties as Commissions employee he had expressed views
of fact and law as basis for the award. Hence, the said on all or any of the matter in dispute or difference.
judgment cannot be enforced by any Philippine court as it
would violate the constitutional provision that no decision shall The dispute between the parties had its origin in the non-
be rendered by any court without expressing therein clearly delivery of the 4,300 metric tons of oil well cement to the
and distinctly the facts and the law on which it is based. The petitioner. The primary question that may be posed, therefore,
appellate court ruled further that the dismissal of the private is whether or not the non-delivery of the said cargo is a proper
respondents objections for non-payment of the required legal subject for arbitration under the above-quoted Clause 16. The
fees, without the foreign court first replying to the private petitioner contends that the same was a matter within the
respondents query as to the amount of legal fees to be paid, purview of Clause 16, particularly the phrase, x x x or as to any
constituted want of notice or violation of due process. Lastly, it other questions, claim, right or thing whatsoever, in any way
pointed out that the arbitration proceeding was defective arising or relating to the supply order/contract, design, drawing,
because the arbitrator was appointed solely by the petitioner, specification, instruction x x x. It is argued that the foregoing
and the fact that the arbitrator was a former employee of the phrase allows considerable latitude so as to include non-
latter gives rise to a presumed bias on his part in favor of the delivery of the cargo which was a claim, right or thing relating
petitioner. to the supply order/contract. The contention is bereft of merit.
First of all, the petitioner has misquoted the said phrase,
A subsequent motion for reconsideration by the petitioner of shrewdly inserting a comma between the words supply
the appellate courts decision was denied, thus, this petition for order/contract and design where none actually exists. An
review on certiorari citing the following as grounds in support accurate reproduction of the phrase reads, x x x or as to any
thereof: other question, claim, right or thing whatsoever, in any way
arising out of or relating to the supply order/contract design,
drawing, specification, instruction or these conditions x x x. The
RESPONDENT COURT OF APPEALS GRAVELY
absence of a comma between the words supply order/contract
ERRED IN AFFIRMING THE LOWER COURTS
and design indicates that the former cannot be taken
ORDER OF DISMISSAL SINCE:
separately but should be viewed in conjunction with the words possessed with the required skill and expertise which may be
design, drawing, specification, instruction or these conditions. It otherwise absent in the regular courts.
is thus clear that to fall within the purview of this phrase, the
claim, right or thing whatsoever must arise out of or relate to This Court agrees with the appellate court in its ruling that the
the design, drawing, specification, or instruction of the supply non-delivery of the oil well cement is a matter properly
order/contract. The petitioner also insists that the non-delivery cognizable by the regular courts as stipulated by the parties in
of the cargo is not only covered by the foregoing phrase but Clause 15 of their contract:
also by the phrase, x x x or otherwise concerning the materials
or the execution or failure to execute the same during the All questions, disputes and differences, arising under out of or
stipulated/extended period or after completion/abandonment in connection with this supply order, shall be subject to the
thereof x x x. exclusive jurisdiction of the court, within the local limits of
whose jurisdiction and the place from which this supply order is
The doctrine of noscitur a sociis, although a rule in the situated.
construction of statutes, is equally applicable in the
ascertainment of the meaning and scope of vague contractual The following fundamental principles in the interpretation of
stipulations, such as the aforementioned phrase. According to contracts and other instruments served as our guide in arriving
the maxim noscitur a sociis, where a particular word or phrase at the foregoing conclusion:
is ambiguous in itself or is equally susceptible of various
meanings, its correct construction may be made clear and
"ART. 1373. If some stipulation of any contract should admit of
specific by considering the company of the words in which it is
several meanings, it shall be understood as bearing that import
found or with which it is associated, or stated differently, its
which is most adequate to render it effectual."
obscurity or doubt may be reviewed by reference to associated
words. A close examination of Clause 16 reveals that it covers
three matters which may be submitted to arbitration namely, ART. 1374. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly.
(1) all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items Sec. 11. Instrument construed so as to give effect to all
ordered; or provisions. In the construction of an instrument, where there
are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all.
(2) any other question, claim, right or thing whatsoever, in any
way arising out of or relating to the supply order/contract
design, drawing, specification, instruction or these conditions; Thus, this Court has held that as in statutes, the provisions of a
or contract should not be read in isolation from the rest of the
instrument but, on the contrary, interpreted in the light of the
other related provisions. The whole and every part of a contract
(3) otherwise concerning the materials or the execution or
must be considered in fixing the meaning of any of its parts and
failure to execute the same during stipulated/extended period
in order to produce a harmonious whole. Equally applicable is
or after the completion/abandonment thereof.
the canon of construction that in interpreting a statute (or a
contract as in this case), care should be taken that every part
The first and second categories unmistakably refer to thereof be given effect, on the theory that it was enacted as an
questions and disputes relating to the design, drawing, integrated measure and not as a hodge-podge of conflicting
instructions, specifications or quality of the materials of the provisions. The rule is that a construction that would render a
supply/order contract. In the third category, the clause, provision inoperative should be avoided; instead, apparently
execution or failure to execute the same, may be read as inconsistent provisions should be reconciled whenever
execution or failure to execute the supply order/contract. But in possible as parts of a coordinated and harmonious whole.
accordance with the doctrine of noscitur a sociis, this reference
to the supply order/contract must be construed in the light of
The petitioners interpretation that Clause 16 is of such latitude
the preceding words with which it is associated, meaning to
as to contemplate even the non-delivery of the oil well cement
say, as being limited only to the design, drawing, instructions,
would in effect render Clause 15 a mere superfluity. A perusal
specifications or quality of the materials of the supply
of Clause 16 shows that the parties did not intend arbitration to
order/contract. The non-delivery of the oil well cement is
be the sole means of settling disputes. This is manifest from
definitely not in the nature of a dispute arising from the failure
Clause 16 itself which is prefixed with the proviso, Except
to execute the supply order/contract design, drawing,
where otherwise provided in the supply order/contract x x x,
instructions, specifications or quality of the materials. That
thus indicating that the jurisdiction of the arbitrator is not all
Clause 16 should pertain only to matters involving the technical
encompassing, and admits of exceptions as may be provided
aspects of the contract is but a logical inference considering
elsewhere in the supply order/contract. We believe that the
that the underlying purpose of a referral to arbitration is for
correct interpretation to give effect to both stipulations in the
such technical matters to be deliberated upon by a person
contract is for Clause 16 to be confined to all claims or disputes
arising from or relating to the design, drawing, instructions,
specifications or quality of the materials of the supply of facts and law upon which the award in favor of the petitioner
order/contract, and for Clause 15 to cover all other claims or was based. The pertinent portion of the judgment of the foreign
disputes. court reads:
The petitioner then asseverates that granting, for the sake of ORDER
argument, that the non-delivery of the oil well cement is not a
proper subject for arbitration, the failure of the replacement Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
cement to conform to the specifications of the contract is a Court. On the basis of conditions of award decree is passed.
matter clearly falling within the ambit of Clause 16. In this Award Paper No. 3/B-1 shall be a part of the decree. The
contention, we find merit. When the 4,300 metric tons of oil well plaintiff shall also be entitled to get from defendant ( US$ 899,
cement were not delivered to the petitioner, an agreement was 603.77 (US$ Eight Lakhs ninety nine thousand six hundred and
forged between the latter and the private respondent that Class three point seventy seven only) alongwith 9% interest per
G cement would be delivered to the petitioner as replacement. annum till the last date of realisation.
Upon inspection, however, the replacement cement was
rejected as it did not conform to the specifications of the As specified in the order of the Civil Judge of Dehra Dun,
contract. Only after this latter circumstance was the matter Award Paper No. 3/B-1 shall be a part of the decree. This is a
brought before the arbitrator. Undoubtedly, what was referred categorical declaration that the foreign court adopted the
to arbitration was no longer the mere non-delivery of the cargo findings of facts and law of the arbitrator as contained in the
at the first instance but also the failure of the replacement latters Award Paper. Award Paper No. 3/B-1, contains an
cargo to conform to the specifications of the contract, a matter exhaustive discussion of the respective claims and defenses of
clearly within the coverage of Clause 16. the parties, and the arbitrators evaluation of the same.
Inasmuch as the foregoing is deemed to have been
The private respondent posits that it was under no legal incorporated into the foreign courts judgment the appellate
obligation to make replacement and that it undertook the latter court was in error when it described the latter to be a simplistic
only in the spirit of liberality and to foster good business decision containing literally, only the dispositive portion.
relationship. Hence, the undertaking to deliver the replacement
cement and its subsequent failure to conform to specifications The constitutional mandate that no decision shall be rendered
are not anymore subject of the supply order/contract or any of by any court without expressing therein clearly and distinctly
the provisions thereof. We disagree. the facts and the law on which it is based does not preclude
the validity of memorandum decisions which adopt by
As per Clause 7 of the supply order/contract, the private reference the findings of fact and conclusions of law contained
respondent undertook to deliver the 4,300 metric tons of oil in the decisions of inferior tribunals. In Francisco v. Permskul,
well cement at BOMBAY (INDIA) 2181 MT and CALCUTTA this Court held that the following memorandum decision of the
2119 MT. The failure of the private respondent to deliver the Regional Trial Court of Makati did not transgress the
cargo to the designated places remains undisputed. Likewise, requirements of Section 14, Article VIII of the Constitution:
the fact that the petitioner had already paid for the cost of the
cement is not contested by the private respondent. The private MEMORANDUM DECISION
respondent claims, however, that it never benefited from the
transaction as it was not able to recover the cargo that was
After a careful perusal, evaluation and study of the records of
unloaded at the port of Bangkok. First of all, whether or not the
this case, this Court hereby adopts by reference the findings of
private respondent was able to recover the cargo is immaterial
fact and conclusions of law contained in the decision of the
to its subsisting duty to make good its promise to deliver the
Metropolitan Trial Court of Makati, Metro Manila, Branch 63
cargo at the stipulated place of delivery. Secondly, we find it
and finds that there is no cogent reason to disturb the same.
difficult to believe this representation. In its Memorandum filed
before this Court, the private respondent asserted that the Civil
Court of Bangkok had already ruled that the non-delivery of the WHEREFORE, judgment appealed from is hereby affirmed in
cargo was due solely to the fault of the carrier. It is, therefore, toto. (Underscoring supplied.)
but logical to assume that the necessary consequence of this
finding is the eventual recovery by the private respondent of This Court had occasion to make a similar pronouncement in
the cargo or the value thereof. What inspires credulity is not the earlier case of Romero v. Court of Appeals, where the
that the replacement was done in the spirit of liberality but that assailed decision of the Court of Appeals adopted the findings
it was undertaken precisely because of the private respondents and disposition of the Court of Agrarian Relations in this wise:
recognition of its duty to do so under the supply order/contract,
Clause 16 of which remains in force and effect until the full We have, therefore, carefully reviewed the evidence and made
execution thereof. a re-assessment of the same, and We are persuaded, nay
compelled, to affirm the correctness of the trial courts factual
We now go to the issue of whether or not the judgment of the findings and the soundness of its conclusion. For judicial
foreign court is enforceable in this jurisdiction in view of the convenience and expediency, therefore, We hereby adopt by
private respondents allegation that it is bereft of any statement way of reference, the findings of facts and conclusions of the
court a quo spread in its decision, as integral part of this Our rejected its objections for a clearly meritorious ground. The
decision. (Underscoring supplied) private respondent was afforded sufficient opportunity to be
heard. It was not incumbent upon the foreign court to reply to
Hence, even in this jurisdiction, incorporation by reference is the private respondents written communication. On the
allowed if only to avoid the cumbersome reproduction of the contrary, a genuine concern for its cause should have
decision of the lower courts, or portions thereof, in the decision prompted the private respondent to ascertain with all due
of the higher court. This is particularly true when the decision diligence the correct amount of legal fees to be paid. The
sought to be incorporated is a lengthy and thorough discussion private respondent did not act with prudence and diligence thus
of the facts and conclusions arrived at, as in this case, where its plea that they were not accorded the right to procedural due
Award Paper No. 3/B-1 consists of eighteen (18) single spaced process cannot elicit either approval or sympathy from this
pages. Court.
Furthermore, the recognition to be accorded a foreign The private respondent bewails the presumed bias on the part
judgment is not necessarily affected by the fact that the of the arbitrator who was a former employee of the petitioner.
procedure in the courts of the country in which such judgment This point deserves scant consideration in view of the following
was rendered differs from that of the courts of the country in stipulation in the contract:
which the judgment is relied on. This Court has held that
matters of remedy and procedure are governed by the lex fori x x x. It will be no objection to any such appointment that the
or the internal law of the forum. Thus, if under the procedural arbitrator so appointed is a Commission employer (sic) that he
rules of the Civil Court of Dehra Dun, India, a valid judgment had to deal with the matter to which the supply or contract
may be rendered by adopting the arbitrators findings, then the relates and that in the course of his duties as Commissions
same must be accorded respect. In the same vein, if the employee he had expressed views on all or any of the matter in
procedure in the foreign court mandates that an Order of the dispute or difference. (Underscoring supplied.)
Court becomes final and executory upon failure to pay the
necessary docket fees, then the courts in this jurisdiction Finally, we reiterate hereunder our pronouncement in the case
cannot invalidate the order of the foreign court simply because of Northwest Orient Airlines, Inc. v. Court of Appeals that:
our rules provide otherwise.
A foreign judgment is presumed to be valid and binding in the
The private respondent claims that its right to due process had country from which it comes, until the contrary is shown. It is
been blatantly violated, first by reason of the fact that the also proper to presume the regularity of the proceedings and
foreign court never answered its queries as to the amount of the giving of due notice therein.
docket fees to be paid then refused to admit its objections for
failure to pay the same, and second, because of the presumed Under Section 50, Rule 39 of the Rules of Court, a judgment in
bias on the part of the arbitrator who was a former employee of an action in personam of a tribunal of a foreign country having
the petitioner. jurisdiction to pronounce the same is presumptive evidence of
a right as between the parties and their successors-in-interest
Time and again this Court has held that the essence of due by a subsequent title. The judgment may, however, be assailed
process is to be found in the reasonable opportunity to be by evidence of want of jurisdiction, want of notice to the party,
heard and submit any evidence one may have in support of collusion, fraud, or clear mistake of law or fact. Also, under
ones defense or stated otherwise, what is repugnant to due Section 3 of Rule 131, a court, whether of the Philippines or
process is the denial of opportunity to be heard. Thus, there is elsewhere, enjoys the presumption that it was acting in the
no violation of due process even if no hearing was conducted, lawful exercise of jurisdiction and has regularly performed its
where the party was given a chance to explain his side of the official duty.
controversy and he waived his right to do so.
Consequently, the party attacking a foreign judgment, the
In the instant case, the private respondent does not deny the private respondent herein, had the burden of overcoming the
fact that it was notified by the foreign court to file its objections presumption of its validity which it failed to do in the instant
to the petition, and subsequently, to pay legal fees in order for case.
its objections to be given consideration. Instead of paying the
legal fees, however, the private respondent sent a The foreign judgment being valid, there is nothing else left to
communication to the foreign court inquiring about the correct be done than to order its enforcement, despite the fact that the
amount of fees to be paid. On the pretext that it was yet petitioner merely prays for the remand of the case to the RTC
awaiting the foreign courts reply, almost a year passed without for further proceedings. As this Court has ruled on the validity
the private respondent paying the legal fees. Thus, on and enforceability of the said foreign judgment in this
February 2, 1990, the foreign court rejected the objections of jurisdiction, further proceedings in the RTC for the reception of
the private respondent and proceeded to adjudicate upon the evidence to prove otherwise are no longer necessary.
petitioners claims. We cannot subscribe to the private
respondents claim that the foreign court violated its right to due
process when it failed to reply to its queries nor when the latter
WHEREFORE, the instant petition is GRANTED, and the 8) The Superior Court for the State of California, County
assailed decision of the Court of Appeals sustaining the trial of Contra Costa[,] did not properly acquire jurisdiction over the
courts dismissal of the OIL AND NATURAL GAS subject matter of and over the persons involved in [C]ase
COMMISSIONs complaint in Civil Case No. 4006 before #C21-00265.
Branch 30 of the RTC of Surigao City is REVERSED, and
another in its stead is hereby rendered ORDERING private 9) The Judgment on Stipulations for Entry in Judgment
respondent PACIFIC CEMENT COMPANY, INC. to pay to in Case #C21-00265 dated December 12, 1991 was obtained
petitioner the amounts adjudged in the foreign judgment without the assistance of counsel for [petitioner] and without
subject of said case. SO ORDERED. sufficient notice to him and therefore, was rendered in clear
violation of [petitioners] constitutional rights to substantial and
procedural due process.
[G.R. No. 141536. February 26, 2001] 10) The Judgment on Stipulation for Entry in Judgment in
Case #C21-00265 dated December 12, 1991 was procured by
means of fraud or collusion or undue influence and/or based on
GIL MIGUEL T. PUYAT, petitioner, vs. RON ZABARTE,
a clear mistake of fact and law.
respondent.
The Case
13) In the transaction, which is the subject matter in Case
#C21-00265, [petitioner] is not in any way liable, in fact and in
law, to [respondent] in this case, as contained in [petitioners]
Before us is a Petition for Review on Certiorari under Rule 45 Answer to Complaint in Case #C21-00265 dated April 1, 1991,
of the Rules of Court, challenging the August 31, 1999 Annex B of [respondents] Complaint dated December 6, 1993.
Decision of the Court of Appeals (CA), which affirmed the
Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil 14) [Respondent] is guilty of misrepresentation or
Case No. 64107; and the January 20, 2000 CA Resolution falsification in the filing of his Complaint in this case dated
which denied reconsideration.
December 6, 1993. Worse, [respondent] has no capacity to sue
in the Philippines.
The assailed CA Decision disposed as follows:
15) Venue has been improperly laid in this case.
WHEREFORE, finding no error in the judgment appealed from,
the same is AFFIRMED." (Record, pp. 42-44)
The Facts
On 1 August 1994, [respondent] filed a [M]otion for
[S]ummary [J]udgment under Rule 34 of the Rules of
The facts of this case, as narrated by the Court of Appeals, are Court alleging that the [A]nswer filed by [petitioner] failed
as follows: to tender any genuine issue as to the material facts. In
his [O]pposition to [respondents] motion, [petitioner]
It appears that on 24 January 1994, [Respondent] Ron Zabarte demurred as follows:
commenced [an action] to enforce the money judgment
rendered by the Superior Court for the State of California, 2) [Petitioner] begs to disagree[;] in support hereof, [he]
County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] wishes to mention that in his Answer with Special and
filed his Answer with the following special and affirmative Affirmative Defenses dated March 16, 1994 [petitioner] has
defenses: interposed that the Judgment on Stipulations for Entry in
Judgment is null and void, fraudulent, illegal and
xxx xxx unenforceable, the same having been obtained by means of
xxx fraud, collusion, undue influence and/or clear mistake of fact
and law. In addition, [he] has maintained that said Judgment on
Stipulations for Entry in Judgment was obtained without the that [the latters] Answer had failed to raise the issue of
assistance of counsel for [petitioner] and without sufficient jurisdiction. [Petitioner] countered by asserting in his Reply that
notice to him and therefore, was rendered in violation of his jurisdiction [could] not be fixed by agreement of the parties.
constitutional rights to substantial and procedural due process. The lower court dismissed [his] [M]otion for [R]econsideration
and [M]otion [to] [D]ismiss (Record, pp. 196-198), x x x.
The [M]otion for [S]ummary [J]udgment was set for
hearing on 12 August 1994 during which [respondent] The RTC eventually rendered its February 21, 1997 Decision,
marked and submitted in evidence the following: which disposed as follows:
Petitioner vehemently insists that summary judgment is For summary judgment to be valid, Rule 34, Section 3 of the
inappropriate to resolve the case at bar, arguing that his Rules of Court, requires (a) that there must be no genuine
Answer allegedly raised genuine and material factual matters issue as to any material fact, except for the amount of
which he should have been allowed to prove during trial. damages; and (b) that the party presenting the motion for
summary judgment must be entitled to a judgment as a matter
On the other hand, respondent argues that the alleged genuine of law. As mentioned earlier, petitioner admitted that a foreign
issues of fact raised by petitioner are mere conclusions of law, judgment had been rendered against him and in favor of
or propositions arrived at not by any process of natural respondent, and that he had paid $5,000 to the latter in partial
reasoning from a fact or a combination of facts stated but by compliance therewith. Hence, respondent, as the party
the application of the artificial rules of law to the facts pleaded. presenting the Motion for Summary Judgment, was shown to
be entitled to the judgment.
The RTC granted respondents Motion for Summary Judgment
because petitioner, in his Answer, admitted the existence of the The CA made short shrift of the first requirement. To show that
Judgment on Stipulation for Entry in Judgment. Besides, he petitioner had raised no genuine issue, it relied instead on the
had already paid $5,000 to respondent, as provided in the finality of the foreign judgment which was, in fact, partially
foreign judgment sought to be enforced. Hence, the trial court executed. Hence, we shall show in the following discussion
ruled that, there being no genuine issue as to any material fact, how the defenses presented by petitioner failed to tender any
the case should properly be resolved through summary genuine issue of fact, and why a full-blown trial was not
judgment. The CA affirmed this ruling. necessary for the resolution of the issues.
Jurisdiction
We concur with the lower courts. Summary judgment is a
procedural device for the prompt disposition of actions in which
the pleadings raise only a legal issue, and not a genuine issue Petitioner alleges that jurisdiction over Case No. C21-00265,
as to any material fact. By genuine issue is meant a question of which involved partnership interest, was vested in the
fact that calls for the presentation of evidence. It should be Securities and Exchange Commission, not in the Superior
distinguished from an issue that is sham, contrived, set in bad Court of California, County of Contra Costa.
faith and patently unsubstantial.
We disagree. In the absence of proof of California law on the
Summary judgment is resorted to in order to avoid long drawn jurisdiction of courts, we presume that such law, if any, is
out litigations and useless delays. When affidavits, depositions similar to Philippine law. We base this conclusion on the
and admissions on file show that there are no genuine issues presumption of identity or similarity, also known as processual
of fact to be tried, the Rules allow a party to pierce the presumption. The Complaint, which respondent filed with the
allegations in the pleadings and to obtain immediate relief by trial court, was for the enforcement of a foreign judgment. He
way of summary judgment. In short, since the facts are not in alleged therein that the action of the foreign court was for the
dispute, the court is allowed to decide the case summarily by collection of a sum of money, breach of promissory notes, and
applying the law to the material facts. damages.
In our jurisdiction, such a case falls under the jurisdiction of defense and negotiated a settlement with respondent and his
civil courts, not of the Securities and Exchange Commission counsel in December 1991. Respondent also stated that
(SEC). The jurisdiction of the latter is exclusively over matters petitioner, ignoring the judges reminder of the importance of
enumerated in Section 5, PD 902-A, prior to its latest having a lawyer, argued that he would be the one to settle the
amendment. If the foreign court did not really have jurisdiction case and pay anyway. Eventually, the Compromise Agreement
over the case, as petitioner claims, it would have been very was presented in court and signed before Judge Ellen James
easy for him to show this. Since jurisdiction is determined by on January 3, 1992. Hence, petitioners rights to counsel and to
the allegations in a complaint, he only had to submit a copy of due process were not violated.
the complaint filed with the foreign court. Clearly, this issue did
not warrant trial. Unjust Enrichment
3) The unwillingness to extend local judicial facilities to non- PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES,
residents or aliens when the docket may already be HILDA B. NARCISO, SR. MARIANI DIMARANAN, SFIC, and
overcrowded; JOEL C. LAMANGAN in their behalf and on behalf of the Class
Plaintiffs in Class Action No. MDL 840, United States District
4) The inadequacy of the local judicial machinery for Court of Hawaii, petitioners, vs. HON. SANTIAGO JAVIER
effectuating the right sought to be maintained; and RANADA, in his capacity as Presiding Judge of Branch 137,
Regional Trial Court, Makati City, and the ESTATE OF
The difficulty of ascertaining foreign law. 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
None of the aforementioned reasons barred the RTC from
Marcos, Jr., respondents.
exercising its jurisdiction. In the present action, there was no
more need for material witnesses, no forum shopping or
harassment of petitioner, no inadequacy in the local machinery DECISION
to enforce the foreign judgment, and no question raised as to
the application of any foreign law. TINGA, J.:
Authorities agree that the issue of whether a suit should be Our martial law experience bore strange unwanted fruits, and
entertained or dismissed on the basis of the above-mentioned we have yet to finish weeding out its bitter crop. While the
principle depends largely upon the facts of each case and on restoration of freedom and the fundamental structures and
the sound discretion of the trial court. Since the present action processes of democracy have been much lauded, according to
lodged in the RTC was for the enforcement of a foreign a significant number, the changes, however, have not
judgment, there was no need to ascertain the rights and the sufficiently healed the colossal damage wrought under the
obligations of the parties based on foreign laws or contracts. oppressive conditions of the martial law period. The cries of
The parties needed only to perform their obligations under the justice for the tortured, the murdered, and the desaparecidos
Compromise Agreement they had entered into. arouse outrage and sympathy in the hearts of the fair-minded,
yet the dispensation of the appropriate relief due them cannot
Under Section 48, Rule 39 of the 1997 Rules of Civil be extended through the same caprice or whim that
Procedure, a judgment in an action in personam rendered by a characterized the ill-wind of martial rule. The damage done
foreign tribunal clothed with jurisdiction is presumptive was not merely personal but institutional, and the proper
evidence of a right as between the parties and their rebuke to the iniquitous past has to involve the award of
successors-in-interest by a subsequent title. reparations due within the confines of the restored rule of law.
The petitioners in this case are prominent victims of human affirmed by the US Court of Appeals for the Ninth Circuit, in a
rights violations who, deprived of the opportunity to directly decision rendered on 17 December 1996.
confront the man who once held absolute rule over this
country, have chosen to do battle instead with the earthly On 20 May 1997, the present petitioners filed Complaint with
representative, his estate. The clash has been for now the Regional Trial Court, City of Makati (Makati RTC) for the
interrupted by a trial court ruling, seemingly comported to legal enforcement of the Final Judgment. They alleged that they are
logic, that required the petitioners to pay a whopping filing fee members of the plaintiff class in whose favor the US District
of over Four Hundred Seventy-Two Million Pesos Court awarded damages. They argued that since the Marcos
(P472,000,000.00) in order that they be able to enforce a Estate failed to file a petition for certiorari with the US Supreme
judgment awarded them by a foreign court. There is an Court after the Ninth Circuit Court of Appeals had affirmed the
understandable temptation to cast the struggle within the Final Judgment, the decision of the US District Court had
simplistic confines of a morality tale, and to employ short-cuts become final and executory, and hence should be recognized
to arrive at what might seem the desirable solution. But easy, and enforced in the Philippines, pursuant to Section 50, Rule
reflexive resort to the equity principle all too often leads to a 39 of the Rules of Court then in force.
result that may be morally correct, but legally wrong.
On 5 February 1998, the Marcos Estate filed a motion to
Nonetheless, the application of the legal principles involved in dismiss, raising, among others, the non-payment of the correct
this case will comfort those who maintain that our substantive filing fees. It alleged that petitioners had only paid Four
and procedural laws, for all their perceived ambiguity and Hundred Ten Pesos (P410.00) as docket and filing fees,
susceptibility to myriad interpretations, are inherently fair and notwithstanding the fact that they sought to enforce a monetary
just. The relief sought by the petitioners is expressly mandated amount of damages in the amount of over Two and a Quarter
by our laws and conforms to established legal principles. The Billion US Dollars (US$2.25 Billion). The Marcos Estate cited
granting of this petition for certiorari is warranted in order to Supreme Court Circular No. 7, pertaining to the proper
correct the legally infirm and unabashedly unjust ruling of the computation and payment of docket fees. In response, the
respondent judge. petitioners claimed that an action for the enforcement of a
foreign judgment is not capable of pecuniary estimation; hence,
The essential facts bear little elaboration. On 9 May 1991, a a filing fee of only Four Hundred Ten Pesos (P410.00) was
complaint was filed with the United States District Court (US proper, pursuant to Section 7(c) of Rule 141.
District Court), District of Hawaii, against the Estate of former
Philippine President Ferdinand E. Marcos (Marcos Estate). The On 9 September 1998, respondent Judge Santiago Javier
action was brought forth by ten Filipino citizens who each Ranada of the Makati RTC issued the subject Order dismissing
alleged having suffered human rights abuses such as arbitrary the complaint without prejudice. Respondent judge opined that
detention, torture and rape in the hands of police or military contrary to the petitioners submission, the subject matter of the
forces during the Marcos regime. The Alien Tort Act was complaint was indeed capable of pecuniary estimation, as it
invoked as basis for the US District Courts jurisdiction over the involved a judgment rendered by a foreign court ordering the
complaint, as it involved a suit by aliens for tortious violations payment of definite sums of money, allowing for easy
of international law. These plaintiffs brought the action on their determination of the value of the foreign judgment. On that
own behalf and on behalf of a class of similarly situated score, Section 7(a) of Rule 141 of the Rules of Civil Procedure
individuals, particularly consisting of all current civilian citizens would find application, and the RTC estimated the proper
of the Philippines, their heirs and beneficiaries, who between amount of filing fees was approximately Four Hundred Seventy
1972 and 1987 were tortured, summarily executed or had Two Million Pesos, which obviously had not been paid.
disappeared while in the custody of military or paramilitary
groups. Plaintiffs alleged that the class consisted of Not surprisingly, petitioners filed a Motion for Reconsideration,
approximately ten thousand (10,000) members; hence, joinder which Judge Ranada denied in an Order dated 28 July 1999.
of all these persons was impracticable. From this denial, petitioners filed a Petition for Certiorari under
Rule 65 assailing the twin orders of respondent judge. They
The institution of a class action suit was warranted under Rule prayed for the annulment of the questioned orders, and an
23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure, order directing the reinstatement of Civil Case No. 97-1052 and
the provisions of which were invoked by the plaintiffs. the conduct of appropriate proceedings thereon.
Subsequently, the US District Court certified the case as a
class action and created three (3) sub-classes of torture, Petitioners submit that their action is incapable of pecuniary
summary execution and disappearance victims. Trial ensued, estimation as the subject matter of the suit is the enforcement
and subsequently a jury rendered a verdict and an award of of a foreign judgment, and not an action for the collection of a
compensatory and exemplary damages in favor of the plaintiff sum of money or recovery of damages. They also point out that
class. Then, on 3 February 1995, the US District Court, to require the class plaintiffs to pay Four Hundred Seventy Two
presided by Judge Manuel L. Real, rendered a Final Judgment Million Pesos (P472,000,000.00) in filing fees would negate
(Final Judgment) awarding the plaintiff class a total of One and render inutile the liberal construction ordained by the Rules
Billion Nine Hundred Sixty Four Million Five Thousand Eight of Court, as required by Section 6, Rule 1 of the Rules of Civil
Hundred Fifty Nine Dollars and Ninety Cents
($1,964,005,859.90). The Final Judgment was eventually
Procedure, particularly the inexpensive disposition of every 5. P 250,000.00 or more but
action. less than P 300,00.00 - P 1,750.00
6. P 300,000.00 or more but
Petitioners invoke Section 11, Article III of the Bill of Rights of not more than P 400,000.00 - P 2,000.00
the Constitution, which provides that Free access to the courts 7. P 350,000.00 or more but not
and quasi-judicial bodies and adequate legal assistance shall more than P400,000.00 - P 2,250.00
not be denied to any person by reason of poverty, a mandate 8. For each P 1,000.00 in excess of
which is essentially defeated by the required exorbitant filing P 400,000.00 - P 10.00
fee. The adjudicated amount of the filing fee, as arrived at by
the RTC, was characterized as indisputably unfair, inequitable, ...
and unjust.
(Emphasis
The Commission on Human Rights (CHR) was permitted to supplied)
intervene in this case. It urged that the petition be granted and
a judgment rendered, ordering the enforcement and execution Obviously, the above-quoted provision covers, on one hand,
of the District Court judgment in accordance with Section 48, ordinary actions, permissive counterclaims, third-party, etc.
Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the complaints and complaints-in-interventions, and on the other,
Makati RTC erred in interpreting the action for the execution of money claims against estates which are not based on
a foreign judgment as a new case, in violation of the principle judgment. Thus, the relevant question for purposes of the
that once a case has been decided between the same parties present petition is whether the action filed with the lower court
in one country on the same issue with finality, it can no longer is a money claim against an estate not based on judgment.
be relitigated again in another country. The CHR likewise
invokes the principle of comity, and of vested rights. Petitioners complaint may have been lodged against an estate,
but it is clearly based on a judgment, the Final Judgment of the
The Courts disposition on the issue of filing fees will prove a US District Court. The provision does not make any distinction
useful jurisprudential guidepost for courts confronted with between a local judgment and a foreign judgment, and where
actions enforcing foreign judgments, particularly those lodged the law does not distinguish, we shall not distinguish.
against an estate. There is no basis for the issuance a limited
pro hac vice ruling based on the special circumstances of the A reading of Section 7 in its entirety reveals several instances
petitioners as victims of martial law, or on the emotionally- wherein the filing fee is computed on the basis of the amount of
charged allegation of human rights abuses. the relief sought, or on the value of the property in litigation.
The filing fee for requests for extrajudicial foreclosure of
An examination of Rule 141 of the Rules of Court readily mortgage is based on the amount of indebtedness or the
evinces that the respondent judge ignored the clear letter of the mortgagees claim. In special proceedings involving properties
law when he concluded that the filing fee be computed based such as for the allowance of wills, the filing fee is again based
on the total sum claimed or the stated value of the property in on the value of the property. The aforecited rules evidently
litigation. have no application to petitioners complaint.
In dismissing the complaint, the respondent judge relied on Petitioners rely on Section 7(b), particularly the proviso on
Section 7(a), Rule 141 as basis for the computation of the filing actions where the value of the subject matter cannot be
fee of over P472 Million. The provision states: estimated. The provision reads in full:
SEC. 7. Clerk of Regional Trial Court.- SEC. 7. Clerk of Regional Trial Court.-
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall Yet even if there is no unanimity as to the applicable theory
exercise exclusive original jurisdiction: behind the recognition and enforcement of foreign judgments
or a universal treaty rendering it obligatory force, there is
xxx
consensus that the viability of such recognition and can safeguard against possible abuses to the easy resort to
enforcement is essential. Steiner and Vagts note: offshore litigation if it can be demonstrated that the original
claim is noxious to our constitutional values.
. . . The notion of unconnected bodies of national law on
private international law, each following a quite separate path, There is no obligatory rule derived from treaties or conventions
is not one conducive to the growth of a transnational that requires the Philippines to recognize foreign judgments, or
community encouraging travel and commerce among its allow a procedure for the enforcement thereof. However,
members. There is a contemporary resurgence of writing generally accepted principles of international law, by virtue of
stressing the identity or similarity of the values that systems of the incorporation clause of the Constitution, form part of the
public and private international law seek to further a community laws of the land even if they do not derive from treaty
interest in common, or at least reasonable, rules on these obligations. The classical formulation in international law sees
matters in national legal systems. And such generic principles those customary rules accepted as binding result from the
as reciprocity play an important role in both fields. combination two elements: the established, widespread, and
consistent practice on the part of States; and a psychological
Salonga, whose treatise on private international law is of element known as the opinion juris sive necessitates (opinion
worldwide renown, points out: as to law or necessity). Implicit in the latter element is a belief
that the practice in question is rendered obligatory by the
Whatever be the theory as to the basis for recognizing foreign existence of a rule of law requiring it.
judgments, there can be little dispute that the end is to protect
the reasonable expectations and demands of the parties. While the definite conceptual parameters of the recognition and
Where the parties have submitted a matter for adjudication in enforcement of foreign judgments have not been authoritatively
the court of one state, and proceedings there are not tainted established, the Court can assert with certainty that such an
with irregularity, they may fairly be expected to submit, within undertaking is among those generally accepted principles of
the state or elsewhere, to the enforcement of the judgment international law. As earlier demonstrated, there is a
issued by the court. widespread practice among states accepting in principle the
need for such recognition and enforcement, albeit subject to
There is also consensus as to the requisites for recognition of a limitations of varying degrees. The fact that there is no binding
foreign judgment and the defenses against the enforcement universal treaty governing the practice is not indicative of a
thereof. As earlier discussed, the exceptions enumerated in widespread rejection of the principle, but only a disagreement
Section 48, Rule 39 have remain unchanged since the time as to the imposable specific rules governing the procedure for
they were adapted in this jurisdiction from long standing recognition and enforcement.
American rules. The requisites and exceptions as delineated
under Section 48 are but a restatement of generally accepted Aside from the widespread practice, it is indubitable that the
principles of international law. Section 98 of The Restatement, procedure for recognition and enforcement is embodied in the
Second, Conflict of Laws, states that a valid judgment rendered rules of law, whether statutory or jurisprudential, adopted in
in a foreign nation after a fair trial in a contested proceeding will various foreign jurisdictions. In the Philippines, this is
be recognized in the United States, and on its face, the term evidenced primarily by Section 48, Rule 39 of the Rules of
valid brings into play requirements such notions as valid Court which has existed in its current form since the early
jurisdiction over the subject matter and parties. Similarly, the 1900s. Certainly, the Philippine legal system has long ago
notion that fraud or collusion may preclude the enforcement of accepted into its jurisprudence and procedural rules the
a foreign judgment finds affirmation with foreign jurisprudence viability of an action for enforcement of foreign judgment, as
and commentators, as well as the doctrine that the foreign well as the requisites for such valid enforcement, as derived
judgment must not constitute a clear mistake of law or fact. from internationally accepted doctrines. Again, there may be
And finally, it has been recognized that public policy as a distinctions as to the rules adopted by each particular state, but
defense to the recognition of judgments serves as an umbrella they all prescind from the premise that there is a rule of law
for a variety of concerns in international practice which may obliging states to allow for, however generally, the recognition
lead to a denial of recognition. and enforcement of a foreign judgment. The bare principle, to
our mind, has attained the status of opinio juris in international
The viability of the public policy defense against the practice.
enforcement of a foreign judgment has been recognized in this
jurisdiction. This defense allows for the application of local This is a significant proposition, as it acknowledges that the
standards in reviewing the foreign judgment, especially when procedure and requisites outlined in Section 48, Rule 39 derive
such judgment creates only a presumptive right, as it does in their efficacy not merely from the procedural rule, but by virtue
cases wherein the judgment is against a person. The defense of the incorporation clause of the Constitution. Rules of
is also recognized within the international sphere, as many civil procedure are promulgated by the Supreme Court, and could
law nations adhere to a broad public policy exception which very well be abrogated or revised by the high court itself. Yet
may result in a denial of recognition when the foreign court, in the Supreme Court is obliged, as are all State components, to
the light of the choice-of-law rules of the recognizing court, obey the laws of the land, including generally accepted
applied the wrong law to the case. The public policy defense principles of international law which form part thereof, such as
those ensuring the qualified recognition and enforcement of resolution thereof is indispensable for the determination of the
foreign judgments. case.
Thus, relative to the enforcement of foreign judgments in the One more word. It bears noting that Section 48, Rule 39
Philippines, it emerges that there is a general right recognized acknowledges that the Final Judgment is not conclusive yet,
within our body of laws, and affirmed by the Constitution, to but presumptive evidence of a right of the petitioners against
seek recognition and enforcement of foreign judgments, as well the Marcos Estate. Moreover, the Marcos Estate is not
as a right to defend against such enforcement on the grounds precluded to present evidence, if any, of want of jurisdiction,
of want of jurisdiction, want of notice to the party, collusion, want of notice to the party, collusion, fraud, or clear mistake of
fraud, or clear mistake of law or fact. 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
The preclusion of an action for enforcement of a foreign of the Final Judgment before the courts under the jurisdiction of
judgment in this country merely due to an exhorbitant the Philippines, or for that matter any other issue which may
assessment of docket fees is alien to generally accepted legitimately be presented before the trial court. Such issues are
practices and principles in international law. Indeed, there are to be litigated before the trial court, but within the confines of
grave concerns in conditioning the amount of the filing fee on the matters for proof as laid down in Section 48, Rule 39. On
the pecuniary award or the value of the property subject of the the other hand, the speedy resolution of this claim by the trial
foreign decision. Such pecuniary award will almost certainly be court is encouraged, and contumacious delay of the decision
in foreign denomination, computed in accordance with the on the merits will not be brooked by this Court.
applicable laws and standards of the forum. The vagaries of
inflation, as well as the relative low-income capacity of the WHEREFORE, the petition is GRANTED. The assailed orders
Filipino, to date may very well translate into an award virtually are NULLIFIED and SET ASIDE, and a new order
unenforceable in this country, despite its integral validity, if the REINSTATING Civil Case No. 97-1052 is hereby issued. No
docket fees for the enforcement thereof were predicated on the costs. SO ORDERED.
amount of the award sought to be enforced. The theory
adopted by respondent judge and the Marcos Estate may even
HERALD BLACK DACASIN vs SHARON DEL MUNDO
lead to absurdities, such as if applied to an award involving real
DACASIN; G.R. No. 168785, February 5, 2010; CARPIO, J.:
property situated in places such as the United States or
Scandinavia where real property values are inexorably high.
The Case
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. For reviewis a dismissalof a suit to enforce a post-
foreign divorce child custody agreement for lack of jurisdiction.
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 The Facts
in the foreign judgment. In this particular circumstance, given
that the complaint is lodged against an estate and is based on
the US District Courts 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
Petitioner Herald Dacasin (petitioner), American, and
involving property. Thus, only the blanket filing fee of minimal
respondent Sharon Del Mundo Dacasin (respondent), Filipino,
amount is required.
were married in Manila in April 1994. They have one daughter,
Stephanie, born on 21 September 1995. In June 1999,
Finally, petitioners also invoke Section 11, Article III of the respondent sought and obtained from the Circuit Court, 19th
Constitution, which states that [F]ree access to the courts and Judicial Circuit, Lake County, Illinois (Illinois court) a divorce
quasi-judicial bodies and adequate legal assistance shall not decree against petitioner. In its ruling, the Illinois court
be denied to any person by reason of poverty. Since the dissolved the marriage of petitioner and respondent, awarded
provision is among the guarantees ensured by the Bill of to respondent sole custody of Stephanie and retained
Rights, it certainly gives rise to a demandable right. However, jurisdiction over the case for enforcement purposes.
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 On 28 January 2002, petitioner and respondent
the controversy can be settled on other grounds or unless the executed in Manila a contract (Agreement) for the joint custody
of Stephanie. The parties chose Philippine courts as exclusive
forum to adjudicate disputes arising from the Agreement.
Respondent undertook to obtain from the Illinois court an order trial court: (1) the Agreement novated the valid divorce decree,
relinquishing jurisdiction to Philippine courts. modifying the terms of child custody from sole (maternal) to
joint;or (2) the Agreement is independent of the divorce decree
obtained by respondent.
Respondent sought the dismissal of the complaint for, The question is whether the trial court has jurisdiction
among others, lack of jurisdiction because of the Illinois courts to take cognizance of petitioners suit and enforce the
retention of jurisdiction to enforce the divorce decree. Agreement on the joint custody of the parties child.
The Ruling of the Trial Court The trial court has jurisdiction to entertain petitioners
suit but not to enforce the Agreement which is void. However,
factual and equity considerations militate against the dismissal
of petitioners suit and call for the remand of the case to settle
In its Order dated 1 March 2005, the trial court the question of Stephanies custody.
sustained respondents motion and dismissed the case for lack
of jurisdiction. The trial court held that: (1) it is precluded from
taking cognizance over the suit considering the Illinois courts
retention of jurisdiction to enforce its divorce decree, including Regional Trial Courts Vested With Jurisdiction
its order awarding sole custody of Stephanie to respondent; (2)
the divorce decree is binding on petitioner following the to Enforce Contracts
nationality rule prevailing in this jurisdiction;and (3) the
Agreement is void for contravening Article 2035, paragraph 5
of the Civil Codeprohibiting compromise agreements on
jurisdiction.
Subject matter jurisdiction is conferred by law. At the
time petitioner filed his suit in the trial court, statutory law vests
on Regional Trial Courts exclusive original jurisdiction over civil
actions incapable of pecuniary estimation.An action for specific
Petitioner sought reconsideration, raising the new performance, such as petitioners suit to enforce the Agreement
argument that the divorce decree obtained by respondent is on joint child custody, belongs to this species of actions.Thus,
void. Thus, the divorce decree is no bar to the trial courts jurisdiction-wise, petitioner went to the right court.
exercise of jurisdiction over the case.
Thus, pursuant to his national law, private respondent is no GERBERT R. CORPUZ, - versus -DAISYLYN TIROL
longer the husband of petitioner. He would have no standing to STO. TOMAS and The SOLICITOR GENERAL; G.R. No.
sue in the case below as petitioners husband entitled to 186571; August 11, 2010; BRION, J.:
exercise control over conjugal assets. As he is bound by the
Decision of his own countrys Court, which validly exercised
Before the Court is a direct appeal from the decision
jurisdiction over him, and whose decision he does not
of the Regional Trial Court (RTC) of Laoag City, Branch 11,
repudiate, he is estopped by his own representation before
elevated via a petition for review on certiorari under Rule 45 of
said Court from asserting his right over the alleged conjugal
the Rules of Court (present petition).
property. (Emphasis supplied)
Two years after the divorce, Gerbert has moved on This conclusion, the RTC stated, is consistent with the
and has found another Filipina to love. Desirous of marrying his legislative intent behind the enactment of the second
new Filipina fiance in the Philippines, Gerbert went to the Pasig paragraph of Article 26 of the Family Code, as determined by
City Civil Registry Office and registered the Canadian divorce the Court in Republic v. Orbecido III; the provision was enacted
decree on his and Daisylyns marriage certificate. Despite the to avoid the absurd situation where the Filipino spouse remains
registration of the divorce decree, an official of the National married to the alien spouse who, after obtaining a divorce, is
Statistics Office (NSO) informed Gerbert that the marriage no longer married to the Filipino spouse.
between him and Daisylyn still subsists under Philippine law; to
be enforceable, the foreign divorce decree must first be
judicially recognized by a competent Philippine court, pursuant
to NSO Circular No. 4, series of 1982. THE PETITION
Accordingly, Gerbert filed a petition for judicial From the RTCs ruling, Gerbert filed the present
recognition of foreign divorce and/or declaration of petition.
marriage as dissolved (petition) with the RTC. Although
summoned, Daisylyn did not file any responsive pleading but
Gerbert asserts that his petition before the RTC is
submitted instead a notarized letter/manifestation to the trial
essentially for declaratory relief, similar to that filed in
court. She offered no opposition to Gerberts petition and, in
Orbecido; he, thus, similarly asks for a determination of his
fact, alleged her desire to file a similar case herself but was
rights under the second paragraph of Article 26 of the Family
prevented by financial and personal circumstances. She, thus,
Code. Taking into account the rationale behind the second
requested that she be considered as a party-in-interest with a
paragraph of Article 26 of the Family Code, he contends that
similar prayer to Gerberts.
the provision applies as well to the benefit of the alien spouse.
He claims that the RTC ruling unduly stretched the doctrine in
Orbecido by limiting the standing to file the petition only to the
Filipino spouse an interpretation he claims to be contrary to the
In its October 30, 2008 decision, the RTC denied essence of the second paragraph of Article 26 of the Family
Gerberts petition. The RTC concluded that Gerbert was not Code. He considers himself as a proper party, vested with
the proper party to institute the action for judicial recognition of sufficient legal interest, to institute the case, as there is a
the foreign divorce decree as he is a naturalized Canadian possibility that he might be prosecuted for bigamy if he marries
citizen. It ruled that only the Filipino spouse can avail of the his Filipina fiance in the Philippines since two marriage
remedy, under the second paragraph of Article 26 of the Family certificates, involving him, would be on file with the Civil
Code, in order for him or her to be able to remarry under Registry Office. The Office of the Solicitor General and
Philippine law. Article 26 of the Family Code reads: Daisylyn, in their respective Comments, both support Gerberts
position.
Recognizing the reality that divorce is a possibility in As the RTC correctly stated, the provision was
marriages between a Filipino and an alien, President Corazon included in the law to avoid the absurd situation where the
C. Aquino, in the exercise of her legislative powers under the Filipino spouse remains married to the alien spouse who, after
Freedom Constitution, enacted Executive Order No. (EO) 227, obtaining a divorce, is no longer married to the Filipino spouse.
amending Article 26 of the Family Code to its present wording, The legislative intent is for the benefit of the Filipino spouse, by
as follows: clarifying his or her marital status, settling the doubts created
by the divorce decree. Essentially, the second paragraph of
Article 26 of the Family Code provided the Filipino spouse
a substantive right to have his or her marriage to the alien
Art. 26. All marriages solemnized spouse considered as dissolved, capacitating him or her
outside the Philippines, in accordance with to remarry. Without the second paragraph of Article 26 of the
the laws in force in the country where they Family Code, the judicial recognition of the foreign decree of
were solemnized, and valid there as such, divorce, whether in a proceeding instituted precisely for that
shall also be valid in this country, except purpose or as a related issue in another proceeding, would be
those prohibited under Articles 35(1), (4), (5) of no significance to the Filipino spouse since our laws do not
and (6), 36, 37 and 38. recognize divorce as a mode of severing the marital bond;
Article 17 of the Civil Code provides that the policy against
absolute divorces cannot be subverted by judgments
promulgated in a foreign country. The inclusion of the second
paragraph in Article 26 of the Family Code provides the direct We qualify our above conclusion i.e., that the second
exception to this rule and serves as basis for recognizing the paragraph of Article 26 of the Family Code bestows no rights in
dissolution of the marriage between the Filipino spouse and his favor of aliens with the complementary statement that this
or her alien spouse. conclusion is not sufficient basis to dismiss Gerberts petition
before the RTC. In other words, the unavailability of the second
paragraph of Article 26 of the Family Code to aliens does not
necessarily strip Gerbert of legal interest to petition the RTC for
Additionally, an action based on the second the recognition of his foreign divorce decree. The foreign
paragraph of Article 26 of the Family Code is not limited to the divorce decree itself, after its authenticity and conformity with
recognition of the foreign divorce decree. If the court finds that the aliens national law have been duly proven according to our
the decree capacitated the alien spouse to remarry, the courts rules of evidence, serves as a presumptive evidence of right in
can declare that the Filipino spouse is likewise capacitated to favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules
contract another marriage. No court in this jurisdiction, of Court which provides for the effect of foreign judgments.
however, can make a similar declaration for the alien spouse This Section states:
(other than that already established by the decree), whose
status and legal capacity are generally governed by his
national law.
SEC. 48. Effect of foreign
judgments or final orders.The effect of a
judgment or final order of a tribunal of a
foreign country, having jurisdiction to
Given the rationale and intent behind the enactment, render the judgment or final order is as
and the purpose of the second paragraph of Article 26 of the follows:
Family Code, the RTC was correct in limiting the applicability of
the provision for the benefit of the Filipino spouse. In other
words, only the Filipino spouse can invoke the second
paragraph of Article 26 of the Family Code; the alien spouse (a) In case of a judgment
can claim no right under this provision. or final order upon a
specific thing, the
judgment or final order is
conclusive upon the title of
the thing; and
The
foreign (b) In case of a judgment
divorce or final order against a
decree person, the judgment or
is final order is
presum presumptive evidence of
ptive a right as between the
evidenc parties and their
e of a successors in interest by
right a subsequent title.
that
clothes
the
party In either case, the judgment or final
with order may be repelled by evidence of a want
legal of jurisdiction, want of notice to the party,
interest collusion, fraud, or clear mistake of law or
to fact.
petition
for its
recognit
ion in To our mind, direct involvement or being the subject of the
this foreign judgment is sufficient to clothe a party with the requisite
jurisdict interest to institute an action before our courts for the
ion recognition of the foreign judgment. In a divorce situation, we
have declared, no less, that the divorce obtained by an alien
abroad may be recognized in the Philippines, provided the
divorce is valid according to his or her national law.
In fact, more than the principle of comity that is served
by the practice of reciprocal recognition of foreign judgments
between nations, the res judicata effect of the foreign
The starting point in any recognition of a foreign judgments of divorce serves as the deeper basis for extending
divorce judgment is the acknowledgment that our courts do not judicial recognition and for considering the alien spouse bound
take judicial notice of foreign judgments and laws. Justice by its terms. This same effect, as discussed above, will not
Herrera explained that, as a rule, no sovereign is bound to give obtain for the Filipino spouse were it not for the substantive
effect within its dominion to a judgment rendered by a tribunal rule that the second paragraph of Article 26 of the Family Code
of another country. This means that the foreign judgment and provides.
its authenticity must be proven as facts under our rules on
evidence, together with the aliens applicable national law to
show the effect of the judgment on the alien himself or herself.
The recognition may be made in an action instituted specifically Conside
for the purpose or in another action where a party invokes the rations
foreign decree as an integral aspect of his claim or defense. beyond
the
recognit
ion of
In Gerberts case, since both the foreign divorce the
decree and the national law of the alien, recognizing his or her foreign
capacity to obtain a divorce, purport to be official acts of a divorce
sovereign authority, Section 24, Rule 132 of the Rules of Court decree
comes into play. This Section requires proof, either by (1)
official publications or (2) copies attested by the officer having
legal custody of the documents. If the copies of official records
are not kept in the Philippines, these must be (a) accompanied As a matter of housekeeping concern, we note that
by a certificate issued by the proper diplomatic or consular the Pasig City Civil Registry Office has already recorded
officer in the Philippine foreign service stationed in the foreign the divorce decree on Gerbert and Daisylyns marriage
country in which the record is kept and (b) authenticated by the certificate based on the mere presentation of the decree.
seal of his office. We consider the recording to be legally improper; hence, the
need to draw attention of the bench and the bar to what had
been done.
(e) divorces; Evidently, the Pasig City Civil Registry Office was
aware of the requirement of a court recognition, as it cited NSO
(f) legitimations;
Circular No. 4, series of 1982, and Department of Justice
(g) adoptions; Opinion No. 181, series of 1982 both of which required a final
order from a competent Philippine court before a foreign
(h) acknowledgment of natural judgment, dissolving a marriage, can be registered in the civil
children; registry, but it, nonetheless, allowed the registration of the
decree. For being contrary to law, the registration of the foreign
(i) naturalization; and divorce decree without the requisite judicial recognition is
patently void and cannot produce any legal effect.
(j) changes of name.
But while the law requires the entry of the divorce decree in the
civil registry, the law and the submission of the decree by
We hasten to point out, however, that this ruling
should not be construed as requiring two separate proceedings
for the registration of a foreign divorce decree in the civil
registry one for recognition of the foreign decree and another
specifically for cancellation of the entry under Rule 108 of the
Rules of Court. The recognition of the foreign divorce decree
may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of
Court) is precisely to establish the status or right of a party or a
particular fact. Moreover, Rule 108 of the Rules of Court can
serve as the appropriate adversarial proceeding by which the
applicability of the foreign judgment can be measured and
tested in terms of jurisdictional infirmities, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
SO ORDERED.