EN BANC
Contracting Parties, before:
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal
guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw
Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the option
of the plaintiff, in the territory of one of the High Contracting
Parties, either before the court of the domicile of the carrier or
of his principal place of business, or where he has a place of
business through which the contract has been made, or
before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent
Northwest Orient Airlines (NOA) is a foreign corporation with principal office in
Minnesota, U.S.A. and licensed to do business and maintain a branch office in
the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip
ticket in San Francisco. U.S.A., for his flight from San Francisco to Manila
via Tokyo and back. The scheduled departure date from Tokyo was December
20, 1986. No date was specified for his return to San Francisco. 1
On December 19, 1986, the petitioner checked in at the NOA counter in the
San Francisco airport for his scheduled departure to Manila. Despite a
previous confirmation and re-confirmation, he was informed that he had no
reservation for his flight from Tokyo to Manila. He therefore had to be
wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial
Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on
the ground of lack of jurisdiction. Citing the above-quoted article, it contended
that the complaint could be instituted only in the territory of one of the High
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which
the contract had been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor
was this its principal place of business. Neither was the petitioner's ticket
issued in this country nor was his destination Manila but San Francisco in the
United States.
On February 1, 1988, the lower court granted the motion and dismissed the
case. 2 The petitioner appealed to the Court of Appeals, which affirmed the
decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion
for reconsideration, but the same was denied. 4 The petitioner then came to
this Court, raising substantially the same issues it submitted in the Court of
Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of
minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling
that Article 28(1) of the Warsaw Convention violates the
constitutional guarantees of due process and equal
protection.
The Republic of the Philippines is a party to the Convention for the Unification
of Certain Rules Relating to International Transportation by Air, otherwise
known as the Warsaw Convention. It took effect on February 13, 1933. The
Convention was concurred in by the Senate, through its Resolution No. 19, on
May 16, 1950. The Philippine instrument of accession was signed by President
Elpidio Quirino on October 13, 1950, and was deposited with the Polish
government on November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President Ramon
Magsaysay issued Proclamation No. 201, declaring our formal adherence
thereto. "to the end that the same and every article and clause thereof may be
observed and fulfilled in good faith by the Republic of the Philippines and the
citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the
Philippine government and, as such, has the force and effect of law in this
country.
The petitioner contends that Article 28(1) cannot be applied in the present case
because it is unconstitutional. He argues that there is no substantial distinction
between a person who purchases a ticket in Manila and a person who
purchases his ticket in San Francisco. The classification of the places in which
actions for damages may be brought is arbitrary and irrational and thus violates
the due process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional
question only if it is shown that the essential requisites of a judicial inquiry into
such a question are first satisfied. Thus, there must be an actual case or
controversy involving a conflict of legal rights susceptible of judicial
determination; the constitutional question must have been opportunely
raised by the proper party; and the resolution of the question is
unavoidably necessary to the decision of the case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude
is based on the doctrine of separation of powers, which enjoins upon the
departments of the government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint
legislative-executive act. The presumption is that it was first carefully
studied and determined to be constitutional before it was adopted and
given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this
presumption. Apparently, the Convention considered the four places
designated in Article 28 the most convenient forums for the litigation of any
claim that may arise between the airline and its passenger, as distinguished
from all other places. At any rate, we agree with the respondent court that this
case can be decided on other grounds without the necessity of resolving the
constitutional issue.
B. The petitioner claims that the lower court erred in not ruling
that Art. 28(1) of the Warsaw Convention is inapplicable
because of a fundamental change in the circumstances that
served as its basis.
The petitioner goes at great lengths to show that the provisions in the
Convention were intended to protect airline companies under "the conditions
prevailing then and which have long ceased to exist." He argues that in view
of the significant developments in the airline industry through the years, the
treaty has become irrelevant. Hence, to the extent that it has lost its basis for
approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to
Jessup, "this doctrine constitutes an attempt to formulate a legal principle
which would justify non-performance of a treaty obligation if the conditions with
relation to which the parties contracted have changed so materially and so
unexpectedly as to create a situation in which the exaction of performance
would be unreasonable." 7 The key element of this doctrine is the vital change
in the condition of the contracting parties that they could not have foreseen at
the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v.
Trans World Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability
rules that would cover all the hazards of air travel . . . The
Warsaw delegates knew that, in the years to come, civil
aviation would change in ways that they could not foresee.
They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these changes
. . . The ever-changing needs of the system of civil aviation
can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline
industry was still in its infancy. However, that circumstance alone is not
sufficient justification for the rejection of the treaty at this time. The changes
recited by the petitioner were, realistically, not entirely unforeseen although
they were expected in a general sense only. In fact, the Convention itself,
anticipating such developments, contains the following significant provision:
 Article 41. Any High Contracting Party shall be entitled not
earlier than two years after the coming into force of this
convention to call for the assembling of a new international
conference in order to consider any improvements which may
be made in this convention. To this end, it will communicate
with the Government of the French Republic which will take
the necessary measures to make preparations for such
conference.
But the more important consideration is that the treaty has not been rejected
by the Philippine government. The doctrine of rebus sic stantibus does not
operate automatically to render the treaty inoperative. There is a necessity
for a formal act of rejection, usually made by the head of State, with a
statement of the reasons why compliance with the treaty is no longer
required.
In lieu thereof, the treaty may be denounced even without an expressed
justification for this action. Such denunciation is authorized under its Article
39, viz:
Article 39. (1) Any one of the High Contracting Parties may
denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once
inform the Government of each of the High Contracting
Parties.
(2) Denunciation shall take effect six months after the
notification of denunciation, and shall operate only as regards
the party which shall have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic
stantibus or pursuant to Article 39, is not a function of the courts but of the
other branches of government. This is a political act. The conclusion and
renunciation of treaties is the prerogative of the political departments and may
not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their
wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that
the plaintiff must sue in the United States, because this would
deny him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a
suit in the United States would constitute a constructive denial of his right to
access to our courts for the protection of his rights. He would consequently be
deprived of this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts
with appropriate jurisdiction as defined by law. It does not mean that a person
can go to any court for redress of his grievances regardless of the nature or
value of his claim. If the petitioner is barred from filing his complaint before our
courts, it is because they are not vested with the appropriate jurisdiction under
the Warsaw Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling
that Article 28(1) of the Warsaw Convention is a rule merely
of venue and was waived by defendant when it did not move
to dismiss on the ground of improper venue.
By its own terms, the Convention applies to all international transportation of
persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression
"international transportation" shall mean any transportation in
which, according to the contract made by the parties, the
place of departure and the place of destination, whether or not
there be a break in the transportation or a transshipment, are
situated [either] within the territories of two High Contracting
Parties . . .
Whether the transportation is "international" is determined by the contract of
the parties, which in the case of passengers is the ticket. When the contract of
carriage provides for the transportation of the passenger between certain
designated terminals "within the territories of two High Contracting Parties,"
the provisions of the Convention automatically apply and exclusively govern
the rights and liabilities of the airline and its passenger.
Since the flight involved in the case at bar is international, the same being from
the United States to the Philippines and back to the United States, it is subject
to the provisions of the Warsaw Convention, including Article 28(1), which
enumerates the four places where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over
which authorities are sharply divided. While the petitioner cites several cases
holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are
later cases cited by the private respondent supporting the conclusion that the
provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon d court which otherwise would have no
jurisdiction over the subject-matter of an action; but the venue of an action as
fixed by statute may be changed by the consent of the parties and an objection
that the plaintiff brought his suit in the wrong county may be waived by the
failure of the defendant to make a timely objection. In either case, the court
may render a valid judgment. Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether or not a prohibition exists against
their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as
a jurisdiction and not a venue provision. First, the wording of Article 32, which
indicates the places where the action for damages "must" be brought,
underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention,
which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with the
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot
be left to the will of the parties regardless of the time when the damage
occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific
Airways, Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of
Article 28(2), especially when considered in the light of Article
32. Article 28(2) provides that "questions of procedure shall
be governed by the law of the court to which the case is
submitted" (Emphasis supplied). Section (2) thus may be read
to leave for domestic decision questions regarding the
suitability and location of a particular Warsaw Convention
case.
In other words, where the matter is governed by the Warsaw Convention,
jurisdiction takes on a dual concept. Jurisdiction in the international sense must
be established in accordance with Article 28(1) of the Warsaw Convention,
following which the jurisdiction of a particular court must be established
pursuant to the applicable domestic law. Only after the question of which court
has jurisdiction is determined will the issue of venue be taken up. This second
question shall be governed by the law of the court to which the case is
submitted.
The petitioner submits that since Article 32 states that the parties are
precluded "before the damages occurred" from amending the rules of Article
28(1) as to the place where the action may be brought, it would follow that the
Warsaw Convention was not intended to preclude them from doing so "after
the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special
agreements entered into before the damage occurred by
which the parties purport to infringe the rules laid down by this
convention, whether by deciding the law to be applied, or by
altering the rules as to jurisdiction, shall be null and void.
Nevertheless for the transportation of goods, arbitration
clauses shall be allowed, subject to this convention, if the
arbitration is to take place within one of the jurisdictions
referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after
the damages (shall have) occurred," the article should be regarded as
possessing the character of a "venue" and not of a "jurisdiction" provision.
Hence, in moving to dismiss on the ground of lack of jurisdiction, the private
respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not
support this conclusion. In any event, we agree that even
granting arguendo that Article 28(1) is a venue and not a jurisdictional
provision, dismissal of the case was still in order. The respondent court was
correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its
motion to dismiss is not correct. True it is that NOA averred in
its MOTION TO DISMISS that the ground thereof is "the Court
has no subject matter jurisdiction to entertain the Complaint"
which SANTOS considers as equivalent to "lack of jurisdiction
over the subject matter . . ." However, the gist of NOA's
argument in its motion is that the Philippines is not the proper
place where SANTOS could file the action — meaning that
the venue of the action is improperly laid. Even assuming then
 that the specified ground of the motion is erroneous, the fact
is the proper ground of the motion — improper venue — has
been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor
of non-waiver if there are special circumstances justifying this conclusion, as
in the petition at bar. As we observed in Javier vs. Intermediate Court of
Appeals: 13
Legally, of course, the lack of proper venue was deemed
waived by the petitioners when they failed to invoke it in their
original motion to dismiss. Even so, the motivation of the
private respondent should have been taken into account by
both the trial judge and the respondent court in arriving at their
decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of
our Court of Appeals, where it was held that Article 28(1) is a venue provision.
However, the private respondent avers that this was in effect reversed by the
case of Aranas v. United Airlines, 15 where the same court held that Article
28(1) is a jurisdictional provision. Neither of these cases is binding on this
Court, of course, nor was either of them appealed to us. Nevertheless, we here
express our own preference for the later case of Aranas insofar as its
pronouncements on jurisdiction conform to the judgment we now make in this
petition.
B. The petitioner claims that the lower court erred in not ruling
that under Article 28(1) of the Warsaw Convention, this case
was properly filed in the Philippines, because Manila was the
destination of the plaintiff.
The Petitioner contends that the facts of this case are analogous to those
in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a
round-trip ticket from Montreal to Los Angeles and back to Montreal. The date
and time of departure were specified but not of the return flight. The plane
crashed while on route from Montreal to Los Angeles, killing Mrs. Silverberg.
Her administratrix filed an action for damages against Air Canada in the U.S.
District Court of California. The defendant moved to dismiss for lack of
jurisdiction but the motion was denied thus:
. . . It is evident that the contract entered into between Air
Canada and Mrs. Silverberg as evidenced by the ticket
booklets and the Flight Coupon No. 1, was a contract for Air
Canada to carry Mrs. Silverberg to Los Angeles on a certain
flight, a certain time and a certain class, but that the time for
her to return remained completely in her power. Coupon No.
2 was only a continuing offer by Air Canada to give her a ticket
to return to Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the
place of destination" as used in the Warsaw Convention is
considered by both the Canadian C.T.C. and the United
States C.A.B. to describe at least two "places of
destination," viz., the "place of destination" of
a particular flight either an "outward destination" from the
"point of origin" or from the "outward point of destination" to
any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the
Warsaw Convention of the flight on which Mrs. Silverberg was
killed, was Los Angeles according to the ticket, which was the
contract between the parties and the suit is properly filed in
this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling
because the date and time of his return flight to San Francisco were, as in the
Aanestad case, also left open. Consequently, Manila and not San Francisco
should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British
Airways, 17 where the United States District Court (Eastern District of
Pennsylvania) said:
. . . Although the authorities which addressed this precise
issue are not extensive, both the cases and the commentators
are almost unanimous in concluding that the "place of
destination" referred to in the Warsaw Convention "in a trip
consisting of several parts . . . is the ultimate destination that
is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with
the Court's analysis in Aanestad; whether the return portion of
the ticket is characterized as an option or a contract, the
carrier was legally bound to transport the passenger back to
the place of origin within the prescribed time and. the
passenger for her part agreed to pay the fare and, in fact, did
pay the fare. Thus there was mutuality of obligation and a
binding contract of carriage, The fact that the passenger could
forego her rights under the contract does not make it any less
a binding contract. Certainly, if the parties did not contemplate
 the return leg of the journey, the passenger would not have
paid for it and the carrier would not have issued a round trip
ticket.
We agree with the latter case. The place of destination, within the meaning
of the Warsaw Convention, is determined by the terms of the contract of
carriage or, specifically in this case, the ticket between the passenger
and the carrier. Examination of the petitioner's ticket shows that his
ultimate destination is San Francisco. Although the date of the return
flight was left open, the contract of carriage between the parties indicates
that NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed
stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the
Aanestad case because these decisions are from different jurisdictions. But
that is neither here nor there. In fact, neither of these cases is controlling on
this Court. If we have preferred the Butz case, it is because, exercising our
own freedom of choice, we have decided that it represents the better, and
correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed
stopping place." It is the "destination" and not an "agreed stopping place"
that controls for purposes of ascertaining jurisdiction under the
Convention.
The contract is a single undivided operation, beginning with the place of
departure and ending with the ultimate destination. The use of the singular in
this expression indicates the understanding of the parties to the Convention
that every contract of carriage has one place of departure and one place of
destination. An intermediate place where the carriage may be broken is not
regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling
that under Art. 28(1) of the Warsaw Convention, this case was
properly filed in the Philippines because the defendant has its
domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in
French and that in interpreting its provisions, American courts have taken the
broad view that the French legal meaning must govern. 18 In French, he says,
the "domicile" of the carrier means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air
France vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in
the United States. They say that the domicile of a corporation
includes any country where the airline carries on its business
on "a regular and substantial basis," and that the United
States qualifies under such definition. The meaning of
domicile cannot, however, be so extended. The domicile of a
corporation is customarily regarded as the place where it is
incorporated, and the courts have given the meaning to the
term as it is used in article 28(1) of the Convention. (See Smith
v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798,
802; Nudo v. Societe Anonyme Belge d' Exploitation de la
Navigation Aerienne Sabena Belgian World Airlines (E.D. pa.
1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale
Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974).
Moreover, the structure of article 28(1), viewed as a whole, is
also incompatible with the plaintiffs' claim. The article, in
stating that places of business are among the bases of the
jurisdiction, sets out two places where an action for damages
may be brought; the country where the carrier's principal place
of business is located, and the country in which it has a place
of business through which the particular contract in question
was made, that is, where the ticket was bought, Adopting the
plaintiffs' theory would at a minimum blur these carefully
drawn distinctions by creating a third intermediate category. It
would obviously introduce uncertainty into litigation under the
article because of the necessity of having to determine, and
without standards or criteria, whether the amount of business
done by a carrier in a particular country was "regular" and
"substantial." The plaintiff's request to adopt this basis of
jurisdiction is in effect a request to create a new jurisdictional
standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official
language is French, are we bound to apply French law? . . .
We think this question and the underlying choice of law issue
warrant some discussion
. . . We do not think this statement can be regarded as a
conclusion that internal French law is to be "applied" in the
choice of law sense, to determine the meaning and scope of
the Convention's terms. Of course, French legal usage must
be considered in arriving at an accurate English translation of
the French. But when an accurate English translation is made
and agreed upon, as here, the inquiry into meaning does not
then revert to a quest for a past or present French law to be
 "applied" for revelation of the proper scope of the terms. It
does not follow from the fact that the treaty is written in French
that in interpreting it, we are forever chained to French law,
either as it existed when the treaty was written or in its present
state of development. There is no suggestion in the treaty that
French law was intended to govern the meaning of Warsaw's
terms, nor have we found any indication to this effect in its
legislative history or from our study of its application and
interpretation by other courts. Indeed, analysis of the cases
indicates that the courts, in interpreting and applying the
Warsaw Convention, have, not considered themselves bound
to apply French law simply because the Convention is written
in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the
complaint is allowed to be filed under Article 28(1). By specifying the three
other places, to wit, the principal place of business of the carrier, its place of
business where the contract was made, and the place of destination, the article
clearly meant that these three other places were not comprehended in the term
"domicile."
D. The petitioner claims that the lower court erred in not ruling
that Art. 28(1) of the Warsaw Convention does not apply to
actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private
respondent acted arbitrarily and in bad faith, discriminated against the
petitioner, and committed a willful misconduct because it canceled his
confirmed reservation and gave his reserved seat to someone who had no
better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of
the Warsaw Convention. He argues that in at least two American cases, 21 it
was held that Article 28(1) of the Warsaw Convention does not apply if the
action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where
the article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered"
by Article 17, Article 24 clearly excludes any relief not
provided for in the Convention as modified by the Montreal
Agreement. It does not, however, limit the kind of cause of
action on which the relief may be founded; rather it provides
that any action based on the injuries specified in Article 17
"however founded," i.e., regardless of the type of action on
which relief is founded, can only be brought subject to the
conditions and limitations established by the Warsaw System.
Presumably, the reason for the use of the phrase "however
founded," in two-fold: to accommodate all of the multifarious
bases on which a claim might be founded in different
countries, whether under code law or common law, whether
under contract or tort, etc.; and to include all bases on which
a claim seeking relief for an injury might be founded in any
one country. In other words, if the injury occurs as described
in Article 17, any relief available is subject to the conditions
and limitations established by the Warsaw System, regardless
of the particular cause of action which forms the basis on
which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful
misconduct resulting in a tort is insufficient to exclude the case from the
comprehension of the Warsaw Convention. The petitioner has apparently
misconstrued the import of Article 25(l) of the Convention, which reads as
follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of
the provisions of this Convention which exclude or limit his
liability. if the damage is caused by his willful misconduct or
by such default on his part as, in accordance with the law of
the court to which the case is submitted, is considered to be
equivalent to willful misconduct.
It is understood under this article that the court called upon to determine
the applicability of the limitation provision must first be vested with the
appropriate jurisdiction. Article 28(1) is the provision in the Convention
which defines that jurisdiction. Article 22 23 merely fixes the monetary
ceiling for the liability of the carrier in cases covered by the Convention.
If the carrier is indeed guilty of willful misconduct, it can avail itself of the
limitations set forth in this article. But this can be done only if the action
has first been commenced properly under the rules on jurisdiction set
forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when one
of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender
age or other handicap, the courts must be vigilant for his
protection.
Application of this article to the present case is misplaced. The above provision
assumes that the court is vested with jurisdiction to rule in favor of the
disadvantaged minor, As already explained, such jurisdiction is absent in the
case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens
being denied access to their own courts because of the restrictive provision of
Article 28(1) of the Warsaw Convention. Among these is the United States,
which has proposed an amendment that would enable the passenger to sue
in his own domicile if the carrier does business in that jurisdiction. The reason
for this proposal is explained thus:
In the event a US citizen temporarily residing abroad
purchases a Rome to New York to Rome ticket on a foreign
air carrier which is generally subject to the jurisdiction of the
US, Article 28 would prevent that person from suing the carrier
in the US in a "Warsaw Case" even though such a suit could
be brought in the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the
Warsaw Convention, which was adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the
required minimum number of contracting parties. Pending such ratification, the
petitioner will still have to file his complaint only in any of the four places
designated by Article 28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does
not necessarily have the right to sue in his own courts simply because the
defendant airline has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his
claims in the United States rather than in his own country at least
inconvenience. But we are unable to grant him the relief he seeks because we
are limited by the provisions of the Warsaw Convention which continues to
bind us. It may not be amiss to observe at this point that the mere fact that he
will have to litigate in the American courts does not necessarily mean he will
litigate in vain. The judicial system of that country in known for its sense of
fairness and, generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is
so ordered.
Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino,
Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.
G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-
TRADE, INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and
FRANCISCO S. AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC,
INC., respondents.
TORRES, JR., J.:p
Business Corporations, according to Lord Coke, "have no souls." They
do business peddling goods, wares or even services across national
boundaries in "souless forms" in quest for profits albeit at times,
unwelcomed in these strange lands venturing into uncertain markets
and, the risk of dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the
Court of Appeals on June 7, 1991, sustaining the RTC Order dated
February 22, 1991, denying the petitioners' Motion to Dismiss, and
directing the issuance of a writ of preliminary injunction, and its
companion Resolution of October 9, 1991, denying the petitioners'
Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC.,
(CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for
brevity) are both domestic corporations, while petitioner Francisco S.
Aguirre is their President and majority stockholder. Private
Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC.
(ITEC, for brevity) are corporations duly organized and existing
under the laws of the State of Alabama, United States of America.
There is no dispute that ITEC is a foreign corporation not licensed
to do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner
ASPAC referred to as "Representative Agreement".1 Pursuant to the
contract, ITEC engaged ASPAC as its "exclusive representative" in
the Philippines for the sale of ITEC's products, in consideration of
which, ASPAC was paid a stipulated commission. The agreement was
signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and
ASPAC respectively, for and in behalf of their companies. 2 The said
agreement was initially for a term of twenty-four months. After the
lapse of the agreed period, the agreement was renewed for another
twenty-four months.
Through a "License Agreement"3 entered into by the same parties on
November 10, 1988, ASPAC was able to incorporate and use the
name "ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became
legally and publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported
by ITEC, to their sole customer, the Philippine Long Distance
Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new
appellation, and PLDT executed a document entitled "PLDT-
ASPAC/ITEC PROTOCOL"4 which defined the project details for the
supply of ITEC's Interface Equipment in connection with the Fifth
Expansion Program of PLDT.
One year into the second term of the parties' Representative
Agreement, ITEC decided to terminate the same, because petitioner
ASPAC allegedly violated its contractual commitment as stipulated in
their agreements.5
ITEC charges the petitioners and another Philippine Corporation,
DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the
President of which is likewise petitioner Aguirre, of using knowledge
and information of ITEC's products specifications to develop their own
line of equipment and product support, which are similar, if not
identical to ITEC's own, and offering them to ITEC's former customer.
On January 31, 1991, the complaint6 in Civil Case No. 91-294, was
filed with the Regional Trial Court of Makati, Branch 134 by ITEC, INC.
Plaintiff sought to enjoin, first, preliminarily and then, after trial,
permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre
and their agents and business associates, to cease and desist from
selling or attempting to sell to PLDT and to any other party, products
which have been copied or manufactured "in like manner, similar or
identical to the products, wares and equipment of plaintiff," and (2)
defendant ASPAC, to cease and desist from using in its corporate
name, letter heads, envelopes, sign boards and business dealings,
plaintiff's trademark, internationally known as ITEC; and the recovery
from defendants in solidum, damages of at least P500,000.00,
attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss7 the complaint on the
following grounds:
(1) That plaintiff has no legal capacity to sue as it is a foreign
corporation doing business in the Philippines without the required BOI
authority and SEC license, and (2) that plaintiff is simply engaged in
forum shopping which justifies the application against it of the principle
of "forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which
ITEC INTERNATIONAL, INC. was substituted as plaintiff instead of
ITEC, INC.8
In their Supplemental Motion to Dismiss,9 defendants took note of the
amendment of the complaint and asked the court to consider in
toto their motion to dismiss and their supplemental motion as their
answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the
court a quo on February 22, 1991, issued its Order: 10 (1) denying the
motion to dismiss for being devoid of legal merit with a rejection of both
grounds relied upon by the defendants in their motion to dismiss, and
(2) directing the issuance of a writ of preliminary injunction on the
same day.
From the foregoing order, petitioners elevated the case to the
respondent Court of Appeals on a Petition for Certiorari and
Prohibition11 under Rule 65 of the Revised Rules of Court, assailing
and seeking the nullification and the setting aside of the Order and the
Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
 We find no reason whether in law or from the facts of record,
to disagree with the (lower court's) ruling. We therefore are
unable to find in respondent Judge's issuance of said writ the
grave abuse of discretion ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not show
that Certiorari lies in the present case and therefore, the
petition does not deserve to be given due course.
WHEREFORE, the present petition should be, as it is hereby,
denied due course and accordingly, is hereby dismissed.
Costs against the petitioners.
SO ORDERED.12
Petitioners filed a motion for reconsideration13 on June 7, 1991, which
was likewise denied by the respondent court.
WHEREFORE, the present motion for reconsideration should
be, as it is hereby, denied for lack of merit. For the same
reason, the motion to have the motion for reconsideration set
for oral argument likewise should be and is hereby denied.
SO ORDERED.14
Petitioners are now before us via Petition for Review
on Certiorari15 under Rule 45 of the Revised Rules of Court.
It is the petitioners' submission that private respondents are foreign
corporations actually doing business in the Philippines without the
requisite authority and license from the Board of Investments and the
Securities and Exchange Commission, and thus, disqualified from
instituting the present action in our courts. It is their contention that the
provisions of the Representative Agreement, petitioner ASPAC
executed with private respondent ITEC, are similarly "highly
restrictive" in nature as those found in the agreements which
confronted the Court in the case of Top-Weld
Manufacturing, Inc. vs. ECED S.A. et al.,16 as to reduce petitioner
ASPAC to a mere conduit or extension of private respondents in the
Philippines.
In that case, we ruled that respondent foreign corporations are doing
business in the Philippines because when the respondents entered
into the disputed contracts with the petitioner, they were carrying out
the purposes for which they were created, i.e., to manufacture and
market welding products and equipment. The terms and conditions of
the contracts as well as the respondents' conduct indicate that they
established within our country a continuous business, and not merely
one of a temporary character. The respondents could be exempted
from the requirements of Republic Act 5455 if the petitioner is an
independent entity which buys and distributes products not only of the
petitioner, but also of other manufacturers or transacts business in its
name and for its account and not in the name or for the account of the
foreign principal. A reading of the agreements between the petitioner
and the respondents shows that they are highly restrictive in nature,
thus making the petitioner a mere conduit or extension of the
respondents.
It is alleged that certain provisions of the "Representative Agreement"
executed by the parties are similar to those found in the License
Agreement of the parties in the Top-Weld case which were considered
as "highly restrictive" by this Court. The provisions in point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set
by ITEC from time to time. Unless otherwise expressly agreed
to in writing by ITEC the purchase price is net to ITEC and
does not include any transportation charges, import charges
or taxes into or within the Territory. All orders from customers
are subject to formal acceptance by ITEC at its Huntsville,
Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any
product which competes with an existing ITEC product or any
product which ITEC has under active development.
3.1.2. Actively solicit all potential customers within the
Territory in a systematic and business like manner.
3.1.3. Inform ITEC of all request for proposals, requests for
bids, invitations to bid and the like within the Territory.
 3.1.4. Attain the Annual Sales Goal for the Territory
established by ITEC. The Sales Goals for the first 24 months
is set forth on Attachment two (2) hereto. The Sales Goal for
additional twelve month periods, if any, shall be sent to the
Sales Agent by ITEC at the beginning of each period. These
Sales Goals shall be incorporated into this Agreement and
made a part hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement REPRESENTATIVE
is authorized to solicit sales within the Territory on ITEC's
behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific
customers and on terms and conditions expressly authorized
by ITEC in writing.17
Aside from the abovestated provisions, petitioners point out the
following matters of record, which allegedly bear witness to the
respondents' activities within the Philippines in pursuit of their
business dealings:
a. While petitioner ASPAC was the authorized exclusive
representative for three (3) years, it solicited from and closed
several sales for and on behalf of private respondents as to
their products only and no other, to PLDT, worth no less than
US $ 15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these
sales and identified by private respondents' sole witness, Mr.
Clarence Long, is not in the name of petitioner ASPAC as
such representative, but in the name of private respondent
ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC
PROTOCOL (Annex C of the original and amended
complaints) which defined the responsibilities of the parties
thereto as to the supply, installation and maintenance of the
ITEC equipment sold under said Contract No. 1 is, as its very
title indicates, in the names jointly of the petitioner ASPAC and
private respondents;
d. To evidence receipt of the purchase price of US $ 15 Million,
private respondent ITEC, Inc. issued in its letter head, a
Confirmation of payment dated November 13, 1989 and its
Invoice dated November 22, 1989 (Annexes 1 and 2 of the
Motion to Dismiss and marked as Exhibits 2 and 3 for the
petitioners), both of which were identified by private
respondent's sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991).18
Petitioners contend that the above acts or activities belie the supposed
independence of petitioner ASPAC from private respondents. "The
unrebutted evidence on record below for the petitioners likewise reveal
the continuous character of doing business in the Philippines by
private respondents based on the standards laid down by this Court
in Wang Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al.19 and
again in TOP-WELD. (supra)" It thus appears that as the respondent
Court of Appeals and the trial court's failure to give credence on the
grounds relied upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion amounting to an excess
of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no
capacity to bring suit here, the Philippines is not the "most convenient
forum" because the trial court is devoid of any power to enforce its
orders issued or decisions rendered in a case that could not have been
commenced to begin with, such that in insisting to assume and
exercise jurisdiction over the case below, the trial court had gravely
abused its discretion and even actually exceeded its jurisdiction.
As against petitioner's insistence that private respondent is "doing business"
in the Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules
and Regulations Implementing the Omnibus Investments Code of 1987, the
following:
(1) A foreign firm is deemed not engaged in business in the
Philippines if it transacts business through middlemen, acting
in their own names, such as indebtors, commercial bookers
commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its
representative domiciled in the Philippines has an
independent status in that it transacts business in its name
and for its account. 20
Private respondent argues that a scrutiny of its Representative
Agreement with the Petitioners will show that although ASPAC was
named as representative of ITEC., ASPAC actually acted in its own
name and for its own account. The following provisions are particularly
mentioned:
3.1.7.1. In the event that REPRESENTATIVE imports directly
from ITEC, REPRESENTATIVE will pay for its own account;
all customs duties and import fees imposed on any ITEC
products; all import expediting or handling charges and
expenses imposed on ITEC products; and any stamp tax fees
imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as
representative under this Agreement, REPRESENTATIVE
shall receive a sales commission equivalent to a per
centum of the FOB value of all ITEC equipment sold to
customers within the territory as a direct result of
REPRESENTATIVE's sales efforts.21
More importantly, private respondent charges ASPAC of admitting its
independence from ITEC by entering and ascribing to provision No. 6
of the Representative Agreement.
6.0 Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor
and not as an employee, worker, laborer, partner, joint
venturer of ITEC as these terms are defined by the laws,
regulations, decrees or the like of any jurisdiction, including
the jurisdiction of the United States, the state of Alabama and
the Territory.22
Although it admits that the Representative Agreement contains
provisions which both support and belie the independence of ASPAC,
private respondent echoes the respondent court's finding that the
lower court did not commit grave abuse of discretion nor acted in
excess of jurisdiction when it found that the ground relied upon by the
petitioners in their motion to dismiss does not appear to be
indubitable.23
The issues before us now are whether or not private respondent
ITEC is an unlicensed corporation doing business in the
Philippines, and if it is, whether or not this fact bars it from
invoking the injunctive authority of our courts.
Considering the above, it is necessary to state what is meant by "doing
business" in the Philippines. Section 133 of the Corporation Code,
provides that "No foreign corporation, transacting business in the
Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine
Courts or administrative tribunals on any valid cause of action
recognized under Philippine laws."24
Generally, a "foreign corporation" has no legal existence within
the state in which it is foreign. This proceeds from the principle
that juridical existence of a corporation is confined within the
territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory. Such
foreign corporation may be excluded by any other state from doing
business within its limits, or conditions may be imposed on the
exercise of such privileges.25 Before a foreign corporation can transact
business in this country, it must first obtain a license to transact
business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without
such a license, it shall not be permitted to maintain or intervene in any
action, suit, or proceeding in any court or administrative agency of the
Philippines, but it may be sued on any valid cause of action recognized
under Philippine laws.26
In a long line of decisions, this Court has not altogether prohibited
foreign corporation not licensed to do business in the Philippines from
suing or maintaining an action in Philippine Courts. What it seeks to
prevent is a foreign corporation doing business in the Philippines
without a licensed from gaining access to Philippine Courts.27
The purpose of the law in requiring that foreign corporations doing
business in the Philippines be licensed to do so and that they appoint
an agent for service of process is to subject the foreign corporation
doing business in the Philippines to the jurisdiction of its courts. The
object is not to prevent the foreign corporation from performing single
acts, but to prevent it from acquiring a domicile for the purpose of
business without taking steps necessary to render it amenable to suit
in the local courts.28 The implication of the law is that it was never the
purpose of the legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines,
and thus, in effect, to permit persons to avoid their contracts made with
such foreign corporations.29
There is no exact rule or governing principle as to what constitutes
"doing" or "engaging" or "transacting" business. Indeed, such case
must be judged in the light of its peculiar circumstances, upon its
peculiar facts and upon the language of the statute applicable. The
true test, however, seems to be whether the foreign corporation is
continuing the body or substance of the business or enterprise for
which it was organized.30
Article 44 of the Omnibus Investments Code of 1987 defines the
phrase to include:
soliciting orders, purchases, service contracts, opening
offices, whether called "liaison" offices or branches;
appointing representatives or distributors who are domiciled
in the Philippines or who in any calendar year stay in the
Philippines for a period or periods totalling one hundred eighty
(180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that
imply a continuity or commercial dealings or arrangements
and contemplate to that extent the performance of acts or
works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business organization.
Thus, a foreign corporation with a settling agent in the Philippines
which issued twelve marine policies covering different shipments to
the Philippines31 and a foreign corporation which had been collecting
premiums on outstanding policies 32 were regarded as doing business
here.
The same rule was observed relating to a foreign corporation with an
"exclusive distributing agent" in the Philippines, and which has been
selling its products here since 1929, 33 and a foreign corporation
engaged in the business of manufacturing and selling computers
worldwide, and had installed at least 26 different products in several
corporations in the Philippines, and allowed its registered logo and
trademark to be used and made it known that there exists a designated
distributor in the Philippines.34
In Georg Grotjahn GMBH and Co. vs. Isnani,35 it was held that the
uninterrupted performance by a foreign corporation of acts pursuant
to its primary purposes and functions as a regional area headquarters
for its home office, qualifies such corporation as one doing business
in the country.
These foregoing instances should be distinguished from a single
or isolated transaction or occasional, incidental, or casual
transactions, which do not come within the meaning of the
law,36 for in such case, the foreign corporation is deemed not
engaged in business in the Philippines.
Where a single act or transaction, however, is not merely incidental or
casual but indicates the foreign corporation's intention to do other
business in the Philippines, said single act or transaction constitutes
"doing" or "engaging in" or "transacting" business in the Philippines.3 7
In determining whether a corporation does business in the Philippines
or not, aside from their activities within the forum, reference may be
made to the contractual agreements entered into by it with other
entities in the country. Thus, in the Top-Weld case (supra), the foreign
corporation's LICENSE AND TECHNICAL AGREEMENT and
DISTRIBUTOR AGREEMENT with their local contacts were made the
basis of their being regarded by this Tribunal as corporations doing
business in the country. Likewise, in Merill Lynch
Futures, Inc.vs. Court of Appeals, etc. 38 the FUTURES CONTRACT
entered into by the petitioner foreign corporation weighed heavily in
the court's ruling.
With the abovestated precedents in mind, we are persuaded to
conclude that private respondent had been "engaged in" or
"doing business" in the Philippines for some time now. This is the
inevitable result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various business contacts in
the country, particularly ASPAC and Telephone Equipment Sales and
Services, Inc. (TESSI, for brevity). The latter is a local electronics firm
engaged by ITEC to be its local technical representative, and to create
a service center for ITEC products sold locally. Its arrangements, with
these entities indicate convincingly ITEC's purpose to bring about the
situation among its customers and the general public that they are
dealing directly with ITEC, and that ITEC is actively engaging in
business in the country.
In its Master Service Agreement39 with TESSI, private respondent
required its local technical representative to provide the employees of
the technical and service center with ITEC identification cards and
business cards, and to correspond only on ITEC, Inc., letterhead.
TESSI personnel are instructed to answer the telephone with "ITEC
Technical Assistance Center.", such telephone being listed in the
telephone book under the heading of ITEC Technical Assistance
Center, and all calls being recorded and forwarded to ITEC on a
weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly
report detailing the failure and repair of ITEC products, and to
requisition monthly the materials and components needed to replace
stock consumed in the warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the
respondents shows that there are provisions which are highly
restrictive in nature, such as to reduce petitioner ASPAC to a mere
extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative
Agreement between ITEC and ASPAC provides: "The Representative
shall not represent or offer for sale within the Territory any product
which competes with an existing ITEC product or any product which
ITEC has under active development." Likewise pertinent is the
following provision: "When acting under this Agreement,
REPRESENTATIVE is authorized to solicit sales within the Territory
on ITEC's behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific customers and
on terms and conditions expressly authorized by ITEC in writing."
When ITEC entered into the disputed contracts with ASPAC and
TESSI, they were carrying out the purposes for which it was
created, i.e., to market electronics and communications products. The
terms and conditions of the contracts as well as ITEC's conduct
indicate that they established within our country a continuous
business, and not merely one of a temporary character.40
Notwithstanding such finding that ITEC is doing business in the
country, petitioner is nonetheless estopped from raising this fact
to bar ITEC from instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue in
Philippine Courts although not authorized to do business here against
a Philippine citizen or entity who had contracted with and benefited by
said corporation.41 To put it in another way, a party is estopped to
challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And
the doctrine of estoppel to deny corporate existence applies to a
foreign as well as to domestic corporations.42 One who has dealt
with a corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity: The
principle will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such
person has received the benefits of the contract.43
The rule is deeply rooted in the time-honored axiom of Commodum ex
injuria sua non habere debet — no person ought to derive any
advantage of his own wrong. This is as it should be for as mandated
by law, "every person must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."44
Concededly, corporations act through agents, like directors and
officers. Corporate dealings must be characterized by utmost good
faith and fairness. Corporations cannot just feign ignorance of the legal
rules as in most cases, they are manned by sophisticated officers with
tried management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable
proportion between benefits and expected burdens. This is a norm
which should be observed where one or the other is a foreign entity
venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time
they enter into a contract and at the time it is to become operative.
(Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98).
Moreover, a person is presumed to be more knowledgeable about his
own state law than his alien or foreign contemporary. In this case, the
record shows that, at least, petitioner had actual knowledge of the
applicability of R.A. No. 5455 at the time the contract was executed
and at all times thereafter. This conclusion is compelled by the fact
that the same statute is now being propounded by the petitioner to
bolster its claim. We, therefore sustain the appellate court's view that
"it was incumbent upon TOP-WELD to know whether or not IRTI and
ECED were properly authorized to engage in business in the
Philippines when they entered into the licensing and distributorship
agreements." The very purpose of the law was circumvented and
evaded when the petitioner entered into said agreements despite the
prohibition of R.A. No. 5455. The parties in this case being equally
guilty of violating R.A. No. 5455, they are in pari delicto, in which case
it follows as a consequence that petitioner is not entitled to the relief
prayed for in this case.
The doctrine of lack of capacity to sue based on the failure to acquire
a local license is based on considerations of sound public policy. The
license requirement was imposed to subject the foreign corporation
doing business in the Philippines to the jurisdiction of its courts. It was
never intended to favor domestic corporations who enter into solitary
transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business
in this country.45
In Antam Consolidated Inc. vs. Court of Appeals, et al.46 we
expressed our chagrin over this commonly used scheme of defaulting
local companies which are being sued by unlicensed foreign
companies not engaged in business in the Philippines to invoke the
lack of capacity to sue of such foreign companies. Obviously, the
same ploy is resorted to by ASPAC to prevent the injunctive action
filed by ITEC to enjoin petitioner from using knowledge possibly
acquired in violation of fiduciary arrangements between the parties.
By entering into the "Representative Agreement" with ITEC, Petitioner
is charged with knowledge that ITEC was not licensed to engage in
business activities in the country, and is thus estopped from raising in
defense such incapacity of ITEC, having chosen to ignore or even
presumptively take advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted
from the license requirement in order to institute an action in our courts
if its representative in the country maintained an independent status
during the existence of the disputed contract. Petitioner is deemed to
have acceded to such independent character when it entered into the
Representative Agreement with ITEC, particularly, provision 6.2
(supra).
Petitioner's insistence on the dismissal of this action due to the
application, or non application, of the private international law rule of
forum non conveniens defies well-settled rules of fair play. According
to petitioner, the Philippine Court has no venue to apply its discretion
whether to give cognizance or not to the present action, because it has
not acquired jurisdiction over the person of the plaintiff in the case, the
latter allegedly having no personality to sue before Philippine Courts.
This argument is misplaced because the court has already acquired
jurisdiction over the plaintiff in the suit, by virtue of his filing the original
complaint. And as we have already observed, petitioner is not at
liberty to question plaintiff's standing to sue, having already
acceded to the same by virtue of its entry into the Representative
Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court,
based on the facts of the case, whether to give due course to the suit
or dismiss it, on the principle of forum non convenience.4 7 Hence, the
Philippine Court may refuse to assume jurisdiction in spite of its having
acquired jurisdiction. Conversely, the court may assume jurisdiction
over the case if it chooses to do so; provided, that the following
requisites are met: 1) That the Philippine Court is one to which
the parties may conveniently resort to; 2) That the Philippine
Court is in a position to make an intelligent decision as to the law
and the facts; and, 3) That the Philippine Court has or is likely to
have power to enforce its decision.48
The aforesaid requirements having been met, and in view of the
court's disposition to give due course to the questioned action, the
matter of the present forum not being the "most convenient" as a
ground for the suit's dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is
hereby DISMISSED. The decision of the Court of Appeals dated June
7, 1991, upholding the RTC Order dated February 22, 1991, denying
the petitioners' Motion to Dismiss, and ordering the issuance of the
Writ of Preliminary Injunction, is hereby affirmed in toto.
SO ORDERED.
THIRD DIVISION
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of
the Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO
DEMETRIA, and JOSE JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank
officers in an exchange of letters and/or in a meeting with the buyers constitute
a perfected and enforceable contract of sale over 101 hectares of land in Sta.
Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If
so, may the Central Bank-appointed conservator of Producers Bank (now First
Philippine International Bank) repudiate such "apparent authority" after said
contract has been deemed perfected? During the pendency of a suit for
specific performance, does the filing of a "derivative suit" by the majority
shareholders and directors of the distressed bank to prevent the enforcement
or implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the
instant Petition for review on certiorariunder Rule 45 of the Rules of Court, to
set aside the Decision promulgated January 14, 1994 of the respondent Court
of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June
14, 1994 denying the motion for reconsideration. The dispositive portion of the
said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the
elimination of the damages awarded under paragraphs 3, 4 and 6 of
its dispositive portion and the reduction of the award in paragraph 5
thereof to P75,000.00, to be assessed against defendant bank. In all
other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive
portion are deemed, herein and hereafter, to legally refer to the
plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the
other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over
the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna
with an area of 101 hectares, more or less, covered by and embraced
in Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive,
of the Land Records of Laguna, between the plaintiffs as buyers and
the defendant Producers Bank for an agreed price of Five and One
Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality
of this decision and receipt from the plaintiffs the amount of P5.5
Million, to execute in favor of said plaintiffs a deed of absolute sale
over the aforementioned six (6) parcels of land, and to immediately
deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to
T- 106937, inclusive, for purposes of registration of the same deed
and transfer of the six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose
A. Janolo and Demetrio Demetria the sums of P200,000.00 each in
moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the
sum of P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs
the amount of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally,
actual and moderate damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply
to sur-rejoinder, the petition was given due course in a Resolution dated
January 18, 1995. Thence, the parties filed their respective memoranda and
reply memoranda. The First Division transferred this case to the Third Division
per resolution dated October 23, 1995. After carefully deliberating on the
aforesaid submissions, the Court assigned the case to the
undersigned ponentefor the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the
Philippines; petitioner Bank, for brevity) is a banking institution organized and
existing under the laws of the Republic of the Philippines. Petitioner Mercurio
Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department
of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age
and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose
Janolo.
Respondent Court of Appeals is the court which issued the Decision and T-106933 70,899 sq. m.
Resolution sought to be set aside through this petition.
T-106934 52,246 sq. m.
The Facts T-106935 96,768 sq. m.
T-106936 187,114 sq. m.
The facts of this case are summarized in the respondent Court's Decision 3 as
follows: T-106937 481,481 sq. m.

(1) In the course of its banking operations, the defendant Producer My offer is for PESOS: THREE MILLION FIVE HUNDRED
Bank of the Philippines acquired six parcels of land with a total area of THOUSAND (P3,500,000.00) PESOS, in cash.
101 hectares located at Don Jose, Sta. Rose, Laguna, and covered
by Transfer Certificates of Title Nos. T-106932 to T-106937. The Kindly contact me at Telephone Number 921-1344.
property used to be owned by BYME Investment and Development
Corporation which had them mortgaged with the bank as collateral for
a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, (3) On September 1, 1987, defendant Rivera made on behalf of the
wanted to purchase the property and thus initiated negotiations for that bank a formal reply by letter which is hereunder quoted (Exh. "C"):
purpose.
September 1, 1987
(2) In the early part of August 1987 said plaintiffs, upon the suggestion
of BYME investment's legal counsel, Jose Fajardo, met with defendant JP M-P GUTIERREZ ENTERPRISES
Mercurio Rivera, Manager of the Property Management Department 142 Charisma St., Doña Andres II
of the defendant bank. The meeting was held pursuant to plaintiffs' Rosario, Pasig, Metro Manila
plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the
meeting, plaintiff Janolo, following the advice of defendant Rivera,
Attention: JOSE O. JANOLO
made a formal purchase offer to the bank through a letter dated
August 30, 1987 (Exh. "B"), as follows:
Dear Sir:
August 30, 1987
Thank you for your letter-offer to buy our six (6) parcels of acquired
lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.).
The Producers Bank of the Philippines Please be informed however that the bank's counter-offer is at P5.5
Makati, Metro Manila million for more than 101 hectares on lot basis.

Attn. Mr. Mercurio Q. Rivera We shall be very glad to hear your position on the on the matter.
Manager, Property Management Dept.
Best regards.
Gentleman:
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's
I have the honor to submit my formal offer to purchase your properties aforequoted reply, wrote (Exh. "D"):
covered by titles listed hereunder located at Sta. Rosa, Laguna, with
a total area of 101 hectares, more or less.
September 17, 1987

TCT NO. AREA

T-106932 113,580 sq. m.
Producers Bank replaced by an Acting Conservator in the person of defendant Leonida
Paseo de Roxas T. Encarnacion. On November 4, 1987, defendant Rivera wrote
Makati, Metro Manila plaintiff Demetria the following letter (Exh. "F"):

Attention: Mr. Mercurio Rivera Attention: Atty. Demetrio Demetria

Gentlemen: Dear Sir:

In reply to your letter regarding my proposal to purchase your 101- Your proposal to buy the properties the bank foreclosed from Byme
hectare lot located at Sta. Rosa, Laguna, I would like to amend my investment Corp. located at Sta. Rosa, Laguna is under study yet as
previous offer and I now propose to buy the said lot at P4.250 million of this time by the newly created committee for submission to the
in CASH.. newly designated Acting Conservator of the bank.

Hoping that this proposal meets your satisfaction. For your information.

(5) There was no reply to Janolo's foregoing letter of September 17, (7) What thereafter transpired was a series of demands by the
1987. What took place was a meeting on September 28, 1987 plaintiffs for compliance by the bank with what plaintiff considered as
between the plaintiffs and Luis Co, the Senior Vice-President of a perfected contract of sale, which demands were in one form or
defendant bank. Rivera as well as Fajardo, the BYME lawyer, another refused by the bank. As detailed by the trial court in its
attended the meeting. Two days later, or on September 30, 1987, decision, on November 17, 1987, plaintiffs through a letter to
plaintiff Janolo sent to the bank, through Rivera, the following letter defendant Rivera (Exhibit "G") tendered payment of the amount of
(Exh. "E"): P5.5 million "pursuant to (our) perfected sale agreement." Defendants
refused to receive both the payment and the letter. Instead, the parcels
The Producers Bank of the Philippines of land involved in the transaction were advertised by the bank for sale
Paseo de Roxas, Makati to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the
Metro Manila execution by the bank of the documents on what was considered as a
"perfected agreement." Thus:
Attention: Mr. Mercurio Rivera
Mr. Mercurio Rivera
Manager, Producers Bank
Re: 101 Hectares of Land
in Sta. Rosa, Laguna Paseo de Roxas, Makati
Metro Manila
Gentlemen:
Dear Mr. Rivera:
Pursuant to our discussion last 28 September 1987, we are pleased
to inform you that we are accepting your offer for us to purchase the This is in connection with the offer of our client, Mr. Jose O. Janolo, to
purchase your 101-hectare lot located in Sta. Rosa, Laguna, and
property at Sta. Rosa, Laguna, formerly owned by Byme Investment,
which are covered by TCT No. T-106932 to 106937.
for a total price of PESOS: FIVE MILLION FIVE HUNDRED
THOUSAND (P5,500,000.00).
From the documents at hand, it appears that your counter-offer dated
Thank you. September 1, 1987 of this same lot in the amount of P5.5 million was
accepted by our client thru a letter dated September 30, 1987 and was
received by you on October 5, 1987.
(6) On October 12, 1987, the conservator of the bank (which has been
placed under conservatorship by the Central Bank since 1984) was
In view of the above circumstances, we believe that an agreement has
been perfected. We were also informed that despite repeated follow-
up to consummate the purchase, you now refuse to honor your
commitment. Instead, you have advertised for sale the same lot to
others.
In behalf of our client, therefore, we are making this formal demand
upon you to consummate and execute the necessary
actions/documentation within three (3) days from your receipt hereof.
We are ready to remit the agreed amount of P5.5 million at your
advice. Otherwise, we shall be constrained to file the necessary court
action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt
of the foregoing letter and stated, in its communication of December
2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office
of our Conservator for proper disposition" However, no response
came from the Acting Conservator. On December 14, 1987, the
plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this
time through the Acting Conservator, defendant Encarnacion.
Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O.
JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as
our agreed purchase price of the 101-hectare lot covered by TCT Nos.
106932, 106933, 106934, 106935, 106936 and 106937 and registered
under Producers Bank.
This is in connection with the perfected agreement consequent from
your offer of P5.5 Million as the purchase price of the said lots. Please
inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months.
Then, on May 3, 1988, plaintiff, through counsel, made a final demand
for compliance by the bank with its obligations under the considered
perfected contract of sale (Exhibit "N"). As recounted by the trial court
(Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex
"4" of defendant's answer to amended complaint), the defendants
through Acting Conservator Encarnacion repudiated the authority of
defendant Rivera and claimed that his dealings with the plaintiffs,
particularly his counter-offer of P5.5 Million are unauthorized or illegal.
On that basis, the defendants justified the refusal of the tenders of
payment and the non-compliance with the obligations under what the
plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance
with damages against the bank, its Manager Rivers and Acting
Conservator Encarnacion. The basis of the suit was that the
transaction had with the bank resulted in a perfected contract of sale,
The defendants took the position that there was no such perfected
sale because the defendant Rivera is not authorized to sell the
property, and that there was no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through
counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to
intervene in the trial court, alleging that as owner of 80% of the Bank's
outstanding shares of stock, he had a substantial interest in resisting
the complaint. On July 8, 1991, the trial court issued an order denying
the motion to intervene on the ground that it was filed after trial had
already been concluded. It also denied a motion for reconsideration
filed thereafter. From the trial court's decision, the Bank, petitioner
Rivera and conservator Encarnacion appealed to the Court of Appeals
which subsequently affirmed with modification the said judgment.
Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was
substituted in place of Demetria and Janolo, in view of the assignment of the
latters' rights in the matter in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of
Appeals, Henry Co and several other stockholders of the Bank, through
counsel Angara Abello Concepcion Regala and Cruz, filed an action
(hereafter, the "Second Case") — purportedly a "derivative suit" — with the
Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-
1606, against Encarnacion, Demetria and Janolo "to declare any perfected
sale of the property as unenforceable and to stop Ejercito from enforcing or
implementing the sale"4 In his answer, Janolo argued that the Second Case
was barred by litis pendentia by virtue of the case then pending in the Court of
Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a
Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private
respondent opposed this motion on the ground, among others, that plaintiff's
act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion
is still pending in the Makati RTC.
In their Petition6 and Memorandum7 , petitioners summarized their position as
follows:
I.
The Court of Appeals erred in declaring that a contract of sale was
perfected between Ejercito (in substitution of Demetria and Janolo)
and the bank.
II.
The Court of Appeals erred in declaring the existence of an
enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not
have the power to overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform
to the evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the
ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are
supported by the evidence on record and may no longer be questioned
in this case.
III.
The Court of Appeals correctly held that there was a perfected contract
between Demetria and Janolo (substituted by; respondent Ejercito)
and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart
from being estopped from repudiating the agency and the contract,
has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be
summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the
statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the
authority of the bank officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings
of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme
Court promulgated Revised Circular No. 28-91 requiring that a party "must
certify under oath . . . [that] (a) he has not (t)heretofore commenced any other
action or proceeding involving the same issues in the Supreme Court, the
Court of Appeals, or any other tribunal or agency; (b) to the best of his
knowledge, no such action or proceeding is pending" in said courts or
agencies. A violation of the said circular entails sanctions that include the
summary dismissal of the multiple petitions or complaints. To be sure,
petitioners have included a VERIFICATION/CERTIFICATION in their Petition
stating "for the record(,) the pendency of Civil Case No. 92-1606 before the
Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by
stockholders of petitioner Bank against the conservator and other defendants
but which is the subject of a pending Motion to Dismiss Without Prejudice.9
Private respondent Ejercito vigorously argues that in spite of this verification,
petitioners are guilty of actual forum shopping because the instant petition
pending before this Court involves "identical parties or interests represented,
rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues
in the two cases are so interwined that a judgement or resolution in either case
will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping
because:
1) In the earlier or "First Case" from which this proceeding arose, the
Bank was impleaded as a defendant, whereas in the "Second Case"
(assuming the Bank is the real party in interest in a derivative suit), it
wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the
corporation under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by
the Bank president and attached to the Petition identifies the action as
a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal
question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the
said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international
law.12 , where non-resident litigants are given the option to choose the forum
or place wherein to bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less
than honorable excuses, the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when
a party attempts to have his action tried in a particular court or jurisdiction
where he feels he will receive the most favorable judgment or verdict." Hence,
according to Words and Phrases14 , "a litigant is open to the charge of "forum
shopping" whenever he chooses a forum with slight connection to factual
circumstances surrounding his suit, and litigants should be encouraged to
attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing
not only a choice of venues, as it was originally understood in conflicts of laws,
but also to a choice of remedies. As to the first (choice of venues), the Rules
of Court, for example, allow a plaintiff to commence personal actions "where
the defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4,
Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice
of pursuing civil liabilities independently of the criminal, arising from the same
set of facts. A passenger of a public utility vehicle involved in a vehicular
accident may sue on culpa contractual, culpa aquiliana or culpa criminal —
each remedy being available independently of the others — although he
cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the
litigant actually shops for a forum of his action, This was the original
concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum
of their actions, litigants, through the encouragement of their lawyers,
file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting
adjudications among different courts and consequent confusion
enimical (sic) to an orderly administration of justice. It had created
extreme inconvenience to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept — which is
unethical professional legal practice. And this necessitated or had
given rise to the formulation of rules and canons discouraging or
altogether prohibiting the practice. 15
What therefore originally started both in conflicts of laws and in our domestic
law as a legitimate device for solving problems has been abused and mis-used
to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme
Court, as already mentioned, promulgated Circular 28-91. And even before
that, the Court had prescribed it in the Interim Rules and Guidelines issued on
January 11, 1983 and had struck down in several cases 16 the inveterate use
of this insidious malpractice. Forum shopping as "the filing of repetitious suits
in different courts" has been condemned by Justice Andres R. Narvasa (now
Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval
Hughes, et al., "as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion
in one forum, a party seeks a favorable opinion (other than by appeal
or certiorari) in another. The principle applies not only with respect to
suits filed in the courts but also in connection with litigations
commenced in the courts while an administrative proceeding is
pending, as in this case, in order to defeat administrative processes
and in anticipation of an unfavorable administrative ruling and a
favorable court ruling. This is specially so, as in this case, where the
court in which the second suit was brought, has no jurisdiction. 18
The test for determining whether a party violated the rule against forum
shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19 , also by
Chief Justice Narvasa, and that is, forum shopping exists where the elements
of litis pendentia are present or where a final judgment in one case will amount
to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case
No. 86-36563 identity of parties, or at least such parties as represent
the same interests in both actions, as well as identity of rights asserted
and relief prayed for, the relief being founded on the same facts, and
the identity on the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is
successful, amount to res adjudicata in the action under
consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case
No. 86-36563, an identity as regards parties, or interests represented,
rights asserted and relief sought, as well as basis thereof, to a degree
sufficient to give rise to the ground for dismissal known as auter action
pendant or lis pendens. That same identity puts into operation the
sanction of twin dismissals just mentioned. The application of this
sanction will prevent any further delay in the settlement of the
controversy which might ensue from attempts to seek reconsideration
of or to appeal from the Order of the Regional Trial Court in Civil Case
No. 86-36563 promulgated on July 15, 1986, which dismissed the
petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or
person) sues the same party against whom another action or actions for the
alleged violation of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendencia in one case is bar to the others;
and, a final judgment in one would constitute res judicata and thus would
cause the dismissal of the rest. In either case, forum shopping could be cited
by the other party as a ground to ask for summary dismissal of the two 20 (or
more) complaints or petitions, and for imposition of the other sanctions, which
are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with
the Second Case, it is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to
the instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the
alleged perfected sale of real estate. On the other hand, the complaint 21 in the
Second Case seeks to declare such purported sale involving the same real
property "as unenforceable as against the Bank", which is the petitioner herein.
In other words, in the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish what the Bank itself
failed to do in the original case in the trial court. In brief, the objective or the
relief being sought, though worded differently, is the same, namely, to enable
the petitioner Bank to escape from the obligation to sell the property to
respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22 , this Court
ruled that the filing by a party of two apparently different actions, but with
the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner
impleaded different respondents therein — PNOC in the case before
the lower court and the COA in the case before this Court and sought
what seems to be different reliefs. Petitioner asks this Court to set
aside the questioned letter-directive of the COA dated October 10,
1988 and to direct said body to approve the Memorandum of
Agreement entered into by and between the PNOC and petitioner,
while in the complaint before the lower court petitioner seeks to enjoin
the PNOC from conducting a rebidding and from selling to other
parties the vessel "T/T Andres Bonifacio", and for an extension of time
for it to comply with the paragraph 1 of the memorandum of agreement
and damages. One can see that although the relief prayed for in the
two (2) actions are ostensibly different, the ultimate objective in both
actions is the same, that is, approval of the sale of vessel in favor of
petitioner and to overturn the letter-directive of the COA of October 10,
1988 disapproving the sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil
action for certiorari and prohibition in this Court despite the pendency
of their action in the Makati Regional Trial Court, is a species of forum-
shopping. Both actions unquestionably involve the same transactions,
the same essential facts and circumstances. The petitioners' claim of
absence of identity simply because the PCGG had not been
impleaded in the RTC suit, and the suit did not involve certain acts
which transpired after its commencement, is specious. In the RTC
action, as in the action before this Court, the validity of the contract to
purchase and sell of September 1, 1986, i.e., whether or not it had
been efficaciously rescinded, and the propriety of implementing the
same (by paying the pledgee banks the amount of their loans,
obtaining the release of the pledged shares, etc.) were the basic
issues. So, too, the relief was the same: the prevention of such
implementation and/or the restoration of the status quo ante. When
the acts sought to be restrained took place anyway despite the
issuance by the Trial Court of a temporary restraining order, the RTC
suit did not become functus oficio. It remained an effective vehicle for
obtention of relief; and petitioners' remedy in the premises was plain
and patent: the filing of an amended and supplemental pleading in the
RTC suit, so as to include the PCGG as defendant and seek
nullification of the acts sought to be enjoined but nonetheless done.
The remedy was certainly not the institution of another action in
another forum based on essentially the same facts, The adoption of
this latter recourse renders the petitioners amenable to disciplinary
action and both their actions, in this Court as well as in the Court a
quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of
interests represented. Although the plaintiffs in the Second Case (Henry L. Co.
et al.) are not name parties in the First Case, they represent the same interest
and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct
personal interest in the matter in controversy. They are not principally or even
subsidiarily liable; much less are they direct parties in the assailed contract of
sale; and
Secondly, the allegations of the complaint in the Second Case show that the
stockholders are bringing a "derivative suit". In the caption itself, petitioners
claim to have brought suit "for and in behalf of the Producers Bank of the
Philippines" 24 . Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on
behalf of the corporation wherein he holdsstock in order to protect or
vindicate corporate rights, whenever the officials of the corporation
refuse to sue, or are the ones to be sued or hold the control of the
corporation. In such actions, the suing stockholder is regarded as a
nominal party, with the corporation as the real party in interest.
(Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second
Case, petitioners, quite strangely, sought to deny that the Second Case was a
derivative suit, reasoning that it was brought, not by the minority shareholders,
but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of
Directors of petitioner Bank. That being so, then they really represent the Bank.
So, whether they sued "derivatively" or directly, there is undeniably an identity
of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality
Of the Bank is separate and distinct from its shareholders. But the rulings of
this Court are consistent: "When the fiction is urged as a means of perpetrating
a fraud or an illegal act or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law
covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation
of individuals." 25
In addition to the many cases 26 where the corporate fiction has been
disregarded, we now add the instant case, and declare herewith that the
corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be
allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending
corporate causes and in using and applying remedies available to it. To rule
otherwise would be to encourage corporate litigants to use their shareholders
as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs
sought, "because it (the Bank) was the defendant in the (first) case while it was
the plaintiff in the other (Second Case)",citing as authority Victronics
Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et
al., 27 where Court held:
 The rule has not been extended to a defendant who, for reasons
known only to him, commences a new action against the plaintiff
— instead of filing a responsive pleading in the other case — setting
forth therein, as causes of action, specific denials, special and
affirmative defenses or even counterclaims, Thus, Velhagen's and
King's motion to dismiss Civil Case No. 91-2069 by no means negates
the charge of forum-shopping as such did not exist in the first place.
(emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original
case, it could not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual
setting between Victronics and the present suit. In the former, as underscored
in the above-quoted Court ruling, the defendants did not file any responsive
pleading in the first case. In other words, they did not make any denial or raise
any defense or counter-claim therein In the case before us however,
petitioners filed a responsive pleading to the complaint — as a result of which,
the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their
responsive pleadings, the petitioners became plaintiffs themselves in the
original case, giving unto themselves the very remedies they repeated in the
Second Case.
Ultimately, what is truly important to consider in determining whether forum-
shopping exists or not is the vexation caused the courts and parties-litigant by
a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issue. In this case, this is exactly
the problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible decision
in the Second Case barring the parties front enforcing or implementing the said
sale. Indeed, a final decision in one would constitute res judicata in the
other 28 .
The foregoing conclusion finding the existence of forum-shopping
notwithstanding, the only sanction possible now is the dismissal of both cases
with prejudice, as the other sanctions cannot be imposed because petitioners'
present counsel entered their appearance only during the proceedings in this
Court, and the Petition's VERIFICATION/CERTIFICATION contained
sufficient allegations as to the pendency of the Second Case to show good
faith in observing Circular 28-91. The Lawyers who filed the Second Case are
not before us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision. However,
petitioners themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping and not to trifle
with court proceedings and processes They are warned that a repetition of the
same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed
not merely because of forum-shopping but also because of the substantive
issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there
was, on the basis of the facts established, a perfected contract of sale as the
ultimate issue. Holding that a valid contract has been established, respondent
Court stated:
There is no dispute that the object of the transaction is that property
owned by the defendant bank as acquired assets consisting of six (6)
parcels of land specifically identified under Transfer Certificates of
Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the
bank intended to sell the property. As testified to by the Bank's Deputy
Conservator, Jose Entereso, the bank was looking for buyers of the
property. It is definite that the plaintiffs wanted to purchase the
property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department
of the defendant bank, in early August 1987. The procedure in the sale
of acquired assets as well as the nature and scope of the authority of
Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by
Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned
over to me and then I published it in the form of an inter-office
memorandum distributed to all branches that these are
acquired assets for sale. I was instructed to advertise acquired
assets for sale so on that basis, I have to entertain offer; to
accept offer, formal offer and upon having been offered, I
present it to the Committee. I provide the Committee with
necessary information about the property such as original loan
of the borrower, bid price during the foreclosure, total claim of
the bank, the appraised value at the time the property is being
offered for sale and then the information which are relative to
the evaluation of the bank to buy which the Committee
considers and it is the Committee that evaluate as against the
 exposure of the bank and it is also the Committee that submit
to the Conservator for final approval and once approved, we
have to execute the deed of sale and it is the Conservator that
sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their
purpose of buying the property, dealt with and talked to the right
person. Necessarily, the agenda was the price of the property, and
plaintiffs were dealing with the bank official authorized to entertain
offers, to accept offers and to present the offer to the Committee
before which the said official is authorized to discuss information
relative to price determination. Necessarily, too, it being inherent in his
authority, Rivera is the officer from whom official information regarding
the price, as determined by the Committee and approved by the
Conservator, can be had. And Rivera confirmed his authority when he
talked with the plaintiff in August 1987. The testimony of plaintiff
Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr.
Mercurio Rivera, did you ask him point-blank his authority to
sell any property?
A: No, sir. Not point blank although it came from him, (W)hen
I asked him how long it would take because he was saying
that the matter of pricing will be passed upon by the
committee. And when I asked him how long it will take for the
committee to decide and he said the committee meets every
week. If I am not mistaken Wednesday and in about two
week's (sic) time, in effect what he was saying he was not the
one who was to decide. But he would refer it to the committee
and he would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said
he would refer the matter to the committee and he would relay
the decision to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due
Committee of which Luis Co was the Head, with Jose Entereso as one
of the members.
What transpired after the meeting of early August 1987 are consistent
with the authority and the duties of Rivera and the bank's internal
procedure in the matter of the sale of bank's assets. As advised by
Rivera, the plaintiffs made a formal offer by a letter dated August 20,
1987 stating that they would buy at the price of P3.5 Million in cash.
The letter was for the attention of Mercurio Rivera who was tasked to
convey and accept such offers. Considering an aspect of the official
duty of Rivera as some sort of intermediary between the plaintiffs-
buyers with their proposed buying price on one hand, and the bank
Committee, the Conservator and ultimately the bank itself with the set
price on the other, and considering further the discussion of price at
the meeting of August resulting in a formal offer of P3.5 Million in cash,
there can be no other logical conclusion than that when, on September
1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-
offer is at P5.5 Million for more than 101 hectares on lot basis," such
counter-offer price had been determined by the Past Due Committee
and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee of such matters as
original loan of borrower, bid price during foreclosure, total claim of the
bank, and market value. Tersely put, under the established facts, the
price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"),
the official and definitive price at which the bank was selling the
property.
There were averments by defendants below, as well as before this
Court, that the P5.5 Million price was not discussed by the Committee
and that price. As correctly characterized by the trial court, this is not
credible. The testimonies of Luis Co and Jose Entereso on this point
are at best equivocal and considering the gratuitous and self-serving
character of these declarations, the bank's submission on this point
does not inspire belief. Both Co ad Entereso, as members of the Past
Due Committee of the bank, claim that the offer of the plaintiff was
never discussed by the Committee. In the same vein, both Co and
Entereso openly admit that they seldom attend the meetings of the
Committee. It is important to note that negotiations on the price had
started in early August and the plaintiffs had already offered an
amount as purchase price, having been made to understand by
Rivera, the official in charge of the negotiation, that the price will be
submitted for approval by the bank and that the bank's decision will be
relayed to plaintiffs. From the facts, the official bank price. At any rate,
the bank placed its official, Rivera, in a position of authority to accept
offers to buy and negotiate the sale by having the offer officially acted
upon by the bank. The bank cannot turn around and later say, as it
now does, that what Rivera states as the bank's action on the matter
is not in fact so. It is a familiar doctrine, the doctrine of ostensible
authority, that if a corporation knowingly permits one of its officers, or
any other agent, to do acts within the scope of an apparent authority,
and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith
 dealt with the corporation through such agent, he estopped from
denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB
v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court
of Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and
perfected contract as follows: "(1) Consent of the contracting parties; (2) Object
certain which is the subject matter of the contract; (3) Cause of the obligation
which is established."
There is no dispute on requisite no. 2. The object of the questioned contract
consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate
area of about 101 hectares, more or less, and covered by Transfer Certificates
of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first
and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any
supposed counter-offer which Rivera (or Co) may have made is unauthorized.
Since there was no counter-offer by the Bank, there was nothing for Ejercito
(in substitution of Demetria and Janolo) to accept." 30 They disputed the factual
basis of the respondent Court's findings that there was an offer made by Janolo
for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Court's findings of fact.
Verily, in a petition under Rule 45 such as this, errors of fact — if there be any
- are, as a rule, not reviewable. The mere fact that respondent Court (and the
trial court as well) chose to believe the evidence presented by respondent
more than that presented by petitioners is not by itself a reversible error. In
fact, such findings merit serious consideration by this Court, particularly where,
as in this case, said courts carefully and meticulously discussed their findings.
This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of
Appeals, let us review the question of Rivera's authority to act and petitioner's
allegations that the P5.5 million counter-offer was extinguished by the P4.25
million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into
the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual
or apparent. The doctrine of "apparent authority", with special reference to
banks, was laid out in Prudential Bank vs. Court of Appeals31 , where it was
held that:
Conformably, we have declared in countless decisions that the
principal is liable for obligations contracted by the agent. The agent's
apparent representation yields to the principal's true representation
and the contract is considered as entered into between the principal
and the third person (citing National Food Authority vs. Intermediate
Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the
interests of the bank or in the course of dealings of the officers
in their representative capacity but not for acts outside the
scape of their authority (9 C.J.S., p. 417). A bank holding out
its officers and agents as worthy of confidence will not be
permitted to profit by the frauds they may thus be enabled to
perpetrate in the apparent scope of their employment; nor will
it be permitted to shirk its responsibility for such frauds even
though no benefit may accrue to the bank therefrom (10 Am
Jur 2d, p. 114). Accordingly, a banking corporation is liable to
innocent third persons where the representation is made in
the course of its business by an agent acting within the
general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit (McIntosh v. Dakota
Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks
have a fiduciary relationship with the public and their stability depends
on the confidence of the people in their honesty and efficiency. Such
faith will be eroded where banks do not exercise strict care in the
selection and supervision of its employees, resulting in prejudice to
their depositors.
From the evidence found by respondent Court, it is obvious that petitioner
Rivera has apparent or implied authority to act for the Bank in the matter of
selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all
times material to this case, Manager of the Property Management
Department of the Bank". By his own admission, Rivera was already
the person in charge of the Bank's acquired assets (TSN, August 6,
1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being
sold by the Bank. And during the initial meeting between the buyers
and Rivera, the latter suggested that the buyers' offer should be no
less than P3.3 million (TSN, April 26, 1990, pp. 16-17);
 (c) Rivera received the buyers' letter dated August 30, 1987 offering
P3.5 million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell
the property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing
the buyers' proposal to buy the property for P4.25 million (TSN, July
30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million
was the final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on
September 28, 1994, during which the Bank's offer of P5.5 million was
confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting,
Co, a major shareholder and officer of the Bank, confirmed Rivera's
statement as to the finality of the Bank's counter-offer of P5.5 million
(TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank
referred to Rivera as the officer acting for the Bank in relation to parties
interested in buying assets owned/acquired by the Bank. In fact,
Rivera was the officer mentioned in the Bank's advertisements offering
for sale the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals,
et. al.32 , the Court, through Justice Jose A. R. Melo, affirmed the doctrine of
apparent authority as it held that the apparent authority of the officer of the
Bank of P.I. in charge of acquired assets is borne out by similar circumstances
surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority
through documents and testimony which seek to establish
Rivera's actual authority. These pieces of evidence, however, are inherently
weak as they consist of Rivera's self-serving testimony and various inter-office
memoranda that purport to show his limited actual authority, of which private
respondent cannot be charged with knowledge. In any event, since the issue
is apparent authority, the existence of which is borne out by the respondent
Court's findings, the evidence of actual authority is immaterial insofar as the
liability of a corporation is concerned 33 .
Petitioners also argued that since Demetria and Janolo were experienced
lawyers and their "law firm" had once acted for the Bank in three criminal
cases, they should be charged with actual knowledge of Rivera's limited
authority. But the Court of Appeals in its Decision (p. 12) had already made a
factual finding that the buyers had no notice of Rivera's actual authority prior
to the sale. In fact, the Bank has not shown that they acted as its counsel in
respect to any acquired assets; on the other hand, respondent has proven that
Demetria and Janolo merely associated with a loose aggrupation of lawyers
(not a professional partnership), one of whose members (Atty. Susana Parker)
acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-
offer in the letter dated September 17, 1987 extinguished the Bank's offer of
P5.5 million 34 .They disputed the respondent Court's finding that "there was a
meeting of minds when on 30 September 1987 Demetria and Janolo through
Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer
of P5.5 million under Annex "J" (letter dated September 17, 1987)", citingthe
late Justice Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court
rulings starting with Beaumont vs. Prieto 37 .
However, the above-cited authorities and precedents cannot apply in the
instant case because, as found by the respondent Court which reviewed the
testimonies on this point, what was "accepted" by Janolo in his letter dated
September 30, 1987 was the Bank's offer of P5.5 million as confirmed and
reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their
meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the
testimonies of Rivera and Co that the September 28, 1987 meeting "was
meant to have the offerors improve on their position of P5.5.
million."38 However, both the trial court and the Court of Appeals found
petitioners' testimonial evidence "not credible", and we find no basis for
changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the
CA) common finding that private respondents' evidence is more in keeping
with truth and logic — that during the meeting on September 28, 1987, Luis
Co and Rivera "confirmed that the P5.5 million price has been passed upon by
the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-
35)"39 . Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5
million price during the September 28, 1987 meeting revived the said offer.
And by virtue of the September 30, 1987 letter accepting this revived offer,
there was a meeting of the minds, as the acceptance in said letter was absolute
and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of
Rivera's authority and action, particularly the latter's counter-offer of P5.5
million, as being "unauthorized and illegal" came only on May 12, 1988 or more
than seven (7) months after Janolo' acceptance. Such delay, and the absence
of any circumstance which might have justifiably prevented the Bank from
acting earlier, clearly characterizes the repudiation as nothing more than a last-
minute attempt on the Bank's part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied
admission on the part of the petitioners that the written offer made on
September 1, 1987 was carried through during the meeting of September 28,
1987. This is the conclusion consistent with human experience, truth and good
faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5
million was raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle
that points of law, theories, issues of fact and arguments not
adequately brought to the attention of the trial court need not be, and
ordinarily will not be, considered by a reviewing court, as they cannot
be raised for the first time on appeal (Santos vs. IAC, No. 74243,
November 14, 1986, 145 SCRA 592).40
. . . It is settled jurisprudence that an issue which was neither averred
in the complaint nor raised during the trial in the court below cannot
be raised for the first time on appeal as it would be offensive to the
basic rules of fair play, justice and due process (Dihiansan vs. CA, 153
SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos
Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos
vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August
30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense,
private respondent was not given an opportunity in the trial court to controvert
the same through opposing evidence. Indeed, this is a matter of due process.
But we passed upon the issue anyway, if only to avoid deciding the case on
purely procedural grounds, and we repeat that, on the basis of the evidence
already in the record and as appreciated by the lower courts, the inevitable
conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42 :
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at
P5.5 million during the meeting of 28 September 1987, and it was this
verbal offer that Demetria and Janolo accepted with their letter of 30
September 1987, the contract produced thereby would be
unenforceable by action — there being no note, memorandum or
writing subscribed by the Bank to evidence such contract. (Please see
article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official
price and the plaintiffs' acceptance of the price on September 30,
1987, are not, in themselves, formal contracts of sale. They are
however clear embodiments of the fact that a contract of sale was
perfected between the parties, such contract being binding in
whatever form it may have been entered into (case citations omitted).
Stated simply, the banks' letter of September 1, 1987, taken together
with plaintiffs' letter dated September 30, 1987, constitute in law a
sufficient memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications
commenced not only from September 1, 1987 but from Janolo's August 20,
1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda — since they include the names of the parties, the terms and
conditions of the contract, the price and a description of the property as the
object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on
September 28, 1987 did constitute a "new" offer which was accepted by Janolo
on September 30, 1987. Still, the statute of frauds will not apply by reason of
the failure of petitioners to object to oral testimony proving petitioner Bank's
counter-offer of P5.5 million. Hence, petitioners — by such utter failure to
object — are deemed to have waived any defects of the contract under the
statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No.
2 of article 1403, are ratified by the failure to object to the presentation
of oral evidence to prove the same, or by the acceptance of benefits
under them.
As private respondent pointed out in his Memorandum, oral testimony on the
reaffirmation of the counter-offer of P5.5 million is a plenty — and the silence
of petitioners all throughout the presentation makes the evidence binding on
them thus;
 A Yes, sir, I think it was September 28, 1987 and I was again present
because Atty. Demetria told me to accompany him we were able to
meet Luis Co at the Bank.
xxx xxx xxx
Q Now, what transpired during this meeting with Luis Co of the
Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be
reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by
Mr. Mercurio Rivera is the final price and that is the price they intends
(sic) to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement
(sic) that the defendant Rivera's counter-offer of 5.5 million was the
defendant's bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co
of the defendant Bank?
A We went straight to the point because he being a busy person, I told
him if the amount of P5.5 million could still be reduced and he said that
was already passed upon by the committee. What the bank expects
which was contrary to what Mr. Rivera stated. And he told me that is
the final offer of the bank P5.5 million and we should indicate our
position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he
said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with
us at the time at his office.
Q For the record, your Honor please, will you tell this Court who was
with Mr. Co in his Office in Producers Bank Building during this
meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede
on (sic) the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to
the bank which offer we accepted, the offer of the bank which is P5.5
million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million
was reached by the Committee and it is not within his power to reduce
this amount. What can you say to that statement that the amount of
P5.5 million was reached by the Committee?
A It was not discussed by the Committee but it was discussed initially
by Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo
(sic) in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by
the Central Bank of the Philippines during the time that the negotiation and
perfection of the contract of sale took place. Petitioners energetically
contended that the conservator has the power to revoke or overrule actions of
the management or the board of directors of a bank, under Section 28-A of
Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate
supervising or examining department, the Monetary Board finds that a
bank or a non-bank financial intermediary performing quasi-banking
functions is in a state of continuing inability or unwillingness to
maintain a state of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a
conservator to take charge of the assets, liabilities, and the
management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of
the institution, reorganize the management thereof, and restore its
viability. He shall have the power to overrule or revoke the actions of
the previous management and board of directors of the bank or non-
bank financial intermediary performing quasi-banking functions, any
provision of law to the contrary notwithstanding, and such other
powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or
repudiate the perfected contract of sale was raised for the first time in this
Petition — as this was not litigated in the trial court or Court of Appeals. As
already stated earlier, issues not raised and/or ventilated in the trial court, let
alone in the Court of Appeals, "cannot be raised for the first time on appeal as
it would be offensive to the basic rules of fair play, justice and due process."43
In the second place, there is absolutely no evidence that the Conservator, at
the time the contract was perfected, actually repudiated or overruled said
contract of sale. The Bank's acting conservator at the time, Rodolfo Romey,
never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who
took over from Romey after the sale was perfected on September 30, 1987
(Annex V, petition) which unilaterally repudiated — not the contract — but the
authority of Rivera to make a binding offer — and which unarguably came
months after the perfection of the contract. Said letter dated May 12, 1988 is
reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys.
Janolo and Demetria regarding the six (6) parcels of land located at
Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to
any of your clients nor perfected a "contract to sell and buy" with any
of them for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to
and approved by former Acting Conservator Mr. Andres I. Rustia,
Producers Bank Senior Manager Perfecto M. Pascua detailed the
functions of Property Management Department (PMD) staff and
officers (Annex A.), you will immediately read that Manager Mr.
Mercurio Rivera or any of his subordinates has no authority, power or
right to make any alleged counter-offer. In short, your lawyer-clients
did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the
Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of the Central
Bank Act (Rep. Act No. 265, as amended), only the Board of
Directors/Conservator may authorize the sale of any property of the
corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old
board or by any of the bank conservators (starting January, 1984) to
sell the aforesaid property to any of your clients. Apparently, what took
place were just preliminary discussions/consultations between him
and your clients, which everyone knows cannot bind the Bank's Board
or Conservator.
We are, therefore, constrained to refuse any tender of payment by
your clients, as the same is patently violative of corporate and banking
laws. We believe that this is more than sufficient legal justification for
refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All
our acts are official, legal and in accordance with law. We also have
no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
 (Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the "(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its viability."
Such powers, enormous and extensive as they are, cannot extend to the post-
facto repudiation of perfected transactions, otherwise they would infringe
against the non-impairment clause of the Constitution 44 . If the legislature itself
cannot revoke an existing valid contract, how can it delegate such non-existent
powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to
revoke contracts that are, under existing law, deemed to be defective — i.e.,
void, voidable, unenforceable or rescissible. Hence, the conservator merely
takes the place of a bank's board of directors. What the said board cannot do
— such as repudiating a contract validly entered into under the doctrine of
implied authority — the conservator cannot do either. Ineluctably, his power is
not unilateral and he cannot simply repudiate valid obligations of the Bank. His
authority would be only to bring court actions to assail such contracts — as he
has already done so in the instant case. A contrary understanding of the law
would simply not be permitted by the Constitution. Neither by common sense.
To rule otherwise would be to enable a failing bank to become solvent, at the
expense of third parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected contractual
rights nor vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of
Court, findings of fact by the Court of Appeals are not reviewable by the
Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45 ,
we held:
. . . The rule regarding questions of fact being raised with this Court in
a petition for certiorari under Rule 45 of the Revised Rules of Court
has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25,
1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised
in a petition for certiorari under Rule 45 of the Revised Rules of Court.
"The jurisdiction of the Supreme Court in cases brought to it from the
Court of Appeals is limited to reviewing and revising the errors of law
imputed to it, its findings of the fact being conclusive " [Chan vs. Court
of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737,
reiterating a long line of decisions]. This Court has emphatically
declared that "it is not the function of the Supreme Court to analyze or
weigh such evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the lower
court" (Tiongco v. De la Merced, G. R. No. L-24426, July 25, 1974, 58
SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28,
1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-
47531, February 20, 1984, 127 SCRA 596). "Barring, therefore, a
showing that the findings complained of are totally devoid of support
in the record, or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for this Court is
not expected or required to examine or contrast the oral and
documentary evidence submitted by the parties" [Santa Ana, Jr. vs.
Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973]
[at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the facts
of the case, relating to the sufficiency of evidence and the credibility of
witnesses presented. This Court so held that it is not the function of
the Supreme Court to analyze or weigh such evidence all over again.
The Supreme Court's jurisdiction is limited to reviewing errors of law
that may have been committed by the lower court. The Supreme Court
is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and
Goldrock Construction and Development Corp. 47 :
The Court has consistently held that the factual findings of the trial
court, as well as the Court of Appeals, are final and conclusive and
may not be reviewed on appeal. Among the exceptional
circumstances where a reassessment of facts found by the lower
courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is
grave abuse of discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of facts; when the
findings went beyond the issues of the case and the same are contrary
to the admissions of both appellant and appellee. After a careful study
of the case at bench, we find none of the above grounds present to
justify the re-evaluation of the findings of fact made by the courts
below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety
and Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally
applicable to the present case:
We see no valid reason to discard the factual conclusions of the
appellate court, . . . (I)t is not the function of this Court to assess and
evaluate all over again the evidence, testimonial and documentary,
adduced by the parties, particularly where, such as here, the findings
of both the trial court and the appellate court on the matter coincide.
(emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught
with findings and conclusions which were not only contrary to the evidence on
record but have no bases at all," specifically the findings that (1) the "Bank's
counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the
same for discussion" and (2) "the meeting with Co was not to scale down the
price and start negotiations anew, but a meeting on the already determined
price of P5.5 million" Hence, citingPhilippine National Bank vs. Court of
Appeals 49 , petitioners are asking us to review and reverse such factual
findings.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
There can be no other logical conclusion than that when, on
September 1, 1987, Rivera informed plaintiffs by letter that "the bank's
counter-offer is at P5.5 Million for more than 101 hectares on lot basis,
"such counter-offer price had been determined by the Past Due
Committee and approved by the Conservator after Rivera had duly
presented plaintiffs' offer for discussion by the Committee . . . Tersely
put, under the established fact, the price of P5.5 Million was, as clearly
worded in Rivera's letter (Exh. "E"), the official and definitive price at
which the bank was selling the property. (p. 11, CA Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out by
plaintiff, during the meeting of September 28, 1987 between the
plaintiffs, Rivera and Luis Co, the senior vice-president of the bank,
where the topic was the possible lowering of the price, the bank official
refused it and confirmed that the P5.5 Million price had been passed
upon by the Committee and could no longer be lowered (TSN of April
27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this
point, characterizing it as "not credible" and "at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's
submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then
Conservator Rodolfo Romey to testify on their behalf, as he would have been
in the best position to establish their thesis. Under the rules on evidence 51 ,
such suppression gives rise to the presumption that his testimony would have
been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners'
evidence was deemed insufficient by both the trial court and the respondent
Court, and instead, it was respondent's submissions that were believed and
became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings
of fact by the lower courts are valid and correct. But the petitioners are now
asking this Court to disturb these findings to fit the conclusion they are
espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may
disregard findings of fact by the Court of Appeals 52 . We have studied both the
records and the CA Decision and we find no such exceptions in this case. On
the contrary, the findings of the said Court are supported by a preponderance
of competent and credible evidence. The inferences and conclusions are
seasonably based on evidence duly identified in the Decision. Indeed, the
appellate court patiently traversed and dissected the issues presented before
it, lending credibility and dependability to its findings. The best that can be said
in favor of petitioners on this point is that the factual findings of respondent
Court did not correspond to petitioners' claims, but were closer to the evidence
as presented in the trial court by private respondent. But this alone is no reason
to reverse or ignore such factual findings, particularly where, as in this case,
the trial court and the appellate court were in common agreement thereon.
Indeed, conclusions of fact of a trial judge — as affirmed by the Court of
Appeals — are conclusive upon this Court, absent any serious abuse or
evident lack of basis or capriciousness of any kind, because the trial court is
in a better position to observe the demeanor of the witnesses and their
courtroom manner as well as to examine the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the
raising of issues for the first time on appeal [viz., the extinguishment of the
Bank's offer of P5.5 million and the conservator's powers to repudiate
contracts entered into by the Bank's officers] — which per se could justify the
dismissal of the present case. We did not limit ourselves thereto, but delved
as well into the substantive issues — the perfection of the contract of sale and
its enforceability, which required the determination of questions of fact. While
the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Court's decisions and resolutions, we
did so just the same, if only to find out whether there is reason to disturb any
of its factual findings, for we are only too aware of the depth, magnitude and
vigor by which the parties through their respective eloquent counsel, argued
their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating
abnormally under a government-appointed conservator and "there is need to
rehabilitate the Bank in order to get it back on its feet . . . as many people
depend on (it) for investments, deposits and well as employment. As of June
1987, the Bank's overdraft with the Central Bank had already reached P1.023
billion . . . and there were (other) offers to buy the subject properties for a
substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time,
the Court cannot emotionally close its eyes to overriding considerations of
substantive and procedural law, like respect for perfected contracts, non-
impairment of obligations and sanctions against forum-shopping, which must
be upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while
the subject properties may currently command a much higher price, it is
equally true that at the time of the transaction in 1987, the price agreed upon
of P5.5 million was reasonable, considering that the Bank acquired these
properties at a foreclosure sale for no more than P3.5 million 54 . That the Bank
procrastinated and refused to honor its commitment to sell cannot now be used
by it to promote its own advantage, to enable it to escape its binding obligation
and to reap the benefits of the increase in land values. To rule in favor of the
Bank simply because the property in question has algebraically accelerated in
price during the long period of litigation is to reward lawlessness and delays in
the fulfillment of binding contracts. Certainly, the Court cannot stamp its
imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and
Resolution, the Court hereby DENIES the petition. The assailed Decision is
AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in
forum-shopping and WARNED that a repetition of the same or similar acts will
be dealt with more severely. Costs against petitioners.
SO ORDERED.
G.R. No. 120135 March 31, 2003
BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL,
LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA,
SR., and AURELIO K. LITONJUA, JR., respondents.
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the November 29, 1994 decision of the Court of Appeals 1 and the
April 28, 1995 resolution denying petitioners' motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas,
for brevity) filed a Complaint2 before the Regional Trial Court of Pasig against
the Bank of America NT&SA and Bank of America International, Ltd.
(defendant banks for brevity) alleging that: they were engaged in the shipping
business; they owned two vessels: Don Aurelio and El Champion, through their
wholly-owned corporations; they deposited their revenues from said business
together with other funds with the branches of said banks in the United
Kingdom and Hongkong up to 1979; with their business doing well, the
defendant banks induced them to increase the number of their ships in
operation, offering them easy loans to acquire said vessels;3 thereafter, the
defendant banks acquired, through their (Litonjuas') corporations as the
borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6; and (d) El
Conqueror7; the vessels were registered in the names of their corporations;
the operation and the funds derived therefrom were placed under the complete
and exclusive control and disposition of the petitioners; 8 and the possession
the vessels was also placed by defendant banks in the hands of persons
selected and designated by them (defendant banks).9
The Litonjuas claimed that defendant banks as trustees did not fully render an
account of all the income derived from the operation of the vessels as well as
of the proceeds of the subsequent foreclosure sale;10 because of the breach
of their fiduciary duties and/or negligence of the petitioners and/or the persons
designated by them in the operation of private respondents' six vessels, the
revenues derived from the operation of all the vessels declined drastically; the
loans acquired for the purchase of the four additional vessels then matured
and remained unpaid, prompting defendant banks to have all the six vessels,
including the two vessels originally owned by the private respondents,
foreclosed and sold at public auction to answer for the obligations incurred for
and in behalf of the operation of the vessels; they (Litonjuas) lost sizeable
amounts of their own personal funds equivalent to ten percent (10%) of the
acquisition cost of the four vessels and were left with the unpaid balance of
their loans with defendant banks.11 The Litonjuas prayed for the accounting of
the revenues derived in the operation of the six vessels and of the proceeds
of the sale thereof at the foreclosure proceedings instituted by petitioners;
damages for breach of trust; exemplary damages and attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of forum non
conveniens and lack of cause of action against them.13
On December 3, 1993, the trial court issued an Order denying the Motion to
Dismiss, thus:
"WHEREFORE, and in view of the foregoing consideration, the Motion
to Dismiss is hereby DENIED. The defendant is therefore, given a
period of ten (10) days to file its Answer to the complaint.
"SO ORDERED."14
Instead of filing an answer the defendant banks went to the Court of Appeals
on a "Petition for Review on Certiorari"15 which was aptly treated by the
appellate court as a petition for certiorari. They assailed the above-quoted
order as well as the subsequent denial of their Motion for
Reconsideration.16 The appellate court dismissed the petition and denied
petitioners' Motion for Reconsideration.17
Hence, herein petition anchored on the following grounds:
"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER
THE FACT THAT THE SEPARATE PERSONALITIES OF THE
PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE
FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY
SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE
PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE
THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS
NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES
TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF
FORUM SHOULD BE DISTURBED. UNDER THE
CIRCUMSTANCES SURROUNDING THE INSTANT CASE,
DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM
NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL
JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF
FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE
DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT
COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT
PRIVATE RESPONDENTS ARE GUILTY OF FORUM
SHOPPING." 18
As to the first assigned error: Petitioners argue that the borrowers and the
registered owners of the vessels are the foreign corporations and not private
respondents Litonjuas who are mere stockholders; and that the revenues
derived from the operations of all the vessels are deposited in the accounts of
the corporations. Hence, petitioners maintain that these foreign corporations
are the legal entities that have the personalities to sue and not herein private
respondents; that private respondents, being mere shareholders, have no
claim on the vessels as owners since they merely have an inchoate right to
whatever may remain upon the dissolution of the said foreign corporations and
after all creditors have been fully paid and satisfied; 19 and that while private
respondents may have allegedly spent amounts equal to 10% of the
acquisition costs of the vessels in question, their 10% however represents their
investments as stockholders in the foreign corporations.20
Anent the second assigned error, petitioners posit that while the application of
the principle of forum non conveniens is discretionary on the part of the Court,
said discretion is limited by the guidelines pertaining to the private as well as
public interest factors in determining whether plaintiffs' choice of forum should
be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co.
vs. Reyno,22 to wit:
"Private interest factors include: (a) the relative ease of access to
sources of proof; (b) the availability of compulsory process for the
attendance of unwilling witnesses; (c) the cost of obtaining attendance
of willing witnesses; or (d) all other practical problems that make trial
of a case easy, expeditious and inexpensive. Public interest factors
include: (a) the administrative difficulties flowing from court
congestion; (b) the local interest in having localized controversies
decided at home; (c) the avoidance of unnecessary problems in
conflict of laws or in the application of foreign law; or (d) the unfairness
of burdening citizens in an unrelated forum with jury duty."23
In support of their claim that the local court is not the proper forum, petitioners
allege the following:
 "i) The Bank of America Branches involved, as clearly mentioned in
the Complaint, are based in Hongkong and England. As such, the
evidence and the witnesses are not readily available in the Philippines;
"ii) The loan transactions were obtained, perfected, performed,
consummated and partially paid outside the Philippines;
"iii) The monies were advanced outside the Philippines. Furthermore,
the mortgaged vessels were part of an offshore fleet, not based in the
Philippines;
"iv) All the loans involved were granted to the Private Respondents'
foreign CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the laws of
England;
"vi) The subsequent sales of the mortgaged vessels and
the application of the sales proceeds occurred and transpired outside
the Philippines, and the deliveries of the sold mortgaged vessels were
likewise made outside the Philippines;
"vii) The revenues of the vessels and the proceeds of the sales of
these vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and
"viii) Bank of America International Ltd. is not licensed nor engaged in
trade or business in the Philippines."24
Petitioners argue further that the loan agreements, security documentation and
all subsequent restructuring agreements uniformly, unconditionally and
expressly provided that they will be governed by the laws of England; 25that
Philippine Courts would then have to apply English law in resolving whatever
issues may be presented to it in the event it recognizes and accepts herein
case; that it would then be imposing a significant and unnecessary expense
and burden not only upon the parties to the transaction but also to the local
court. Petitioners insist that the inconvenience and difficulty of applying English
law with respect to a wholly foreign transaction in a case pending in the
Philippines may be avoided by its dismissal on the ground of forum non
conveniens. 26
Finally, petitioners claim that private respondents have already waived their
alleged causes of action in the case at bar for their refusal to contest the foreign
civil cases earlier filed by the petitioners against them in Hongkong and
England, to wit:
"1.) Civil action in England in its High Court of Justice, Queen's Bench
Division Commercial Court (1992-Folio No. 2098) against (a)
LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY
COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA
SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE
NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA & (h)
AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice, Queen's Bench
Division, Commercial Court (1992-Folio No. 2245) against (a) EL
CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c)
EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN
LITONJUA.
"3.) Civil action in the Supreme Court of Hongkong High Court (Action
No. 4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A.,
(b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY
S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE
NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING
(EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR.,
and (h) EDUARDO KATIPUNAN LITONJUA.
"4.) A civil action in the Supreme Court of Hong Kong High Court
(Action No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA
S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING
COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e)
EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA
CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA."
and that private respondents' alleged cause of action is already barred by the
pendency of another action or by litis pendentia as shown above.27
On the other hand, private respondents contend that certain material facts and
pleadings are omitted and/or misrepresented in the present petition for
certiorari; that the prefatory statement failed to state that part of the security of
the foreign loans were mortgages on a 39-hectare piece of real estate located
in the Philippines;28 that while the complaint was filed only by the stockholders
of the corporate borrowers, the latter are wholly-owned by the private
respondents who are Filipinos and therefore under Philippine laws, aside from
the said corporate borrowers being but their alter-egos, they have interests of
their own in the vessels.29 Private respondents also argue that the dismissal
by the Court of Appeals of the petition for certiorari was justified because there
was neither allegation nor any showing whatsoever by the petitioners that they
had no appeal, nor any plain, speedy, and adequate remedy in the ordinary
course of law from the Order of the trial judge denying their Motion to Dismiss;
that the remedy available to the petitioners after their Motion to Dismiss was
denied was to file an Answer to the complaint;30 that as upheld by the Court of
Appeals, the decision of the trial court in not applying the principle of forum
non conveniens is in the lawful exercise of its discretion.31 Finally, private
respondents aver that the statement of petitioners that the doctrine of res
judicata also applies to foreign judgment is merely an opinion advanced by
them and not based on a categorical ruling of this Court;32 and that herein
private respondents did not actually participate in the proceedings in the
foreign courts.33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot be
the subject of petition for certiorari. Petitioners should have filed an answer to
the complaint, proceed to trial and await judgment before making an appeal.
As repeatedly held by this Court:
"An order denying a motion to dismiss is interlocutory and cannot be
the subject of the extraordinary petition for certiorari or mandamus.
The remedy of the aggrieved party is to file an answer and to interpose
as defenses the objections raised in his motion to dismiss, proceed to
trial, and in case of an adverse decision, to elevate the entire case by
appeal in due course. xxx Under certain situations, recourse
to certiorari or mandamus is considered appropriate, i.e., (a) when the
trial court issued the order without or in excess of jurisdiction; (b)
where there is patent grave abuse of discretion by the trial court; or (c)
appeal would not prove to be a speedy and adequate remedy as when
an appeal would not promptly relieve a defendant from the injurious
effects of the patently mistaken order maintaining the plaintiff's
baseless action and compelling the defendant needlessly to go
through a protracted trial and clogging the court dockets by another
futile case."34
Records show that the trial court acted within its jurisdiction when it issued the
assailed Order denying petitioners' motion to dismiss. Does the denial of the
motion to dismiss constitute a patent grave abuse of discretion? Would appeal,
under the circumstances, not prove to be a speedy and adequate remedy? We
will resolve said questions in conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to
dismiss the complaint on the ground that plaintiffs have no cause of action
against defendants since plaintiffs are merely stockholders of the corporations
which are the registered owners of the vessels and the borrowers of
petitioners?
No. Petitioners' argument that private respondents, being mere stockholders
of the foreign corporations, have no personalities to sue, and therefore, the
complaint should be dismissed, is untenable. A case is dismissible for lack of
personality to sue upon proof that the plaintiff is not the real party-in-interest.
Lack of personality to sue can be used as a ground for a Motion to Dismiss
based on the fact that the complaint, on the face thereof, evidently states no
cause of action.35 In San Lorenzo Village Association, Inc. vs. Court of
Appeals,36 this Court clarified that a complaint states a cause of action where
it contains three essential elements of a cause of action, namely: (1) the legal
right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the
act or omission of the defendant in violation of said legal right. If these
elements are absent, the complaint becomes vulnerable to a motion to dismiss
on the ground of failure to state a cause of action.37 To emphasize, it is not the
lack or absence of cause of action that is a ground for dismissal of the
complaint but rather the fact that the complaint states no cause of
action.38"Failure to state a cause of action" refers to the insufficiency of
allegation in the pleading, unlike "lack of cause of action" which refers to the
insufficiency of factual basis for the action. "Failure to state a cause of action"
may be raised at the earliest stages of an action through a motion to dismiss
the complaint, while "lack of cause of action" may be raised any time after the
questions of fact have been resolved on the basis of stipulations, admissions
or evidence presented.39
In the case at bar, the complaint contains the three elements of a cause of
action. It alleges that: (1) plaintiffs, herein private respondents, have the right
to demand for an accounting from defendants (herein petitioners), as trustees
by reason of the fiduciary relationship that was created between the parties
involving the vessels in question; (2) petitioners have the obligation, as
trustees, to render such an accounting; and (3) petitioners failed to do the
same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that the
corporate entities have juridical personalities separate and distinct from those
of the private respondents. Private respondents maintain that the corporations
are wholly owned by them and prior to the incorporation of such entities, they
were clients of petitioners which induced them to acquire loans from said
petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case,40
"xxx assuming that the allegation of facts constituting plaintiffs' cause
of action is not as clear and categorical as would otherwise be desired,
any uncertainty thereby arising should be so resolved as to enable a
full inquiry into the merits of the action."
As this Court has explained in the San Lorenzo case, such a course, would
preclude multiplicity of suits which the law abhors, and conduce to the
definitive determination and termination of the dispute. To do otherwise, that
is, to abort the action on account of the alleged fatal flaws of the complaint
would obviously be indecisive and would not end the controversy, since the
institution of another action upon a revised complaint would not be
foreclosed.41
Second Issue. Should the complaint be dismissed on the ground of forum non-
conveniens?
No. The doctrine of forum non-conveniens, literally meaning 'the forum is
inconvenient', emerged in private international law to deter the practice of
global forum shopping,42 that is to prevent non-resident litigants from choosing
the forum or place wherein to bring their suit for malicious reasons, such as to
secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. Under this doctrine,
a court, in conflicts of law cases, may refuse impositions on its jurisdiction
where it is not the most "convenient" or available forum and the parties are not
precluded from seeking remedies elsewhere.43
Whether a suit should be entertained or dismissed on the basis of said doctrine
depends largely upon the facts of the particular case and is addressed to the
sound discretion of the trial court.44 In the case of Communication Materials
and Design, Inc. vs. Court of Appeals,45 this Court held that "xxx [a Philippine
Court may assume jurisdiction over the case if it chooses to do so; provided,
that the following requisites are met: (1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine Court is in
a position to make an intelligent decision as to the law and the facts; and, (3)
that the Philippine Court has or is likely to have power to enforce its
decision."46 Evidently, all these requisites are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court
of Appeals,47 that the doctrine of forum non conveniens should not be used as
a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court
does not include said doctrine as a ground. This Court further ruled that while
it is within the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court's desistance; and
that the propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly
considered a matter of defense.48
Third issue. Are private respondents guilty of forum shopping because of the
pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are present
and where a final judgment in one case will amount to res judicata in the
other.49 Parenthetically, for litis pendentia to be a ground for the dismissal of
an action there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of rights asserted and
relief prayed for, the relief being founded on the same acts; and (c) the identity
in the two cases should be such that the judgment which may be rendered in
one would, regardless of which party is successful, amount to res judicata in
the other.50
In case at bar, not all the requirements for litis pendentia are present. While
there may be identity of parties, notwithstanding the presence of other
respondents,51 as well as the reversal in positions of plaintiffs and
defendants52, still the other requirements necessary for litis pendentia were
not shown by petitioner. It merely mentioned that civil cases were filed in
Hongkong and England without however showing the identity of rights
asserted and the reliefs sought for as well as the presence of the elements
of res judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:
"xxx [T]he petitioners, by simply enumerating the civil actions instituted
abroad involving the parties herein xxx, failed to provide this Court with
relevant and clear specifications that would show the presence of the
above-quoted elements or requisites for res judicata. While it is true
that the petitioners in their motion for reconsideration (CA Rollo, p. 72),
after enumerating the various civil actions instituted abroad, did aver
that "Copies of the foreign judgments are hereto attached and made
integral parts hereof as Annexes 'B', 'C', 'D' and 'E'", they failed,
wittingly or inadvertently, to include a single foreign judgment in their
pleadings submitted to this Court as annexes to their petition. How
then could We have been expected to rule on this issue even if We
were to hold that foreign judgments could be the basis for the
application of the aforementioned principle of res judicata?"53
Consequently, both courts correctly denied the dismissal of herein subject
complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.
G.R. No. 140047 July 13, 2004
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner,
vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.;
VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS;
ILUMINADA SANTOS; AND FIRST INTEGRATED BONDING AND
INSURANCE COMPANY, INC., respondents.
DECISION
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a Filipino
construction firm with the Iraqi Government for the construction of the Institute
of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when
the Iran-Iraq war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City, docketed as
Civil Case No. 91-1906 and assigned to Branch 58, petitioner Philippine Export
and Foreign Loan Guarantee Corporation1 (hereinafter Philguarantee) sought
reimbursement from the respondents of the sum of money it paid to Al Ahli
Bank of Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB), Ministry of
Housing and Construction, Baghdad, Iraq, awarded the construction of the
Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in
Baghdad, Iraq, (hereinafter the Project) to Ajyal Trading and Contracting
Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber
of Commerce for a total contract price of ID5,416,089/046 (or about
US$18,739,668).2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in
behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex), a local
contractor engaged in construction business, entered into a joint venture
agreement with Ajyal wherein the former undertook the execution of the
entire Project, while the latter would be entitled to a commission of 4% of the
contract price.3 Later, or on 8 April 1981, respondent 3-Plex, not being
accredited by or registered with the Philippine Overseas Construction Board
(POCB), assigned and transferred all its rights and interests under the
joint venture agreement to VPECI, a construction and engineering firm
duly registered with the POCB.4 However, on 2 May 1981, 3-Plex and
VPECI entered into an agreement that the execution of the Project would
be under their joint management.5
The SOB required the contractors to submit (1) a performance bond of
ID271,808/610 representing 5% of the total contract price and (2) an advance
payment bond of ID541,608/901 representing 10% of the advance payment to
be released upon signing of the contract.6 To comply with these
requirements, respondents 3-Plex and VPECI applied for the issuance of
a guarantee with petitioner Philguarantee, a government financial
institution empowered to issue guarantees for qualified Filipino
contractors to secure the performance of approved service contracts
abroad.7
Petitioner Philguarantee approved respondents' application. Subsequently,
letters of guarantee8 were issued by Philguarantee to the Rafidain Bank of
Baghdad covering 100% of the performance and advance payment bonds, but
they were not accepted by SOB. What SOB required was a letter-guarantee
from Rafidain Bank, the government bank of Iraq. Rafidain Bank then issued
a performance bond in favor of SOB on the condition that another foreign bank,
not Philguarantee, would issue a counter-guarantee to cover its exposure. Al
Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee
to Rafidain Bank, but it required a similar counter-guarantee in its favor from
the petitioner. Thus, three layers of guarantees had to be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner
Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of Guarantee No.
81-194-F 10 (Performance Bond Guarantee) in the amount of ID271,808/610
and Letter of Guarantee No. 81-195-F11 (Advance Payment Guarantee) in the
amount of ID541,608/901, both for a term of eighteen months from 25 May
1981. These letters of guarantee were secured by (1) a Deed of
Undertaking12executed by respondents VPECI, Spouses Vicente P. Eusebio
and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E. Santos and
Iluminada Santos; and (2) a surety bond13 issued by respondent First
Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond
was later amended on 23 June 1981 to increase the amount of coverage
from P6.4 million to P6.967 million and to change the bank in whose favor the
petitioner's guarantee was issued, from Rafidain Bank to Al Ahli Bank of
Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the
service contract15 for the construction of the Institute of Physical Therapy –
Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, wherein the joint
venture contractor undertook to complete the Project within a period of 547
days or 18 months. Under the Contract, the Joint Venture would supply
manpower and materials, and SOB would refund to the former 25% of the
project cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of 1
Dinar to 3.37777 US Dollars.16
The construction, which was supposed to start on 2 June 1981, commenced
only on the last week of August 1981. Because of this delay and the slow
progress of the construction work due to some setbacks and difficulties, the
Project was not completed on 15 November 1982 as scheduled. But in October
1982, upon foreseeing the impossibility of meeting the deadline and upon the
request of Al Ahli Bank, the joint venture contractor worked for the renewal or
extension of the Performance Bond and Advance Payment Guarantee.
Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-
195-F (Advance Payment Bond) with expiry date of 25 November 1982 were
then renewed or extended to 9 February 1983 and 9 March 1983,
respectively.17 The surety bond was also extended for another period of one
year, from 12 May 1982 to 12 May 1983.18 The Performance Bond was further
extended twelve times with validity of up to 8 December 1986,19 while the
Advance Payment Guarantee was extended three times more up to 24 May
1984 when the latter was cancelled after full refund or reimbursement by the
joint venture contractor.20 The surety bond was likewise extended to 8 May
1987.21
As of March 1986, the status of the Project was 51% accomplished, meaning
the structures were already finished. The remaining 47% consisted in electro-
mechanical works and the 2%, sanitary works, which both required importation
of equipment and materials.22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner
demanding full payment of its performance bond counter-guarantee.
Upon receiving a copy of that telex message on 27 October 1986, respondent
VPECI requested Iraq Trade and Economic Development Minister Mohammad
Fadhi Hussein to recall the telex call on the performance guarantee for being
a drastic action in contravention of its mutual agreement with the latter that (1)
the imposition of penalty would be held in abeyance until the completion of the
project; and (2) the time extension would be open, depending on the
developments on the negotiations for a foreign loan to finance the completion
of the project.23 It also wrote SOB protesting the call for lack of factual or legal
basis, since the failure to complete the Project was due to (1) the Iraqi
government's lack of foreign exchange with which to pay its (VPECI's)
accomplishments and (2) SOB's noncompliance for the past several years with
the provision in the contract that 75% of the billings would be paid in US
dollars.24 Subsequently, or on 19 November 1986, respondent VPECI advised
the petitioner not to pay yet Al Ahli Bank because efforts were being exerted
for the amicable settlement of the Project.25
On 14 April 1987, the petitioner received another telex message from Al Ahli
Bank stating that it had already paid to Rafidain Bank the sum of US$876,564
under its letter of guarantee, and demanding reimbursement by the petitioner
of what it paid to the latter bank plus interest thereon and related expenses. 26
Both petitioner Philguarantee and respondent VPECI sought the assistance of
some government agencies of the Philippines. On 10 August 1987, VPECI
requested the Central Bank to hold in abeyance the payment by the petitioner
"to allow the diplomatic machinery to take its course, for otherwise, the
Philippine government , through the Philguarantee and the Central Bank,
would become instruments of the Iraqi Government in consummating a clear
act of injustice and inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for its account
of the amount of US$876,564 (equivalent to ID271, 808/610) to Al Ahli Bank
representing full payment of the performance counter-guarantee for VPECI's
project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would remit
US$876,564 to Al Ahli Bank, and reiterated the joint and solidary obligation of
the respondents to reimburse the petitioner for the advances made on its
counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait
on 21 January 1988.30 Then, on 6 May 1988, the petitioner paid to Al Ahli Bank
of Kuwait US$59,129.83 representing interest and penalty charges demanded
by the latter bank.31
On 19 June 1991, the petitioner sent to the respondents separate letters
demanding full payment of the amount of P47,872,373.98 plus accruing
interest, penalty charges, and 10% attorney's fees pursuant to their joint and
solidary obligations under the deed of undertaking and surety bond. 32 When
the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case for
collection of a sum of money against the respondents before the RTC of Makati
City.
After due trial, the trial court ruled against Philguarantee and held that the latter
had no valid cause of action against the respondents. It opined that at the time
the call was made on the guarantee which was executed for a specific period,
the guarantee had already lapsed or expired. There was no valid renewal or
extension of the guarantee for failure of the petitioner to secure respondents'
express consent thereto. The trial court also found that the joint venture
contractor incurred no delay in the execution of the Project. Considering the
Project owner's violations of the contract which rendered impossible the joint
venture contractor's performance of its undertaking, no valid call on the
guarantee could be made. Furthermore, the trial court held that no valid notice
was first made by the Project owner SOB to the joint venture contractor before
the call on the guarantee. Accordingly, it dismissed the complaint, as well as
the counterclaims and cross-claim, and ordered the petitioner to pay attorney's
fees of P100,000 to respondents VPECI and Eusebio Spouses and P100,000
to 3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's
decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the status
of project implementation as well as the problems besetting the
contractors, between 1982 to 1985, having sent some of its people to
Baghdad during that period. The successive renewals/extensions of
the guarantees in fact, was prompted by delays, not solely attributable
to the contractors, and such extension understandably allowed by the
SOB (project owner) which had not anyway complied with its
contractual commitment to tender 75% of payment in US Dollars, and
which still retained overdue amounts collectible by VPECI.
… RESPONDENTS
Second, appellant was very much aware of the violations committed
by the SOB of its contractual undertakings with VPECI, principally, the
payment of foreign currency (US$) for 75% of the total contract price,
as well as of the complications and injustice that will result from its
payment of the full amount of the performance guarantee, as evident
in PHILGUARANTEE's letter dated 13 May 1987 ….
… unconditional, and irrevocable the nature and extent of its liability are
Third, appellant was fully aware that SOB was in fact still obligated to
the Joint Venture and there was still an amount collectible from and
still being retained by the project owner, which amount can be set-off
with the sum covered by the performance guarantee.
… to do so. If a person binds himself solidarily with the principal debtor, the
Fourth, well-apprised of the above conditions obtaining at the Project
site and cognizant of the war situation at the time in Iraq, appellant,
though earlier has made representations with the SOB regarding a
possible amicable termination of the Project as suggested by VPECI,
made a complete turn-around and insisted on acting in favor of the
unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court
claiming that the Court of Appeals erred in affirming the trial court's ruling that
I
…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF
UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER IN
CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-
GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO
RESPONDENTS WHAT IT HAD PAID UNDER THE SAID
COUNTER-GUARANTEE.
II
…PETITIONER CANNOT CLAIM SUBROGATION.
III
…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD
LIABLE UNDER THEIR DEED OF
UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to
reimbursement of what it paid under Letter of Guarantee No. 81-194-F it
issued to Al Ahli Bank of Kuwait based on the deed of undertaking and
surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute,
analogous to those of suretyship. Its liability accrued upon the failure of the
respondents to finish the construction of the Institute of Physical Therapy
Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the creditor
to fulfill the obligation of the principal debtor in case the latter should fail
contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of the
principles are common to both. In both contracts, there is a promise to answer
for the debt or default of another. However, in this jurisdiction, they may be
distinguished thus:
1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same consideration.
On the other hand, the contract of guaranty is the guarantor's own
separate undertaking often supported by a consideration
separate from that supporting the contract of the principal; the
original contract of his principal is not his contract.
2. A surety assumes liability as a regular party to the undertaking;
while the liability of a guarantor is conditional depending on the
failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor
is secondary.
4. A surety is an original promissor and debtor from the
beginning, while a guarantor is charged on his own undertaking.
5. A surety is, ordinarily, held to know every default of his
principal; whereas a guarantor is not bound to take notice of the
non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere
indulgence of the creditor to the principal or by want of notice of
the default of the principal, no matter how much he may be
injured thereby. A guarantor is often discharged by the mere
indulgence of the creditor to the principal, and is usually not
liable unless notified of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of Guarantee
No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on
your first written or telex demand Iraq Dinars Two Hundred Seventy
One Thousand Eight Hundred Eight and fils six hundred ten
(ID271,808/610) representing 100% of the performance bond required
of V.P. EUSEBIO for the construction of the Physical Therapy Institute,
Phase II, Baghdad, Iraq, plus interest and other incidental expenses
related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100%
of the obligation unpaid but in no case shall such amount exceed
Iraq Dinars (ID) 271,808/610 plus interest and other incidental
expenses…. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a guaranty,
as well as the factual milieu of this case, we find that the Court of Appeals and
the trial court were correct in ruling that the petitioner is a guarantor and not a
surety. That the guarantee issued by the petitioner is unconditional and
irrevocable does not make the petitioner a surety. As a guaranty, it is still
characterized by its subsidiary and conditional quality because it does not take
effect until the fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound himself.40 In
other words, an unconditional guarantee is still subject to the condition that the
principal debtor should default in his obligation first before resort to the
guarantor could be had. A conditional guaranty, as opposed to an
unconditional guaranty, is one which depends upon some extraneous event,
beyond the mere default of the principal, and generally upon notice of the
principal's default and reasonable diligence in exhausting proper remedies
against the principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that in
the event of default by respondent VPECI the petitioner shall pay, the
obligation assumed by the petitioner was simply that of an unconditional
guaranty, not conditional guaranty. But as earlier ruled the fact that
petitioner's guaranty is unconditional does not make it a surety. Besides, surety
is never presumed. A party should not be considered a surety where the
contract itself stipulates that he is acting only as a guarantor. It is only when
the guarantor binds himself solidarily with the principal debtor that the contract
becomes one of suretyship.42
Having determined petitioner's liability as guarantor, the next question we have
to grapple with is whether the respondent contractor has defaulted in its
obligations that would justify resort to the guaranty. This is a mixed question
of fact and law that is better addressed by the lower courts, since this Court is
not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial court and
the Court of Appeals are binding or conclusive upon this Court unless they are
not supported by the evidence or unless strong and cogent reasons dictate
otherwise.43 The factual findings of the Court of Appeals are normally not
reviewable by us under Rule 45 of the Rules of Court except when they are at
variance with those of the trial court. 44 The trial court and the Court of Appeals
were in unison that the respondent contractor cannot be considered to have
defaulted in its obligations because the cause of the delay was not primarily
attributable to it.
A corollary issue is what law should be applied in determining whether
the respondent contractor has defaulted in the performance of its
obligations under the service contract. The question of whether there is
a breach of an agreement, which includes default or mora,45 pertains to
the essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly provided for in
our laws. The rule followed by most legal systems, however, is that the intrinsic
validity of a contract must be governed by the lex contractus or "proper law of
the contract." This is the law voluntarily agreed upon by the parties (the lex loci
voluntatis) or the law intended by them either expressly or implicitly (the lex
loci intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the
parties.47 Philippine courts would do well to adopt the first and most basic rule
in most legal systems, namely, to allow the parties to select the law applicable
to their contract, subject to the limitation that it is not against the law, morals,
or public policy of the forum and that the chosen law must bear a substantive
relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI contains
no express choice of the law that would govern it. In the United States and
Europe, the two rules that now seem to have emerged as "kings of the hill" are
(1) the parties may choose the governing law; and (2) in the absence of such
a choice, the applicable law is that of the State that "has the most significant
relationship to the transaction and the parties."49 Another authority proposed
that all matters relating to the time, place, and manner of performance and
valid excuses for non-performance are determined by the law of the place of
performance or lex loci solutionis, which is useful because it is undoubtedly
always connected to the contract in a significant way.50
In this case, the laws of Iraq bear substantial connection to the transaction,
since one of the parties is the Iraqi Government and the place of performance
is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its
obligations may be determined by the laws of Iraq. However, since that foreign
law was not properly pleaded or proved, the presumption of identity or
similarity, otherwise known as the processual presumption, comes into play.
Where foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code, provides:
"In reciprocal obligations, neither party incurs in delay if the other party does
not comply or is not ready to comply in a proper manner with what is incumbent
upon him."
Default or mora on the part of the debtor is the delay in the fulfillment of the
prestation by reason of a cause imputable to the former. 52 It is the non-
fulfillment of an obligation with respect to time.53
It is undisputed that only 51.7% of the total work had been accomplished. The
48.3% unfinished portion consisted in the purchase and installation of electro-
mechanical equipment and materials, which were available from foreign
suppliers, thus requiring US Dollars for their importation. The monthly billings
and payments made by SOB54 reveal that the agreement between the parties
was a periodic payment by the Project owner to the contractor depending on
the percentage of accomplishment within the period. 55 The payments were, in
turn, to be used by the contractor to finance the subsequent phase of the
work. 56 However, as explained by VPECI in its letter to the Department of
Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected
the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the
accomplishment billings of the Contractor purely in Iraqi Dinars and
which payment came only after some delays.
5. SOB is fully aware of the following:
…
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would
need foreign currency (US$), to finance the purchase of various
equipment, materials, supplies, tools and to pay for the cost of project
management, supervision and skilled labor not available in Iraq and
therefore have to be imported and or obtained from the Philippines
and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines
requires the remittance into the Philippines of 70% of the salaries of
Filipino workers working abroad in US Dollars;
…
5.5 That the Iraqi Dinar is not a freely convertible currency such that
the same cannot be used to purchase equipment, materials, supplies,
etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT
are not available in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local currency
(Iraqui Dinars) out of Iraq and hence, imported materials, equipment,
etc., cannot be purchased or obtained using Iraqui Dinars as medium
of acquisition.
… to a contract does not perform in a proper manner the prestation which he is
8. Following the approved construction program of the CONTRACT,
upon completion of the civil works portion of the installation of
equipment for the building, should immediately follow, however, the
CONTRACT specified that these equipment which are to be installed
and to form part of the PROJECT have to be procured outside Iraq
since these are not being locally manufactured. Copy f the relevant
portion of the Technical Specification is hereto attached as Annex "C"
and made an integral part hereof;
…
10. Due to the lack of Foreign currency in Iraq for this purpose, and if
only to assist the Iraqi government in completing the PROJECT, the
Contractor without any obligation on its part to do so but with the
knowledge and consent of SOB and the Ministry of Housing &
Construction of Iraq, offered to arrange on behalf of SOB, a foreign
currency loan, through the facilities of Circle International S.A., the
Contractor's Sub-contractor and SACE MEDIO CREDITO which will
act as the guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation
started in June 1985. SOB is informed of the developments of this
negotiation, attached is a copy of the draft of the loan Agreement
between SOB as the Borrower and Agent. The Several Banks, as
Lender, and counter-guaranteed by Istituto Centrale Per II Credito A
Medio Termine (Mediocredito) Sezione Speciale Per L'Assicurazione
Del Credito All'Exportazione (Sace). Negotiations went on and
continued until it suddenly collapsed due to the reported default by
Iraq in the payment of its obligations with Italian government, copy of
the news clipping dated June 18, 1986 is hereto attached as Annex
"D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from
Circle International S.A. that because of the news report that Iraq
defaulted in its obligations with European banks, the approval by
Banco di Roma of the loan to SOB shall be deferred indefinitely, a
copy of the letter of Circle International together with the news
clippings are hereto attached as Annexes "F" and "F-1", respectively.57
As found by both the Court of Appeals and the trial court, the delay or the non-
completion of the Project was caused by factors not imputable to the
respondent contractor. It was rather due mainly to the persistent violations by
SOB of the terms and conditions of the contract, particularly its failure to pay
75% of the accomplished work in US Dollars. Indeed, where one of the parties
bound to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the other
party fails to perform the obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the monthly
billings in purely Iraqi Dinars did not render impossible the performance of the
Project by VPECI. Such posture is quite contrary to its previous
representations. In his 26 March 1987 letter to the Office of the Middle Eastern
and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-
President Jesus M. Tañedo stated that while VPECI had taken every possible
measure to complete the Project, the war situation in Iraq, particularly the lack
of foreign exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the
project but the war situation in Iraq particularly the lack of foreign
exchange is proving to be a great obstacle. Our performance
counterguarantee was called last 26 October 1986 when the
negotiations for a foreign currency loan with the Italian government
through Banco de Roma bogged down following news report that Iraq
has defaulted in its obligation with major European banks. Unless the
situation in Iraq is improved as to allay the bank's apprehension, there
is no assurance that the project will ever be completed. 58
In order that the debtor may be in default it is necessary that the following
requisites be present: (1) that the obligation be demandable and already
liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance because it must appear that the
tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance from
VPECI because it has not yet itself performed its obligation in a proper
manner, particularly the payment of the 75% of the cost of the Project in
US Dollars. The VPECI cannot yet be said to have incurred in delay. Even
assuming that there was delay and that the delay was attributable to
VPECI, still the effects of that delay ceased upon the renunciation by the
creditor, SOB, which could be implied when the latter granted several
extensions of time to the former. 60 Besides, no demand has yet been
made by SOB against the respondent contractor. Demand is generally
necessary even if a period has been fixed in the obligation. And default
generally begins from the moment the creditor demands judicially or extra-
judicially the performance of the obligation. Without such demand, the effects
of default will not arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of
excussion, that is, it cannot be compelled to pay the creditor SOB unless
the property of the debtor VPECI has been exhausted and all legal
remedies against the said debtor have been resorted to by the
creditor.62 It could also set up compensation as regards what the creditor
SOB may owe the principal debtor VPECI.63 In this case, however, the
petitioner has clearly waived these rights and remedies by making the
payment of an obligation that was yet to be shown to be rightfully due
the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the joint venture
contractor had collectibles from SOB which could be set off with the amount
covered by the performance guarantee. In February 1987, the OMEAA
transmitted to the petitioner a copy of a telex dated 10 February 1987 of the
Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent
by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of
the joint venture contractor from the petitioner would "be deducted from the
dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA dated 26
March 1987, the petitioner raised as among the arguments to be presented in
support of the cancellation of the counter-guarantee the fact that the amount
of ID281,414/066 retained by SOB from the Project was more than enough to
cover the counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
· The Iraqi Government does not have the foreign exchange
to fulfill its contractual obligations of paying 75% of progress
billings in US dollars.
… subject to defenses on the part of the debtor, the same defenses which could
· It could also be argued that the amount of ID281,414/066
retained by SOB from the proposed project is more than the
amount of the outstanding counterguarantee.65
In a nutshell, since the petitioner was aware of the contractor's
outstanding receivables from SOB, it should have set up compensation
as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of the
respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA, Manila, it
stated:
VPECI also maintains that the delay in the completion of the project
was mainly due to SOB's violation of contract terms and as such, call
on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment under
the guarantee, PHILGUARANTEE does not want to be an instrument
in any case of inequity committed against a Filipino contractor. It is for
this reason that we are constrained to seek your assistance not only
in ascertaining the veracity of Al Ahli Bank's claim that it has paid
Rafidain Bank but possibly averting such an event. As any payment
effected by the banks will complicate matters, we cannot help
underscore the urgency of VPECI's bid for government intervention for
the amicable termination of the contract and release of the
performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the service
contract and VPECI's outstanding receivables from SOB, as well as the
situation obtaining in the Project site compounded by the Iran-Iraq war, the
petitioner opted to pay the second layer guarantor not only the full amount of
the performance bond counter-guarantee but also interests and penalty
charges.
This brings us to the next question: May the petitioner as a guarantor secure
reimbursement from the respondents for what it has paid under Letter of
Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by the
latter67 and would be legally subrogated to the rights which the creditor has
against the debtor.68 However, a person who makes payment without the
knowledge or against the will of the debtor has the right to recover only insofar
as the payment has been beneficial to the debtor.69 If the obligation was
have been set up against the creditor can be set up against the paying
guarantor.70
From the findings of the Court of Appeals and the trial court, it is clear that the
payment made by the petitioner guarantor did not in any way benefit the
principal debtor, given the project status and the conditions obtaining at the
Project site at that time. Moreover, the respondent contractor was found to
have valid defenses against SOB, which are fully supported by evidence and
which have been meritoriously set up against the paying guarantor, the
petitioner in this case. And even if the deed of undertaking and the surety bond
secured petitioner's guaranty, the petitioner is precluded from enforcing the
same by reason of the petitioner's undue payment on the guaranty. Rights
under the deed of undertaking and the surety bond do not arise because these
contracts depend on the validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty:
the debtor VPECI should have, in the first place, defaulted in its obligation and
that the creditor SOB should have first made a demand from the principal
debtor. It is only when the debtor does not or cannot pay, in whole or in part,
that the guarantor should pay.71 When the petitioner guarantor in this case paid
against the will of the debtor VPECI, the debtor VPECI may set up against it
defenses available against the creditor SOB at the time of payment. This is the
hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the necessary
support and assistance in order to enable … [Filipino exporters and contractors
to operate viably under the prevailing economic and business conditions,"72 the
petitioner should have exercised prudence and caution under the
circumstances. As aptly put by the Court of Appeals, it would be the height of
inequity to allow the petitioner to pass on its losses to the Filipino contractor
VPECI which had sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby DENIED for lack
of merit, and the decision of the Court of appeals in CA-G.R. CV No. 39302 is
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 112573 February 9, 1995
NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.
PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the decision of the Court
of Appeals affirming the dismissal of the petitioner's complaint to enforce the
judgment of a Japanese court. The principal issue here is whether a
Japanese court can acquire jurisdiction over a Philippine corporation
doing business in Japan by serving summons through diplomatic
channels on the Philippine corporation at its principal office in Manila
after prior attempts to serve summons in Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a
corporation organized under the laws of the State of Minnesota, U.S.A., sought
to enforce in Civil Case No. 83-17637 of the Regional Trial Court (RTC),
Branch 54, Manila, a judgment rendered in its favor by a Japanese court
against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP),
a corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10 November
1993, 1 the following are the factual and procedural antecedents of this
controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant
C.F. Sharp & Company, through its Japan branch, entered
into an International Passenger Sales Agency Agreement,
whereby the former authorized the latter to sell its air
transportation tickets. Unable to remit the proceeds of the
ticket sales made by defendant on behalf of the plaintiff under
the said agreement, plaintiff on March 25, 1980 sued
defendant in Tokyo, Japan, for collection of the unremitted
proceeds of the ticket sales, with claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th
Civil Department, Tokyo District Court of Japan against
defendant at its office at the Taiheiyo Building, 3rd floor, 132,
Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture.
The attempt to serve the summons was unsuccessful
because the bailiff was advised by a person in the office that
Mr. Dinozo, the person believed to be authorized to receive
court processes was in Manila and would be back on April 24,
1980.
On April 24, 1980, bailiff returned to the defendant's office to
serve the summons. Mr. Dinozo refused to accept the same
claiming that he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge
of the Tokyo District Court decided to have the complaint and
the writs of summons served at the head office of the
defendant in Manila. On July 11, 1980, the Director of the
Tokyo District Court requested the Supreme Court of Japan
to serve the summons through diplomatic channels upon the
defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records).
Despite receipt of the same, defendant failed to appear at the
scheduled hearing. Thus, the Tokyo Court proceeded to hear
the plaintiff's complaint and on [January 29, 1981], rendered
judgment ordering the defendant to pay the plaintiff the sum
of 83,158,195 Yen and damages for delay at the rate of 6%
per annum from August 28, 1980 up to and until payment is
completed (pp. 12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff
Balingit copy of the judgment. Defendant not having appealed
the judgment, the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence,
on May 20, 1983, a suit for enforcement of the judgment was
filed by plaintiff before the Regional Trial Court of Manila
Branch 54.2
On July 16, 1983, defendant filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null
and void and unenforceable in this jurisdiction having been
rendered without due and proper notice to the defendant
and/or with collusion or fraud and/or upon a clear mistake of
law and fact (pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the
merits. After the plaintiff rested its case, defendant on April 21,
1989, filed a Motion for Judgment on a Demurrer to Evidence
based on two grounds:
(1) the foreign judgment sought to be enforced is null and void
for want of jurisdiction and (2) the said judgment is contrary to
Philippine law and public policy and rendered without due
process of law. Plaintiff filed its opposition after which the
court a quo rendered the now assailed decision dated June
21, 1989 granting the demurrer motion and dismissing the
complaint (Decision, pp. 376-378, Records). In granting the
demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court
sought in this action is null and void for want
of jurisdiction over the person of the
defendant considering that this is an action in
personam; the Japanese Court did not
acquire jurisdiction over the person of the
defendant because jurisprudence requires
that the defendant be served with summons
in Japan in order for the Japanese Court to
acquire jurisdiction over it, the process of the
Court in Japan sent to the Philippines which
is outside Japanese jurisdiction cannot
confer jurisdiction over the defendant in the
case before the Japanese Court of the case
at bar. Boudard versus Tait 67 Phil. 170. The
plaintiff contends that the Japanese Court
acquired jurisdiction because the defendant
is a resident of Japan, having four (4)
branches doing business therein and in fact
had a permit from the Japanese government
to conduct business in Japan (citing the
exhibits presented by the plaintiff); if this is so
then service of summons should have been
made upon the defendant in Japan in any of
these alleged four branches; as admitted by
the plaintiff the service of the summons
issued by the Japanese Court was made in
the Philippines thru a Philippine Sheriff. This
Court agrees that if the defendant in a foreign
court is a resident in the court of that foreign
court such court could acquire jurisdiction
over the person of the defendant but it must
be served upon the defendant in the territorial
jurisdiction of the foreign court. Such is not
the case here because the defendant was
served with summons in the Philippines and
not in Japan.
Unable to accept the said decision, plaintiff on July 11, 1989
moved for reconsideration of the decision, filing at the same
time a conditional Notice of Appeal, asking the court to treat
the said notice of appeal "as in effect after and upon issuance
of the court's denial of the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a
Reply dated August 28, 1989 was filed by the plaintiff.
 On October 16, 1989, the lower court disregarded the Motion
for Reconsideration and gave due course to the plaintiff's
Notice of Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It agreed with the
latter in its reliance upon Boudard vs.Tait 4 wherein it was held that "the
process of the court has no extraterritorial effect and no jurisdiction is acquired
over the person of the defendant by serving him beyond the boundaries of the
state." To support its position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case,
personal service of summons within the forum is required for
the court to acquire jurisdiction over the defendant
(Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer
jurisdiction on the court, personal or substituted service of
summons on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA 739).
But while plaintiff-appellant concedes that the collection suit
filed is an action in personam, it is its theory that a distinction
must be made between an action in personam against a
resident defendant and an action in personam against a non-
resident defendant. Jurisdiction is acquired over a non-
resident defendant only if he is served personally within the
jurisdiction of the court and over a resident defendant if by
personal, substituted or constructive service conformably to
statutory authorization. Plaintiff-appellant argues that since
the defendant-appellee maintains branches in Japan it is
considered a resident defendant. Corollarily, personal,
substituted or constructive service of summons when made in
compliance with the procedural rules is sufficient to give the
court jurisdiction to render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully
be served outside the territorial limits of the jurisdiction of the
court from which it issues (Carter vs. Carter; 41 S.E. 2d 532,
201) and this is regardless of the residence or citizenship of
the party thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150
Iowa 511, 35 LRC, NS, 292, Am. Case 1912 D680). There
must be actual service within the proper territorial limits on
defendant or someone authorized to accept service for him.
Thus, a defendant, whether a resident or not in the forum
where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant
and non-resident defendant were to be adopted, such
distinction applies only to natural persons and not in the
corporations. This finds support in the concept that "a
corporation has no home or residence in the sense in which
those terms are applied to natural persons" (Claude Neon
Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited
by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and
can be predicated on an artificial being only by more or less
imperfect analogy. Strictly speaking, therefore, a corporation
can have no local residence or habitation. It has been said
that a corporation is a mere ideal existence, subsisting only in
contemplation of law — an invisible being which can have, in
fact, no locality and can occupy no space, and therefore
cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing
Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. Hartfold F.
Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character
of a corporation is to be determined by the place of its origin
where its charter was granted and not by the location of its
business activities (Jennings v. Idaho Rail Light & P. Co., 26
Idaho 703, 146 p. 101), A corporation is a "resident" and an
inhabitant of the state in which it is incorporated and no other
(36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly
organized under the Philippine laws. Clearly, its residence is
the Philippines, the place of its incorporation, and not Japan.
While defendant-appellee maintains branches in Japan, this
will not make it a resident of Japan. A corporation does not
become a resident of another by engaging in business there
even though licensed by that state and in terms given all the
rights and privileges of a domestic corporation (Galveston H.
& S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct.
401).
On this premise, defendant appellee is a non-resident
corporation. As such, court processes must be served upon it
at a place within the state in which the action is brought and
 not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1
S. Ct. 354).5
It then concluded that the service of summons effected in Manila or beyond
the territorial boundaries of Japan was null and did not confer jurisdiction upon
the Tokyo District Court over the person of SHARP; hence, its decision was
void.
Unable to obtain a reconsideration of the decision, NORTHWEST elevated the
case to this Court contending that the respondent court erred in holding that
SHARP was not a resident of Japan and that summons on SHARP could only
be validly served within that country.
A foreign judgment is presumed to be valid and binding in the country
from which it comes, until the contrary is shown. It is also proper to
presume the regularity of the proceedings and the giving of due notice
therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in
personam of a tribunal of a foreign country having jurisdiction to pronounce the
same is presumptive evidence of a right as between the parties and their
successors-in-interest by a subsequent title. The judgment may, however,
be assailed by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact. Also, under Section
3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys
the presumption that it was acting in the lawful exercise of jurisdiction
and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity. 7Being the party challenging
the judgment rendered by the Japanese court, SHARP had the duty to
demonstrate the invalidity of such judgment. In an attempt to discharge
that burden, it contends that the extraterritorial service of summons
effected at its home office in the Philippines was not only ineffectual but
also void, and the Japanese Court did not, therefore acquire jurisdiction
over it.
It is settled that matters of remedy and procedure such as those relating to the
service of process upon a defendant are governed by the lex fori or the internal
law of the forum.8 In this case, it is the procedural law of Japan where the
judgment was rendered that determines the validity of the extraterritorial
service of process on SHARP. As to what this law is is a question of fact, not
of law. It may not be taken judicial notice of and must be pleaded and proved
like any other fact.9 Sections 24 and 25, Rule 132 of the Rules of Court provide
that it may be evidenced by an official publication or by a duly attested or
authenticated copy thereof. It was then incumbent upon SHARP to present
evidence as to what that Japanese procedural law is and to show that under
it, the assailed extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of summons and the
decision thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese
law, the presumption of identity or similarity or the so-called processual
presumption 10 may be invoked. Applying it, the Japanese law on the matter is
presumed to be similar with the Philippine law on service of summons on a
private foreign corporation doing business in the Philippines. Section 14, Rule
14 of the Rules of Court provides that if the defendant is a foreign corporation
doing business in the Philippines, service may be made: (1) on its resident
agent designated in accordance with law for that purpose, or, (2) if there is no
such resident agent, on the government official designated by law to that
effect; or (3) on any of its officers or agents within the Philippines.
If the foreign corporation has designated an agent to receive summons, the
designation is exclusive, and service of summons is without force and gives
the court no jurisdiction unless made upon him. 11
Where the corporation has no such agent, service shall be made on the
government official designated by law, to wit: (a) the Insurance Commissioner
in the case of a foreign insurance company; (b) the Superintendent of Banks,
in the case of a foreign banking corporation; and (c) the Securities and
Exchange Commission, in the case of other foreign corporations duly licensed
to do business in the Philippines. Whenever service of process is so made, the
government office or official served shall transmit by mail a copy of the
summons or other legal proccess to the corporation at its home or principal
office. The sending of such copy is a necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon the
Securities and Exchange Commission, the Superintendent of Banks, and the
Insurance Commissioner, as the case may be, presuppose a situation wherein
the foreign corporation doing business in the country no longer has any
branches or offices within the Philippines. Such contention is belied by the
pertinent provisions of the said laws. Thus, Section 128 of the Corporation
Code 13 and Section 190 of the Insurance Code 14 clearly contemplate two
situations: (1) if the corporation had left the Philippines or had ceased to
transact business therein, and (2) if the corporation has no designated agent.
Section 17 of the General Banking Act 15 does not even speak a corporation
which had ceased to transact business in the Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident agent
authorized to receive court processes in Japan. This silence could only mean,
or least create an impression, that it had none. Hence, service on the
designated government official or on any of SHARP's officers or agents in
Japan could be availed of. The respondent, however, insists that only service
of any of its officers or employees in its branches in Japan could be resorted
to. We do not agree. As found by the respondent court, two attempts at
service were made at SHARP's Yokohama branch. Both were
unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be
the person authorized to accept court process, was in Manila. On the
second, Mr. Dinozo was present, but to accept the summons because,
according to him, he was no longer an employee of SHARP. While it may
be true that service could have been made upon any of the officers or
agents of SHARP at its three other branches in Japan, the availability of
such a recourse would not preclude service upon the proper government
official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court which ordered
that summons for SHARP be served at its head office in the Philippine's after
the two attempts of service had failed. 16 The Tokyo District Court requested
the Supreme Court of Japan to cause the delivery of the summons and other
legal documents to the Philippines. Acting on that request, the Supreme Court
of Japan sent the summons together with the other legal documents to the
Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to the
Japanese Embassy in Manila . Thereafter, the court processes were delivered
to the Ministry (now Department) of Foreign Affairs of the Philippines, then to
the Executive Judge of the Court of First Instance (now Regional Trial Court)
of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the
same on SHARP at its principal office in Manila. This service is equivalent to
service on the proper government official under Section 14, Rule 14 of the
Rules of Court, in relation to Section 128 of the Corporation Code. Hence,
SHARP's contention that such manner of service is not valid under Philippine
laws holds no water.17
In deciding against the petitioner, the respondent court sustained the trial
court's reliance on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in personam over
nonresidents, so as to sustain a money judgment, must be
based upon personal service within the state which renders
the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial effect, and no
jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state. Nor has a
judgment of a court of a foreign country against a resident of
this country having no property in such foreign country based
on process served here, any effect here against either the
defendant personally or his property situated here.
Process issuing from the courts of one state or country cannot
run into another, and although a nonresident defendant may
have been personally served with such process in the state or
country of his domicile, it will not give such jurisdiction as to
authorize a personal judgment against him.
It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial
Corp. vs. Soriano, 20 as well as the principle laid down by the Iowa Supreme
Court in the 1911 case of Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved the
enforcement of a judgment of the civil division of the Court of First Instance of
Hanoi, French Indo-China. The trial court dismissed the case because the
Hanoi court never acquired jurisdiction over the person of the defendant
considering that "[t]he, evidence adduced at the trial conclusively proves that
neither the appellee [the defendant] nor his agent or employees were ever in
Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome
Boudard had never, at any time, been his employee." In Magdalena Estate,
what was declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in personam was
the service of summons through publication against non-appearing resident
defendants. It was claimed that the latter concealed themselves to avoid
personal service of summons upon them. In Dial, the defendants were foreign
corporations which were not, domiciled and licensed to engage in business in
the Philippines and which did not have officers or agents, places of business,
or properties here. On the other hand, in the instant case, SHARP was doing
business in Japan and was maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of the past. In that
case, a divided Supreme Court of Iowa declared that the principle that there
can be no jurisdiction in a court of a territory to render a personal judgment
against anyone upon service made outside its limits was applicable alike to
cases of residents and non-residents. The principle was put at rest by the
United States Supreme Court when it ruled in the 1940 case of Milliken
vs. Meyer 22 that domicile in the state is alone sufficient to bring an absent
defendant within the reach of the state's jurisdiction for purposes of a personal
judgment by means of appropriate substituted service or personal service
without the state. This principle is embodied in section 18, Rule 14 of the Rules
of Court which allows service of summons on residents temporarily out of the
Philippines to be made out of the country. The rationale for this rule was
explained in Milliken as follows:
 [T]he authority of a state over one of its citizens is not
terminated by the mere fact of his absence from the state. The
state which accords him privileges and affords protection to
him and his property by virtue of his domicile may also exact
reciprocal duties. "Enjoyment of the privileges of residence
within the state, and the attendant right to invoke the
protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that
citizenship arise out of the relationship to the state which
domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights
and privileges incident to domicile, are not dependent on
continuous presence in the state. One such incident of
domicile is amenability to suit within the state even during
sojourns without the state, where the state has provided and
employed a reasonable method for apprising such an absent
party of the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a corporation may
have is single in its essence and a corporation can have only one domicile
which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain purposes, be
regarded a resident in another state in which it has offices and transacts
business. This is the rule in our jurisdiction and apropos thereto, it may be
necessery to quote what we stated in State Investment House,
Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may
be considered "residents of the Philippine Islands" as that
term is used in Section 20 of the Insolvency Law . . . or
residents of the state under the laws of which they were
respectively incorporated. The answer cannot be found in the
Insolvency Law itself, which contains no definition of the
term, resident, or any clear indication of its meaning. There
are however other statutes, albeit of subsequent enactment
and effectivity, from which enlightening notions of the term
may be derived.
The National Internal Revenue Code declares that the term
"'resident foreign corporation' applies to a foreign corporation
engaged in trade or business within the Philippines," as
distinguished from a "'non-resident foreign corporation' . . .
(which is one) not engaged in trade or bussiness within the
Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034,
states "that branches, subsidiaries, affiliation, extension
offices or any other units of corporation or juridical person
organized under the laws of any foreign country operating in
the Philippines shall be considered residents of the
Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places
"branches and agencies in the Philippines of foreign banks . .
. (which are) called Philippine branches," in the same category
as "commercial banks, savings associations, mortgage
banks, development banks, rural banks, stock savings and
loan associations" (which have been formed and organized
under Philippine laws), making no distinction between the
former and the latter in so far as the terms "banking
institutions" and "bank" are used in the Act [Sec. 2], declaring
on the contrary that in "all matters not specifically covered by
special provisions applicable only to foreign banks, or their
branches and agencies in the Philippines, said foreign banks
or their branches and agencies lawfully doing business in the
Philippines "shall be bound by all laws, rules, and regulations
applicable to domestic banking corporations of the same
class, except such laws, rules and regulations as provided for
the creation, formation, organization, or dissolution of
corporations or as fix the relation, liabilities, responsibilities, or
duties of members, stockholders or officers of corporation.
[Sec. 18].
This court itself has already had occasion to hold [Claude
Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57
Phil. 607] that a foreign corporation licitly doing business in
the Philippines, which is a defendant in a civil suit, may not be
considered a non-resident within the scope of the legal
provision authorizing attachment against a defendant not
residing in the Philippine Islands; [Sec. 424, in relation to Sec.
412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f),
Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57, Rules of
1964] in other words, a preliminary attachment may not be
applied for and granted solely on the asserted fact that the
defendant is a foreign corporation authorized to do business
in the Philippines — and is consequently and necessarily, "a
party who resides out of the Philippines." Parenthetically, if it
may not be considered as a party not residing in the
Philippines, or as a party who resides out of the country, then,
logically, it must be considered a party who does reside in the
 Philippines, who is a resident of the country. Be this as it may,
this Court pointed out that:
. . . Our laws and jurisprudence indicate a
purpose to assimilate foreign corporations,
duly licensed to do business here, to the
status of domestic corporations. (Cf. Section
73, Act No. 1459, and Marshall Wells Co. vs.
Henry W. Elser & Co., 46 Phil. 70, 76; Yu
Cong Eng vs. Trinidad, 47 Phil. 385, 411) We
think it would be entirely out of line with this
policy should we make a discrimination
against a foreign corporation, like the
petitioner, and subject its property to the
harsh writ of seizure by attachment when it
has complied not only with every requirement
of law made specially of foreign corporations,
but in addition with every requirement of law
made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized
to do business in the Philippines "to the status
of domestic corporations, subsumes their being found and
operating as corporations, hence, residing, in the country.
The same principle is recognized in American law: that the
residence of a corporation, if it can be said to have a
residence, is necessarily where it exercises corporate
functions . . .;" that it is considered as dwelling "in the place
where its business is done . . .," as being "located where its
franchises are exercised . . .," and as being "present where it
is engaged in the prosecution of the corporate enterprise;" that
a "foreign corporation licensed to do business in a state is a
resident of any country where it maintains an office or agent
for transaction of its usual and customary business for venue
purposes;" and that the "necessary element in its signification
is locality of existence." [Words and Phrases, Permanent Ed.,
vol. 37, pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan through its four
duly registered branches at the time the collection suit against it was filed, then
in the light of the processual presumption, SHARP may be deemed a
resident of Japan, and, as such, was amenable to the jurisdiction of the
courts therein and may be deemed to have assented to the said courts'
lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the Japanese
Court was valid not only under the processual presumption but also because
of the presumption of regularity of performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses, and
exemplary damages to be without merit. We find no evidence that would justify
an award for attorney's fees and litigation expenses under Article 2208 of the
Civil Code of the Philippines. Nor is an award for exemplary damages
warranted. Under Article 2234 of the Civil Code, before the court may consider
the question of whether or not exemplary damages should be awarded, the
plaintiff must show that he is entitled to moral, temperate, or compensatory
damaged. There being no such proof presented by NORTHWEST, no
exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the challenged
decision is AFFIRMED insofar as it denied NORTHWEST's claims for
attorneys fees, litigation expenses, and exemplary damages but REVERSED
insofar as in sustained the trial court's dismissal of NORTHWEST's complaint
in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila,
and another in its stead is hereby rendered ORDERING private respondent
C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts
adjudged in the foreign judgment subject of said case, with interest thereon at
the legal rate from the filing of the complaint therein until the said foreign
judgment is fully satisfied.
Costs against the private respondent.
SO ORDERED.
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, Petitioner, vs. COURT OF APPEALS,
MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his
capacity as Presiding Judge of Branch 89, Regional Trial Court
of Quezon City, Respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court
seeks to annul and set aside the Resolution 1 dated September 27,
1995 and the Decision 2 dated April 10, 1996 of the Court of
Appeals 3in CA-G.R. SP No. 36533, 4 and the Orders 5 dated August
29, 1994 6 and February 2, 1995 7 that were issued by the trial court
in Civil Case No. Q-93-18394. 8
The pertinent antecedent facts which gave rise to the instant
petition, as stated in the questioned Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. . . .
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer Al-Gazzawi
and Allah Al-Gazzawi, both Saudi nationals. Because it was almost
morning when they returned to their hotels, they agreed to have
breakfast together at the room of Thamer. When they were in te
(sic) room, Allah left on some pretext. Shortly after he did, Thamer
attempted to rape plaintiff. Fortunately, a roomboy and several
security personnel heard her cries for help and rescued her. Later,
the Indonesian police came and arrested Thamer and Allah Al-
Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of
Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and
base manager Baharini negotiated with the police for the immediate
release of the detained crew members but did not succeed because
plaintiff refused to cooperate. She was afraid that she might be
tricked into something she did not want because of her inability to
understand the local dialect. She also declined to sign a blank paper
and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta
flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer
and Allah after two weeks of detention. Eventually, they were again
put in service by defendant SAUDI (sic). In September 1990,
defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27, 1993.
Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report
to Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from
SAUDIA's Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi
court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told
her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the
same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male
crew, in contravention of Islamic tradition. 10
Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help
her while her case is on appeal. Meanwhile, to pay for her upkeep,
she worked on the domestic flight of SAUDIA, while Thamer and
Allah continued to serve in the international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah
dismissed the case against her and allowed her to leave Saudi
Arabia. Shortly before her return to Manila, 12 she was terminated
from the service by SAUDIA, without her being informed of the
cause.
On November 23, 1993, Morada filed a Complaint 13 for damages
against SAUDIA, and Khaled Al-Balawi ("Al-Balawi"), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss 14 which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that
defendant Al-Balawi is not a real party in interest; (3) that the claim
or demand set forth in the Complaint has been waived, abandoned
or otherwise extinguished; and (4) that the trial court has no
jurisdiction to try the case.
On February 10, 1994, Morada filed her Opposition (To Motion to
Dismiss) 15. Saudia filed a reply 16thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein
Al-Balawi was dropped as party defendant. On August 11, 1994,
Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the
Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge 20
denying the Motion to
Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration 21 of the Order dated August 29, 1994. It alleged
that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable
is the law of the Kingdom of Saudi Arabia. On October 14, 1994,
Morada filed her Opposition 22
(To Defendant's Motion for
Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA
alleged that since its Motion for Reconsideration raised lack of
jurisdiction as its cause of action, the Omnibus Motion Rule does not
apply, even if that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not have any
substantial interest in the prosecution of the instant case, and hence,
without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24 dated
February 2, 1995, denying SAUDIA's Motion for Reconsideration. The
pertinent portion of the assailed Order reads as follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian
Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14,
1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiffs Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorney's
fees, upon the basis of the applicable Philippine law, Article 21 of the
New Civil Code of the Philippines, is, clearly, within the jurisdiction
of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration
of the defendant, is DENIED.
SO ORDERED. 25
Consequently, on February 20, 1995, SAUDIA filed its Petition
for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order 26 with
the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with
Temporary Restraining Order 27 dated February 23, 1995,
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIA's Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18,
1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny
Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et. Al., v. Court of Appeals,
et. Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the
instant Petition 29 for Review with Prayer for Temporary Restraining
Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent
Court of Appeals rendered the Decision 30 dated April 10, 1996, now
also assailed. It ruled that the Philippines is an appropriate forum
considering that the Amended Complaint's basis for recovery of
damages is Article 21 of the Civil Code, and thus, clearly within the
jurisdiction of respondent Court. It further held that certiorari is not
the proper remedy in a denial of a Motion to Dismiss, inasmuch as
the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review
with Prayer for Temporary Restraining Order 31 dated April 30, 1996,
given due course by this Court. After both parties submitted their
Memoranda, 32 the instant case is now deemed submitted for
decision.
Petitioner SAUDIA raised the following issues:
I
The trial court has no jurisdiction to hear and try Civil Case No. Q-
93-18394 based on Article 21 of the New Civil Code since the proper
law applicable is the law of the Kingdom of Saudi Arabia inasmuch
as this case involves what is known in private international law as a
"conflicts problem". Otherwise, the Republic of the Philippines will sit
in judgment of the acts done by another sovereign state which is
abhorred.
II
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of
leave of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioner's April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice Thereof.
Further, the Revised Rules of Court should be construed with
liberality pursuant to Section 2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996 decision in
CA-G.R. SP NO. 36533 entitled "Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al." and filed its April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining Order
on May 7, 1996 at 10:29 a.m. or within the 15-day reglementary
period as provided for under Section 1, Rule 45 of the Revised Rules
of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not
yet become final and executory and this Honorable Court can take
cognizance of this case. 33
From the foregoing factual and procedural antecedents, the following
issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING
THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394
ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES".
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT
IN THIS CASE PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must
be settled at the outset. It maintains that private respondent's claim
for alleged abuse of rights occurred in the Kingdom of Saudi Arabia.
It alleges that the existence of a foreign element qualifies the instant
case for the application of the law of the Kingdom of Saudi Arabia,
by virtue of the lex loci delicti commissi rule. 34
On the other hand, private respondent contends that since her
Amended Complaint is based on Articles 19 35 and 21 36 of the Civil
Code, then the instant case is properly a matter of domestic law. 37
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint 38
dated
June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign
airlines corporation doing business in the Philippines. It may be
served with summons and other court processes at Travel Wide
Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114
Valero St., Salcedo Village, Makati, Metro Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to deport
Thamer and Allah after two weeks of detention. Eventually, they
were again put in service by defendant SAUDIA. In September 1990,
defendant SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors reauested her to see
MR. Ali Meniewy, Chief Legal Officer of SAUDIA in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sigh a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from
SAUDIA's Manila manger, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June
28, 1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further
orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to
the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male crew,
in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff
sought the help of the Philippines Embassy in Jeddah. The latter
helped her pursue an appeal from the decision of the court. To pay
for her upkeep, she worked on the domestic flights of defendant
SAUDIA while, ironically, Thamer and Allah freely served the
international flights. 39
Where the factual antecedents satisfactorily establish the existence
of a foreign element, we agree with petitioner that the problem
herein could present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by
the diverse laws of two or more states is said to contain a "foreign
element". The presence of a foreign element is inevitable since social
and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception. 40
The forms in which this foreign element may appear are
many. 41 The foreign element may simply consist in the fact that one
of the parties to a contract is an alien or has a foreign domicile, or
that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may
assume a complex form. 42
In the instant case, the foreign element consisted in the fact that
private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight
stewardess, events did transpire during her many occasions of travel
across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts"
situation to arise.
We thus find private respondent's assertion that the case is purely
domestic, imprecise. A conflictsproblem presents itself here, and the
question of jurisdiction 43 confronts the court a quo.
After a careful study of the private respondent's Amended
Complaint, 44 and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil
Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45
this
Court held that:
The aforecited provisions on human relations were intended to
expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private
respondent's assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal
forum.
Based on the allegations 46 in the Amended Complaint, read in the
light of the Rules of Court on jurisdiction 47 we find that the Regional
Trial Court (RTC) of Quezon City possesses jurisdiction over the
subject matter of the suit. 48 Its authority to try and hear the case
is provided for under Section 1 of Republic Act No. 7691, to wit:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as
the "Judiciary Reorganization Act of 1980", is hereby amended to
read as follows:
Sec. 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall
exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and
cots or the value of the property in controversy exceeds One hundred
thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the above-mentioned items
exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis
ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court -
the venue, Quezon City, is appropriate:
Sec. 2 Venue in Courts of First Instance. - [Now Regional Trial Court]
(a) xxx xxx xxx
(b) Personal actions. - All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be
found, or where the plaintiff or any of the plaintiff resides, at the
election of the plaintiff.
Pragmatic considerations, including the convenience of the parties,
also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the litigant.
Enforceability of a judgment if one is obtained is quite obvious.
Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum,
"vex", "harass", or "oppress" the defendant, e.g. by inflicting upon
him needless expense or disturbance. But unless the balance is
strongly in favor of the defendant, the plaintiffs choice of forum
should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it
best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains substantial
connections. That would have caused a fundamental unfairness to
her.
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent)
should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons
of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary
submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several
motions 50 praying for the dismissal of Morada's Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs under
the premises. Undeniably, petitioner SAUDIA has effectively
submitted to the trial court's jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.: 51
We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower court's jurisdiction over defendant's person,
prayed for dismissal of the complaint on the ground that plaintiff's
cause of action has prescribed. By interposing such second ground
in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative
defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea
of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction
upon the latter's person, who, being the proponent of the affirmative
defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the
court.
Similarly, the case of De Midgely vs. Ferandos, held that;
When the appearance is by motion for the purpose of
objecting to the jurisdiction of the court over the person, it
must be for the sole and separate purpose of objecting to the
jurisdiction of the court. If his motion is for any other purpose
than to object to the jurisdiction of the court over his person,
he thereby submits himself to the jurisdiction of the court. A
special appearance by motion made for the purpose of objecting to
the jurisdiction of the court over the person will be held to be a
general appearance, if the party in said motion should, for example,
ask for a dismissal of the action upon the further ground that the
court had no jurisdiction over the subject matter. 52
Clearly, petitioner had submitted to the jurisdiction of the
Regional Trial Court of Quezon City. Thus, we find that the
trial court has jurisdiction over the case and that its exercise
thereof, justified.
As to the choice of applicable law, we note that choice-of-law
problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant
facts occurred in two or more states; and (2) to what extent should
the chosen legal system regulate the situation. 53
Several theories have been propounded in order to identify the legal
system that should ultimately control. Although ideally, all choice-
of-law theories should intrinsically advance both notions of justice
and predictability, they do not always do so. The forum is then faced
with the problem of deciding which of these two important values
should be stressed. 54
Before a choice can be made, it is necessary for us to determine
under what category a certain set of facts or rules fall. This process
is known as "characterization", or the "doctrine of qualification".
It is the "process of deciding whether or not the facts relate
to the kind of question specified in a conflicts rule." 55 The
purpose of "characterization" is to enable the forum to select
the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual
situation, event, or operative fact. 57 An essential element of conflict
rules is the indication of a "test" or "connecting factor" or "point of
contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting
factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing. 58
Note that one or more circumstances may be present to serve as the
possible test for the determination of the applicable
law. 59 These "test factors" or "points of contact" or
"connecting factors" could be any of the following:
(1) The nationality of a person, his domicile, his residence,
his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a
corporation;
(3) the situs of a thing, that is, the place where a thing is, or
is deemed to be situated. In particular, the lex situs is
decisive when real rights are involved;
(4) the place where an act has been done, the locus actus,
such as the place where a contract has been made, a
marriage celebrated, a will signed or a tort committed. The
lex loci actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect,
e.g., the place of performance of contractual duties, or the
place where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that
should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings
are instituted or done. The lex fori - the law of the forum - is
particularly important because, as we have seen earlier,
matters of "procedure" not going to the substance of the
claim involved are governed by it; and because the lex
fori applies whenever the content of the otherwise applicable
foreign law is excluded from application in a given case for
the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of its master
or owner as such. It also covers contractual relationships
particularly contracts of affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including allegations
in the Amended Complaint deemed admitted for purposes of the
motion to dismiss, we are convinced that there is reasonable basis
for private respondent's assertion that although she was already
working in Manila, petitioner brought her to Jeddah on the pretense
that she would merely testify in an investigation of the charges she
made against the two SAUDIA crew members for the attack on her
person while they were in Jakarta. As it turned out, she was the one
made to face trial for very serious charges, including adultery and
violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the
"handing over" or "turning over" of the person of private respondent
to Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioner's purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering
of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the
guise of petitioner's authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found
by the Prince of Makkah, the alleged conviction and imprisonment of
private respondent was wrongful. But these capped the injury or
harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or
redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one
involving torts, the "connecting factor" or "point of contact"
could be the place or places where the tortious conduct or lex
loci actus occurred. And applying the torts principle in a
conflicts case, we find that the Philippines could be said as a
situs of the tort (the place where the alleged tortious conduct took
place). This is because it is in the Philippines where petitioner
allegedly deceived private respondent, a Filipina residing and
working here. According to her, she had honestly believed
that petitioner would, in the exercise of its rights and in the
performance of its duties, "act with justice, give her due and
observe honesty and good faith." Instead, petitioner failed to
protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our
view what is important here is the place where the over-all harm or
the totality of the alleged injury to the person, reputation, social
standing and human rights of complainant, had lodged, according to
the plaintiff below (herein private respondent). All told, it is not
without basis to identify the Philippines as the situs of the alleged
tort.
Moreover, with the widespread criticism of the traditional rule of lex
loci delicti commissi, modern theories and rules on tort
liability 61 have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories
on tort liability, we find here an occasion to apply the "State of the
most significant relationship" rule, which in our view should be
appropriate to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken
into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place
where the injury occurred; (b) the place where the conduct
causing the injury occurred; (c) the domicile, residence,
nationality, place of incorporation and place of business of
the parties, and (d) the place where the relationship, if any,
between the parties is centered. 62
As already discussed, there is basis for the claim that over-all injury
occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the
business of international air carriage. Thus, the "relationship"
between the parties was centered here, although it should be
stressed that this suit is not based on mere labor law violations. From
the record, the claim that the Philippines has the most significant
contact with the matter in this dispute, 63 raised by private
respondent as plaintiff below against defendant (herein petitioner),
in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the
tort complained of and the place "having the most interest in the
problem", we find, by way of recapitulation, that the Philippine law
on tort liability should have paramount application to and control in
the resolution of the legal issues arising out of this case. Further, we
hold that the respondent Regional Trial Court has jurisdiction over
the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philippine law.
Moreover, we find untenable petitioner's insistence that "[s]ince
private respondent instituted this suit, she has the burden of
pleading and proving the applicable Saudi law on the matter." 64 As
aptly said by private respondent, she has "no obligation to plead and
prove the law of the Kingdom of Saudi Arabia since her cause of
action is based on Articles 19 and 21" of the Civil Code of the
Philippines. In her Amended Complaint and subsequent pleadings,
she never alleged that Saudi law should govern this case. 65 And as
correctly held by the respondent appellate court, "considering that it
was the petitioner who was invoking the applicability of the law of
Saudi Arabia, then the burden was on it [petitioner] to plead and to
establish what the law of Saudi Arabia is". 66
Lastly, no error could be imputed to the respondent appellate court
in upholding the trial court's denial of defendant's (herein
petitioner's) motion to dismiss the case. Not only was jurisdiction in
order and venue properly laid, but appeal after trial was obviously
available, and expeditious trial itself indicated by the nature of the
case at hand. Indubitably, the Philippines is the state
intimately concerned with the ultimate outcome of the case
below, not just for the benefit of all the litigants, but also for
the vindication of the country's system of law and justice in
a transnational setting. With these guidelines in mind, the trial
court must proceed to try and adjudge the case in the light of
relevant Philippine law, with due consideration of the foreign element BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA,
or elements involved. Nothing said herein, of course, should be ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO
construed as prejudging the results of the case in any manner BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S.
whatsoever. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS,
BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO,
IRENEO CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR
WHEREFORE, the instant petition for certiorari is hereby
CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO, TEODULO
DISMISSED. Civil Case No. Q-93-18394 entitled "Milagros P. Morada CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ,
vs. Saudi Arabia Airlines" is hereby REMANDED to Regional Trial FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA,
Court of Quezon City, Branch 89 for further proceedings. MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ,
GILBERT EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR.,
SO ORDERED. EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO
ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU, NESTOR M.
G.R. No. L-104776 December 5, 1994 ESTEVA, BENJAMIN ESTRADA, VALERIO EVANGELISTA, OLIGARIO
FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA,
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO
EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U.
by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDO, petitioners, LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO,
vs. JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO,
ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION, FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY,
BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B.
BUILDERS CORPORATION, respondents. MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO,
FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ,
ERNIE PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO
G.R. Nos. 104911-14 December 5, 1994 PINPIN, JUANITO PAREA, ROMEO I. PATAG, FRANCISCO PINPIN,
LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS,
BIENVENIDO M. CADALIN, ET AL., petitioners, EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR.,
vs. TOMAS B. RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT REYES, VIRGILIO G. RICAZA, RODELIO RIETA, JR., BENITO RIVERA,
INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA,
CORPORATION, respondents. QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO,
PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO,
G.R. Nos. 105029-32 December 5, 1994 FELIZARDO DE LOS SANTOS, JR., GABRIEL SANTOS, JUANITO
SANTOS, PAQUITO SOLANTE, CONRADO A. SOLIS, JR., RODOLFO
ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO
INTERNATIONAL, INC., petitioners, TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES,
vs. MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A. URSOLINO,
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA,
CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO
PATAG, RIZALINO REYES, IGNACIO DE VERA, SOLOMON B. REYES, VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS,
JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEO ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA,
ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO
AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO
ANGLO, VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ABANES, EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO,
ALFREDO BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO,
RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO
S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO
ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA,
FLORENTINO R. AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO,
DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO ALBERTO, JR.,
CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J.
ALCANTARA, BENCIO ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN
ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO,
ALBERTO ALMENAR, ARNALDO ALONZO, AMADO ALORIA, CAMILO
ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS
AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY
ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T.
ANTONIO, ANTONIO APILADO, ARTURO P. APILADO, FRANCISCO
APOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR
AQUINO, ROSENDO M. AQUINO, ROBERTO ARANGORIN, BENJAMIN O.
ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER
ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO,
RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES,
WILFREDO P. ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION,
ARTEMIO M. ASUNCION, EDGARDO ASUNCION, REXY M. ASUNCION,
VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR.,
VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA,
FELIMON BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE
BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O.
BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO BATITIS,
VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO
BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B.
BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R.
BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR,
ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ,
PERFECTO BENSAN, IRENEO BERGONIO, ISABELO BERMUDEZ,
ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN BERSAMIN,
ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR.,
FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO
BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO, AUGUSTO
BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA,
WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G.
BRIONES, AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES
BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO
BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR.,
HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO
CABANIGAN, MOISES CABATAY, HERMANELI CABRERA, PEDRO
CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V.
CALDEJON, OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R.
CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO, ROBERTO
CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO
CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO
CARREON, MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO,
CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO CASTILLO,
JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P. CASTILLO,
SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO,
RAMO CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA
D. CEFERINO, RODOLFO B. CELIS, HERMINIGILDO CEREZO,
VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA,
VIVENCIO B. CIABAL, RODRIGO CLARETE, AUGUSTO COLOMA,
TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO
CORALES, RENATO C. CORCUERA, APOLINAR CORONADO,
ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ,
JESUS M. CORRALES, CESAR CORTEMPRATO, FRANCISCO O.
CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO,
ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ,
AMELIANO DELA CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA
CRUZ, ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ,
DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN DAGONDON,
RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO,
JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID,
VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO,
CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE
GUZMAN, JOSE DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE
LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO
DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO
F. DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S.
DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO
DIONISIO, PHILIPP G. DISMAYA, BENJAMIN DOCTOLERO, ALBERTO
STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C.
DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E.
EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO,
REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS
EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA,
ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO ESPIRITU,
EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU,
JULIAN ESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN,
MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE
ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P.
FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M.
FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES, EDGARDO C.
FLORES, BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO,
ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO
GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N.
GALOSO, GABRIEL GAMBOA, BERNARDO GANDAMON, JUAN
GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA, EUGENIO
GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO
G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO
S. GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO G.
GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO
GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V.
GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO
GUPIT, DENNIS J. GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE
GUZMAN, JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO
HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO, ROSTITO
HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L.
IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A.
INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA,
CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSO IGNACIO,
FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO
JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS,
CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE
W. JOCSON, FELINO M. JOCSON, PEDRO N. JOCSON, VALENTINO S.
JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE,
RICARDO SAN JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM,
SR., LAURO J. LABAY, EMMANUEL C. LABELLA, EDGARDO B.
LACERONA, JOSE B. LACSON, MARIO J. LADINES, RUFINO LAGAC,
RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO LATANAN,
VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL,
ALFREDO LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO,
ARTURO S. LEGASPI, BENITO DE LEMOS, JR., PEDRO G. DE LEON,
MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S. LISING,
RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M.
LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ,
GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ,
BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA,
DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR.,
LEONIDEZ C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT,
ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O.
LUNA, NOLI MACALADLAD, ALFREDO MACALINO, RICARDO
MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG,
RODOLFO V. MACARAIG, BENJAMIN MACATANGAY, HERMOGENES
MACATANGAY, RODEL MACATANGAY, ROMULO MACATANGAY,
OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G.
MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C.
MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY, RICARDO
C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO,
MACARIO S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY,
GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS,
RODOLFO MANA, BERNARDO A. MANALILI, MANUEL MANALILI,
ANGELO MANALO, AGUILES L. MANALO, LEOPOLDO MANGAHAS,
BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON,
ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA,
RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN,
WENCESLAO MARASIGAN, LEONARDO MARCELO, HENRY F.
MARIANO, JOEL MARIDABLE, SANTOS E. MARINO, NARCISO A.
MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO
MATABERDE, RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO
MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE,
REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR.,
CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO,
ERNANI DELA MERCED, RICARDO MERCENA, NEMESIO METRELLO,
RODEL MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO
D. MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO, GENEROSO
MONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA,
ROLANDO M. MORALES, FEDERICO M. MORENO, VICTORINO A.
MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO
MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A.
NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO
D. NAVARRO, FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE
NEGRITE, ALFREDO NEPUMUCENO, HERBERT G. NG, FLORENCIO
NICOLAS, ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D. OBA,
DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO,
ANTONIO B. OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA,
ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN
V. ORALLO, ROMEO S. ORIGINES, DANILO R. ORTANEZ, WILFREDO
OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO, ALFONSO
L. PADILLA, DANILO PAGSANJAN, NUMERIANO PAGSISIHAN,
RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA,
QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,
BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA,
EDILBERTO PASIMIO, JR., JOSE V. PASION, ANGELITO M. PENA,
DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M. PERALTA,
ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ,
ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G.
PERINO, FLORENTINO DEL PILAR, DELMAR F. PINEDA, SALVADOR
PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO POBLETE,
DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO
PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O.
PULIDO, ALEJANDRO PUNIO, FEDERICO QUIMAN, ALFREDO L.
QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DE
RAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A.
RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V.
RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS,
WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F.
RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO,
ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME
RELLOSA, EUGENIO A. REMOQUILLO, GERARDO RENTOZA,
REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES,
BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C.
REYES, ROMULO M. REYES, SERGIO REYES, ERNESTO F. RICO,
FERNANDO M. RICO, EMMANUEL RIETA, RICARDO RIETA, LEO B.
ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA,
EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO
RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS
RONQUILLO, ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO
P. RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES, RAMON
ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO,
TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO, CARLITO
SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V.
SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO
SANCHEZ, APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO
SANTIAGO, EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D.
SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR P.
SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG,
RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA,
ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO,
JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO SOLIS, III,
EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L.
SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON
SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P.
TALUSIK, FERMIN TARUC, JR., LEVY S. TEMPLO, RODOLFO S.
TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M.
TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES, LEONARDO DE
TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO
UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO
VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C.
VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D.
VERA, BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R.
VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO
P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN
VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA,
ALEX VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA,
LEONARDO M. VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI
VILLAR, JOSE V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL
VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO
YABUT, VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for
BRII/AIBC.
Florante M. De Castro for private respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v.
Philippine Overseas Employment Administration's Administrator, et. al.," was
filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the
National Labor Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2)
to render a new decision: (i) declaring private respondents as
in default; (ii) declaring the said labor cases as a class suit;
(iii) ordering Asia International Builders Corporation (AIBC)
and Brown and Root International Inc. (BRII) to pay the claims
of the 1,767 claimants in said labor cases; (iv) declaring Atty.
Florante M. de Castro guilty of forum-shopping; and (v)
dismissing POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al.,
v. Hon. National Labor Relations Commission, et. al.," was filed under Rule 65
of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of
NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-799 and
L-86-05-460 insofar as it: (i) applied the three-year
prescriptive period under the Labor Code of the Philippines
instead of the ten-year prescriptive period under the Civil
Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of
petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders
Corporation, et. al., v. National Labor Relations Commission, et. al." was filed
under Rule 65 of the Revised Rules of Court:
 (1) to reverse the Resolution dated September 2, 1991 of
NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants;
and
(2) to reverse the Resolution dated March 21, 1992 of NLRC
insofar as it denied the motions for reconsideration of AIBC
and BRII (Rollo, pp. 2-59; 61-230).
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 Arbiter Fatima J. Franco to conduct
hearings and to receive evidence on the claims dismissed by the POEA for
lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division
while G.R. Nos. 104911-14 were raffled to the Second Division. In the
Resolution dated July 26, 1993, the Second Division referred G.R. Nos.
104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted the
motion filed in G.R. Nos. 104911-14 for the consolidation of said cases with
G.R. Nos. 104776 and 105029-32, which were assigned to the First Division
(G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp.
369-377, 426-432). In the Resolution dated October 27, 1993, the First
Division granted the motion to consolidate G.R. Nos. 104911-14 with G.R. No.
104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p.
1562).
I deficiencies in the complaint pointed out in the order.
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B.
Evangelista, in their own behalf and on behalf of 728 other overseas contract
workers (OCWs) instituted a class suit by filing an "Amended Complaint" with
the Philippine Overseas Employment Administration (POEA) for money claims
arising from their recruitment by AIBC and employment by BRII (POEA
Case No. L-84-06-555). The claimants were represented by Atty. Gerardo del
Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is
engaged in construction; while AIBC is a domestic corporation licensed as a
service contractor to recruit, mobilize and deploy Filipino workers for overseas
employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired
portion of the employment contracts, which was terminated prematurely, and
secondarily, the payment of the interest of the earnings of the Travel and
Reserved Fund, interest on all the unpaid benefits; area wage and salary
differential pay; fringe benefits; refund of SSS and premium not remitted to the
SSS; refund of withholding tax not remitted to the BIR; penalties for committing
prohibited practices; as well as the suspension of the license of AIBC and the
accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint
and was given, together with BRII, up to July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered
the claimants to file a bill of particulars within ten days from receipt of the order
and the movants to file their answers within ten days from receipt of the bill of
particulars. The POEA Administrator also scheduled a pre-trial conference on
July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and
Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of the
Records", the "Complaint" and the "Compliance and Manifestation." On July
25, 1984, the claimants filed their "Rejoinder and Comments," averring, among
other matters, the failure of AIBC and BRII to file their answers and to attend
the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and
BRII had waived their right to present evidence and had defaulted by failing to
file their answers and to attend the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out
of the Records" filed by AIBC but required the claimants to correct the
On October 10, 1984, claimants asked for time within which to comply with the
Order of October 2, 1984 and filed an "Urgent Manifestation," praying that the
POEA Administrator direct the parties to submit simultaneously their position
papers, after which the case should be deemed submitted for decision. On the
same day, Atty. Florante de Castro filed another complaint for the same money
claims and benefits in behalf of several claimants, some of whom were also
claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated
October 2, 1984 and an "Urgent Manifestation," praying that the POEA direct
the parties to submit simultaneously their position papers after which the case
would be deemed submitted for decision. On the same day, AIBC asked for
time to file its comment on the "Compliance" and "Urgent Manifestation" of
claimants. On November 6, 1984, it filed a second motion for extension of time
to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion
for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for
extension of time and asked that AIBC and BRII be declared in default for
failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among
other reliefs, that claimants should be ordered to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing
AIBC and BRII to file their answers within ten days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal
of the said order of the POEA Administrator. Claimants opposed the appeal,
claiming that it was dilatory and praying that AIBC and BRII be declared in
default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or
Position Paper" dated March 24, 1985, adding new demands: namely, the
payment of overtime pay, extra night work pay, annual leave differential pay,
leave indemnity pay, retirement and savings benefits and their share of
forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA
Administrator directed AIBC to file its answer to the amended complaint (G.R.
No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment."
On the same day, the POEA issued an order directing AIBC and BRII to file
their answers to the "Amended Complaint," otherwise, they would be deemed
to have waived their right to present evidence and the case would be resolved
on the basis of complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class
Suit and Motion for Bill of Particulars Re: Amended Complaint dated March 24,
1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to
AIBC and BRII to file their answers in POEA Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together
with a petition for the issuance of a writ of injunction. On September 19, 1985,
NLRC enjoined the POEA Administrator from hearing the labor cases and
suspended the period for the filing of the answers of AIBC and BRII.
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 respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint
(POEA Case No. L-85-10-777) against AIBC and BRII with the POEA,
demanding monetary claims similar to those subject of POEA Case No. L-84-
06-555. In the same month, Solomon Reyes also filed his own complaint
(POEA Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked
for the substitution of the original counsel of record and the cancellation of the
special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to
enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA
Case No. 86-05-460) in behalf of 11 claimants including Bienvenido Cadalin,
a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on
February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator,
it is not amiss to mention that two cases were filed in the Supreme Court by
the claimants, namely — G.R. No. 72132 on September 26, 1985 and
Administrative Case No. 2858 on March 18, 1986. On May 13, 1987, the
Supreme Court issued a resolution in Administrative Case No. 2858 directing
the POEA Administrator to resolve the issues raised in the motions and
oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to
decide the labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning
the Order dated September 4, 1985 of the POEA Administrator. Said order
required BRII and AIBC to answer the amended complaint in POEA Case No.
L-84-06-555. In a resolution dated November 9, 1987, we dismissed the
petition by informing AIBC that all its technical objections may properly be
resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on
September 22, 1988 by claimant Hermie Arguelles and 18 co-claimants
against the POEA Administrator and several NLRC Commissioners. The
Ombudsman merely referred the complaint to the Secretary of Labor and
Employment with a request for the early disposition of POEA Case No. L-84-
06-555. The second was filed on April 28, 1989 by claimants Emigdio P.
Bautista and Rolando R. Lobeta charging AIBC and BRII for violation of labor
and social 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 January 13, 1987, AIBC filed a motion for reconsideration of the NLRC
Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its
motion for suspension of the period for filing an answer or motion for extension
of time to file the same until the resolution of its motion for reconsideration of
the order of the NLRC dismissing the two appeals. On April 28, 1987, NLRC en
banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint.
At the same hearing, the parties were given a period of 15 days from said date
within which to submit their 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 their
"Supplement to Urgent Manifestational Motion" to comply with the POEA Order
of June 19, 1987. On February 24, 1988, AIBC and BRII submitted their
position paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to
Expunge from the Records" the position paper of AIBC and BRII, claiming that
it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their
memorandum in POEA Case No. L-86-05-460. On September 6, 1988, AIBC
and BRII submitted their Supplemental Memorandum. On September 12,
1988, BRII filed its "Reply to Complainant's Memorandum." On October 26,
1988, claimants submitted their "Ex-Parte Manifestational Motion and
Counter-Supplemental Motion," together with 446 individual contracts of
employments and service records. On October 27, 1988, AIBC and BRII filed
a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA
Case No. L-84-06-555 and the other consolidated cases, which awarded the
amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum For
Partial Appeal" from the decision of the POEA. On the same day, AIBC also
filed its motion for reconsideration and/or appeal in addition to the "Notice of
Appeal" filed earlier on February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the
dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal
Memorandum," together with their "newly discovered evidence" consisting of
payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation,"
stating among other matters that there were only 728 named claimants. On
April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that
there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the
Decision dated January 30, 1989 on the grounds that BRII had failed to appeal
on time and AIBC had not posted the supersedeas bond in the amount of
$824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor
cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that
all the 1,767 claimants be awarded their monetary claims for failure of private
respondents to file their answers within the reglamentary period required by
law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as
follows:
WHEREFORE, premises considered, the Decision of the
POEA in these consolidated cases is modified to the extent
and in accordance with the following dispositions:
1. The claims of the 94 complainants
identified and listed in Annex "A" hereof are
dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are
hereby ordered, jointly and severally, to pay
the 149 complainants, identified and listed in
 Annex "B" hereof, the peso equivalent, at the
time of payment, of the total amount in US
dollars indicated opposite their respective
names;
3. The awards given by the POEA to the 19
complainants classified and listed in Annex
"C" hereof, who appear to have worked
elsewhere than in Bahrain are hereby set
aside.
4. All claims other than those indicated in
Annex "B", including those for overtime work
and favorably granted by the POEA, are
hereby dismissed for lack of substantial
evidence in support thereof or are beyond the
competence of this Commission to pass
upon.
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended
by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco
of this Commission to summon parties, conduct hearings and
receive evidence, as expeditiously as possible, and thereafter
submit a written report to this Commission (First Division) of
the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in
Annex "D" attached and made an integral
part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of
employment in Bahrain (these complainants
numbering 683, are listed in pages 13 to 23
of the decision of POEA, subject of the
appeals) and,
(b) complainants identified and listed in
Annex "E" attached and made an integral part
of this Resolution, whose awards decreed by
the POEA, to Our mind, are not supported by
substantial evidence" (G.R. No.
104776; Rollo, pp. 113-115; G.R. Nos.
104911-14, pp. 85-87; G.R. Nos. 105029-31,
pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition
for certiorari with the Supreme Court (G.R. Nos. 120741-44). The petition was
dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution of the
NLRC were filed. The first, by the claimants represented by Atty. Del Mundo;
the second, by the claimants represented by Atty. De Castro; and the third, by
AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for
reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo
(G.R. No. 104776), the claimants represented by Atty. De Castro (G.R. Nos.
104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and
BRII have submitted, from time to time, compromise agreements for our
approval and jointly moved for the dismissal of their respective petitions insofar
as the claimants-parties to the compromise agreements were concerned (See
Annex A for list of claimants who signed quitclaims).
Thus the following manifestations that the parties had arrived at a compromise
agreement and the corresponding motions for the approval of the agreements
were filed by the parties and approved by the Court:
1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992
(G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-
32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving petitioner
Bienvenido Cadalin and 82 co-petitioners dated September 3,
1992 (G.R. No. 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992
(G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No.
104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp.
407-516);
4) Joint Manifestation and Motion involving claimant Antonio
T. Anglo and 17 co-claimants dated October 14, 1992 (G.R.
Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp.
650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio
Bobongo and 6 co-claimants dated January 15, 1993 (G.R.
No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo,
pp. 629-652);
6) Joint Manifestation and Motion involving claimant Valerio
A. Evangelista and 4 co-claimants dated March 10, 1993
(G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);
7) Joint Manifestation and Motion involving claimants
Palconeri Banaag and 5 co-claimants dated March 17, 1993
(G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-
14, Rollo, pp. 655-675);
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R.
Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-
14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-
1814);
9) Joint Manifestation and Motion involving Valerio
Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No.
104776, Rollo, pp. 1815-1829);
10) Joint Manifestation and Motion involving petitioner
Quiterio R. Agudo and 36 co-claimants dated June 14, 1993
(G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos.
104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp.
1066-1183);
11) Joint Manifestation and Motion involving claimant Arnaldo
J. Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo,
pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving claimant Ricardo
C. Dayrit and 2 co-claimants dated September 7, 1993 (G.R.
Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo,
pp. 1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante
C. Aceres and 37 co-claimants dated September 8, 1993
(G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-
14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
1280-1397);
14) Joint Manifestation and Motion involving Vivencio V.
Abella and 27 co-claimants dated January 10, 1994 (G.R.
Nos. 105029-32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B.
Solano and six co-claimants dated August 25, 1994 (G.R.
Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than
fifty volumes now comprising the records of these cases.
From the records, it appears that the complainants-appellants
allege that they were recruited by respondent-appellant AIBC
for its accredited foreign principal, Brown & Root, on various
dates from 1975 to 1983. They were all deployed at various
projects undertaken by Brown & Root in several countries in
the Middle East, such as Saudi Arabia, Libya, United Arab
Emirates and Bahrain, as well as in Southeast Asia, in
Indonesia and Malaysia.
Having been officially processed as overseas contract
workers by the Philippine Government, all the individual
complainants signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter, reference to the
records would be sparingly made, considering their chaotic
arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably
contained the following relevant terms and conditions.
PART B —
(1) Employment Position Classification :—————————
(Code) :—————————
(2) Company Employment Status :—————————
(3) Date of Employment to Commence on :————————
—
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly rate and overtime
rate as set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer,
and Employer may, at his sole option, change or adjust such
hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this
agreement, the Employer may, at his sole discretion,
terminate employee's service with cause, under this
agreement at any time. If the Employer terminates the
services of the Employee under this Agreement because of
the completion or termination, or suspension of the work on
which the Employee's services were being utilized, or
because of a reduction in force due to a decrease in scope of
such work, or by change in the type of construction of such
work. The Employer will be responsible for his return
transportation to his country of origin. Normally on the most
expeditious air route, economy class accommodation.
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service and/or satisfactory
completion of contract, employee shall be entitled to 12-days
vacation leave with pay. This shall be computed at the basic
wage rate. Fractions of a year's service will be computed on
a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for
every year of service for non-work connected injuries or
illness. If the employee failed to avail of such leave benefits,
the same shall be forfeited at the end of the year in which said
sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be
accrued and payable only upon satisfactory completion of this
contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of
rest with 8 hours regular pay. If work is performed on this day,
all hours work shall be paid at the premium rate. However, this
offday pay provision is applicable only when the laws of the
Host Country require payments for rest day.
In the State of Bahrain, where some of the individual
complainants were deployed, His Majesty Isa Bin Salman Al
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on
June 16, 1976, otherwise known as the Labour Law for the
Private Sector (Records, Vol. 18). This decree took effect on
August 16, 1976. Some of the provisions of Amiri Decree No.
23 that are relevant to the claims of the complainants-
appellants are as follows (italics supplied only for emphasis):
Art. 79: . . . A worker shall receive payment
for each extra hour equivalent to his wage
entitlement increased by a minimum of
twenty-five per centum thereof for hours
worked during the day; and by a minimum of
fifty per centum thereof for hours worked
during the night which shall be deemed to
being from seven o'clock in the evening until
seven o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a
weekly day of rest on full pay.
. . . an employer may require a worker, with
his consent, to work on his weekly day of
restif circumstances so require and in respect
of which an additional sum equivalent to
150% of his normal wage shall be paid to him.
...
Art. 81: . . . When conditions of work require
the worker to work on any official holiday, he
shall be paid an additional sum equivalent to
150% of his normal wage.
Art. 84: Every worker who has completed one
year's continuous service with his employer
shall be entitled to leave on full pay for a
period of not less than 21 days for each year
increased to a period not less than 28 days
after five continuous years of service.
A worker shall be entitled to such leave upon
a quantum meruit in respect of the proportion
of his service in that year.
Art. 107: A contract of employment made for
a period of indefinite duration may be
terminated by either party thereto after giving
the other party thirty days' prior notice before
such termination, in writing, in respect of
monthly paid workers and fifteen days' notice
in respect of other workers. The party
terminating a contract without giving the
required notice shall pay to the other party
compensation equivalent to the amount of
wages payable to the worker for the period of
such notice or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall
pay to such worker, upon termination of
employment, a leaving indemnity for the
period of his employment calculated on the
basis of fifteen days' wages for each year of
the first three years of service and of one
month's wages for each year of service
thereafter. Such worker shall be entitled to
payment of leaving indemnity upon
a quantum meruit in proportion to the period
of his service completed within a year.
All the individual complainants-appellants
have already been repatriated to the
Philippines at the time of the filing of these
cases (R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: — Whether or not complainants are entitled to the
benefits provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who
have worked in Bahrain are entitled to the
above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree
(allegedly prescribing a more favorable
treatment of alien employees) bars
complainants from enjoying its benefits.
Second: — Assuming that Amiri Decree No. 23 of Bahrain is
applicable in these cases, whether or not complainants' claim
for the benefits provided therein have prescribed.
Third: — Whether or not the instant cases qualify as a class
suit.
Fourth: — Whether or not the proceedings conducted by the
POEA, as well as the decision that is the subject of these
appeals, conformed with the requirements of due process;
(a) Whether or not the respondent-appellant
was denied its right to due process;
(b) Whether or not the admission of evidence
by the POEA after these cases were
submitted for decision was valid;
 (c) Whether or not the POEA acquired d. War Zone bonus or premium pay of at least
jurisdiction over Brown & Root International, 100% of basic pay;
Inc.;
e. Area Differential Pay;
(d) Whether or not the judgment awards are
supported by substantial evidence; f. Accrued interests on all the unpaid benefits;

(e) Whether or not the awards based on the g. Salary differential pay;
averages and formula presented by the
complainants-appellants are supported by
h. Wage differential pay;
substantial evidence;
i. Refund of SSS premiums not remitted to
(f) Whether or not the POEA awarded sums
SSS;
beyond what the complainants-appellants
prayed for; and, if so, whether or not these
awards are valid. j. Refund of withholding tax not remitted to
BIR;
Fifth: — Whether or not the POEA erred in holding
respondents AIBC and Brown & Root jointly are severally k. Fringe benefits under B & R's "A Summary
liable for the judgment awards despite the alleged finding that of Employee Benefits" (Annex "Q" of
the former was the employer of the complainants; Amended Complaint);

(a) Whether or not the POEA has acquired l. Moral and exemplary damages;
jurisdiction over Brown & Root;
m. Attorney's fees of at least ten percent of
(b) Whether or not the undisputed fact that the judgment award;
AIBC was a licensed construction contractor
precludes a finding that Brown & Root is n. Other reliefs, like suspending and/or
liable for complainants claims. cancelling the license to recruit of AIBC and
the accreditation of B & R issued by POEA;
Sixth: — Whether or not the POEA Administrator's failure to
hold respondents in default constitutes a reversible error. o. Penalty for violations of Article 34
(prohibited practices), not excluding
Seventh: — Whether or not the POEA Administrator erred in reportorial requirements thereof.
dismissing the following claims:
Eighth: — Whether or not the POEA Administrator erred in not
a. Unexpired portion of contract; dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29,
51-55).
b. Interest earnings of Travel and Reserve
Fund;
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised
Rules on Evidence governing the pleading and proof of a foreign law and
c. Retirement and Savings Plan benefits;
admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of
1976 (Labour Law for the Private Sector). NLRC invoked Article 221 of the
Labor Code of the Philippines, vesting on the Commission ample discretion to
use every and all reasonable means to ascertain the facts in each case without
regard to the 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 overseas employment
contract of the complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the
claimants, who worked in Bahrain, and set aside awards of the POEA
Administrator in favor of the claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the filing of
the claims of the complainants was three years, as provided in Article 291 of
the Labor Code of the Philippines, and not ten years as provided in Article
1144 of the Civil Code 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 that the labor
cases cannot be treated as a class suit for the simple reason that not all the
complainants worked in Bahrain and therefore, the subject matter of the action,
the claims arising from the Bahrain law, is not of common or general interest
to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules
of administrative due process: namely, (1) the failure of the POEA
Administrator to consider the evidence presented by AIBC and BRII; (2) some
findings of fact were not supported by substantial evidence; and (3) some of
the evidence upon which the decision was based were not disclosed to AIBC
and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that
BRII and AIBC are solidarily liable for the claims of the complainants and held
that BRII was the actual employer of the complainants, or at the very least, the
indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA
Administrator through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in
denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the
Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the
claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for
said refund with the appropriate government agencies;
(2) the claimants failed to establish that they are entitled to the
claims which are not based on the overseas employment
contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over
claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired
portion of their contract may be allowed if filed within the three-
year prescriptive period;
(5) that the allegation that complainants were prematurely
repatriated prior to the expiration of their overseas contract
was not established; and
(6) that the POEA Administrator has no jurisdiction over the
complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of
BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L)
86-65-460 should have been dismissed on the ground that the claimants in
said case were also claimants in POEA Case No. (L) 84-06-555. Instead of
dismissing POEA Case No. (L) 86-65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In other words, the
POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following
grounds:
(1) that they were deprived by NLRC and the POEA of their
right to a speedy disposition of their cases as guaranteed by
Section 16, Article III of the 1987 Constitution. The POEA
Administrator allowed private respondents to file their answers
in two years (on June 19, 1987) after the filing of the original
 complaint (on April 2, 1985) and NLRC, in total disregard of
its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have
declared AIBC and BRII in default and should have rendered
summary judgment on the basis of the pleadings and
evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in not holding
that the labor cases filed by AIBC and BRII cannot be
considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten
years; and
(5) that NLRC and the POEA Administrator should have
dismissed POEA Case No. L-86-05-460, the case filed by
Atty. Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the
disposition of the labor cases, considering the great difficulty
of getting all the records of the more than 1,500 claimants, the
piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants,
it was impossible to prepare the answers within the ten-day
period provided in the NLRC Rules, that when the motion to
declare AIBC in default was filed on July 19, 1987, said party
had already filed its answer, and that considering the
staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the
parties, the ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter
of the controversy — which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the claims varied,
some being based on salaries pertaining to the unexpired
portion of the contracts while others being for pure money
claims. Each claimant demanded separate claims peculiar
only to himself and depending upon the particular
circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that
prescribed by Article 291 of the Labor Code of the Philippines
(three years) and not the one prescribed by Article 1144 of the
Civil Code of the Philippines (ten years); and
(5) that they are not concerned with the issue of whether
POEA Case No. L-86-05-460 should be dismissed, this being
a private quarrel between the two labor lawyers (Rollo, pp.
292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the
joint manifestations and motions of AIBC and BRII dated September 2 and 11,
1992, claiming that all the claimants who entered into the compromise
agreements subject of said manifestations and motions were his clients and
that Atty. Florante M. de Castro had no right to represent them in said
agreements. He also claimed that the claimants were paid less than the award
given them by NLRC; that Atty. De Castro collected additional attorney's fees
on top of the 25% which he was entitled to receive; and that the consent of the
claimants to the compromise agreements and quitclaims were procured by
fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated
November 23, 1992, the Court denied the motion to strike out the Joint
Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos.
104911-14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce
Attorney's Lien," alleging that the claimants who entered into compromise
agreements with AIBC and BRII with the assistance of Atty. De Castro, had all
signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-
624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite
Atty. De Castro and Atty. Katz Tierra for contempt of court and for violation of
Canons 1, 15 and 16 of the Code of Professional Responsibility. The said
lawyers allegedly misled this Court, by making it appear that the claimants who
entered into the compromise agreements were represented by Atty. De
Castro, when in fact they were represented by Atty. Del Mundo (G.R. No.
104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty.
De Castro for unethical practices and moved for the voiding of the quitclaims
submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the
grounds that NLRC gravely abused its discretion when it: (1) applied the three-
year prescriptive period under the Labor Code of the Philippines; and (2) it
denied the claimant's formula based on an average overtime pay of three
hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the
negotiation for an amicable settlement of their money claims in Bahrain as
shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of
Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No.
104776 that the prescriptive period in the Labor Code of the Philippines, a
special law, prevails over that provided in the Civil Code of the Philippines, a
general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of
computing the overtime pay, BRII and AIBC claimed that they were not bound
by what appeared therein, because such memorandum was proposed by a
subordinate Bahrain official and there was no showing that it was approved by
the Bahrain Minister of Labor. Likewise, they claimed that the averaging
method was discussed in the course of the negotiation for the amicable
settlement of the dispute and any offer made by a party therein could not be
used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its
discretion when it: (1) enforced the provisions of the Amiri Decree No. 23 of
1976 and not the terms of the employment contracts; (2) granted claims for
holiday, overtime and leave indemnity pay and other benefits, on evidence
admitted in contravention of petitioner's constitutional right to due process; and
(3) ordered the POEA Administrator to hold new hearings for the 683 claimants
whose claims had been dismissed for lack of proof by the POEA Administrator
or NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23
of 1976 was applicable, NLRC erred when it did not apply the one-year
prescription provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they
disagreed as to the time that should be embraced within the prescriptive
period.
To the POEA Administrator, the prescriptive period was ten years, applying
Article 1144 of the Civil Code of the Philippines. NLRC believed otherwise,
fixing the prescriptive period at three years as provided in Article 291 of the
Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different
grounds, insisted that NLRC erred in ruling that the prescriptive period
applicable to the claims was three years, instead of ten years, as found by the
POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive period
was one year as prescribed by the Amiri Decree No. 23 of 1976 but he deferred
to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was
the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code)
refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.
In the instant case, what the respondents violated are not the
rights of the workers as provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued in Bahrain,
which ipso facto amended the worker's contracts of
employment. Respondents consciously failed to conform to
these provisions which specifically provide for the increase of
the worker's rate. It was only after June 30, 1983, four months
after the brown builders brought a suit against B & R in
Bahrain for this same claim, when respondent AIBC's
contracts have undergone amendments in Bahrain for the
new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of
prescription to this instant case is Article 1144 of the Civil
Code of the Philippines, which provides:
 Art. 1144. The following actions may be
brought within ten years from the time the
cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the
respondents shall prescribe in ten years from August 16,
1976. Inasmuch as all claims were filed within the ten-year
prescriptive period, no claim suffered the infirmity of being
prescribed (G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period
is three years as provided in Article 291 of the Labor Code of the Philippines,
the NLRC argued as follows:
The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three
years from the time the cause of action accrued; otherwise
they shall be forever barred" (Art. 291, Labor Code, as
amended). This three-year prescriptive period shall be the one
applied here and which should be reckoned from the date of
repatriation of each individual complainant, considering the
fact that the case is having (sic) filed in this country. We do
not agree with the POEA Administrator that this three-year
prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291
gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a
violation of their employment contracts. There was no
violation; the claims arise from the benefits of the law of the
country where they worked. (G.R. No. 104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided by
the Amiri Decree No. 23 of 1976, NLRC opined that the applicability of
said law was one of characterization, i.e., whether to characterize the
foreign law on prescription or statute of limitation as "substantive" or
"procedural." NLRC cited the decision in Bournias v. Atlantic Maritime
Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the applicability
of the Panama Labor Code in a case filed in the State of New York for claims
arising from said Code. In said case, the claims would have prescribed under
the Panamanian Law but not under the Statute of Limitations of New York. The
U.S. Circuit Court of Appeals held that the Panamanian Law was procedural
as it was not "specifically intended to be substantive," hence, the prescriptive
period provided in the law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of
limitations of a foreign country, and it is not clear on the face
of the statute that its purpose was to limit the enforceability,
outside as well as within the foreign country concerned, of the
substantive rights to which the statute pertains, we think that
as a yardstick for determining whether that was the purpose
this test is the most satisfactory one. It does not lead American
courts into the necessity of examining into the unfamiliar
peculiarities and refinements of different foreign legal
systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is
entitled to succeed, for the respondents have failed to satisfy
us that the Panamanian period of limitation in question was
specifically aimed against the particular rights which the
libelant seeks to enforce. The Panama Labor Code is a statute
having broad objectives, viz: "The present Code regulates the
relations between capital and labor, placing them on a basis
of social justice, so that, without injuring any of the parties,
there may be guaranteed for labor the necessary conditions
for a normal life and to capital an equitable return to its
investment." In pursuance of these objectives the Code gives
laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except
certain ones which are enumerated in Article 621. And there
is nothing in the record to indicate that the Panamanian
legislature gave special consideration to the impact of Article
623 upon the particular rights sought to be enforced here, as
distinguished from the other rights to which that Article is also
applicable. Were we confronted with the question of whether
the limitation period of Article 621 (which carves out particular
rights to be governed by a shorter limitation period) is to be
regarded as "substantive" or "procedural" under the rule of
"specifity" we might have a different case; but here on the
surface of things we appear to be dealing with a "broad," and
not a "specific," statute of limitations (G.R. No. 104776, Rollo,
pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor
Code of the Philippines, which was applied by NLRC, refers only to claims
"arising from the employer's violation of the employee's right as provided by
the Labor Code." They assert that their claims are based on the violation of
their employment contracts, as amended by the Amiri Decree No. 23 of 1976
and therefore the claims may be brought within ten years as provided by Article
1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc.,
70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed under
the Amiri Decree No. 23 of 1976, argue that there is in force in the Philippines
a "borrowing law," which is Section 48 of the Code of Civil Procedure and that
where such kind of law exists, it takes precedence over the common-law
conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of action
based on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription
that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not
be actionable after the lapse of one year from the date of
the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p.
226).
As a general rule, a foreign procedural law will not be applied in the forum.
Procedural matters, such as service of process, joinder of actions,
period and requisites for appeal, and so forth, are governed by the laws
of the forum. This is true even if the action is based upon a foreign
substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga,
Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the sense
that it may be viewed either as procedural or substantive, depending on the
characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court
applied the statute of limitations of New York, instead of the Panamanian law,
after finding that there was no showing that the Panamanian law on
prescription was intended to be substantive. Being considered merely a
procedural law even in Panama, it has to give way to the law of the forum on
prescription of actions.
However, the characterization of a statute into a procedural or substantive law
becomes irrelevant when the country of the forum has a "borrowing statute."
Said statute has the practical effect of treating the foreign statute of limitation
as one of substance (Goodrich, Conflict of Laws 152-153 [1938]). A
"borrowing statute" directs the state of the forum to apply the foreign
statute of limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes,"
one form provides that an action barred by the laws of the place where it
accrued, will not be enforced in the forum even though the local statute has
not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]).
Section 48 of our Code of Civil Procedure is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action
arose, the action is barred, it is also barred in the Philippines
Islands.
Section 48 has not been repealed or amended by the Civil Code of the
Philippines. Article 2270 of said Code repealed only those provisions of the
Code of Civil Procedures as to which were inconsistent with it. There is no
provision in the Civil Code of the Philippines, which is inconsistent with or
contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine
Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be
enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the
forum's public policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553,
40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive
period of the Amiri Decree No. 23 of 1976 as regards the claims in
question would contravene the public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution
emphasized that:
The state shall promote social justice in all phases of national
development. (Sec. 10).
The state affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare
(Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:
 Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the
Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the Labor
Code or ten years, as provided by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144 of
the Civil Code of the Philippines, which provides:
The following actions must be brought within ten years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is Article 291
of the Labor Code of the Philippines, which in pertinent part provides:
Money claims-all money claims arising from employer-
employee relations accruing during the effectivity of this Code
shall be filed within three (3) years from the time the cause of
action accrued, otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air Lines,
Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is
inapplicable to the cases at bench (Rollo, p. 21). The said case involved the
correct computation of overtime pay as provided in the collective bargaining
agreements and not the Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not make any
reference as to the computation for overtime work under the Eight-Hour Labor
Law (Secs. 3 and 4, CA No. 494) and instead insisted that work computation
provided in the collective bargaining agreements between the parties be
observed. Since the claim for pay differentials is primarily anchored on the
written contracts between the litigants, the ten-year prescriptive period
provided by Art. 1144(1) of the New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No.
19933) provides:
Any action to enforce any cause of action under this Act shall
be commenced within three years after the cause of action
accrued otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour
Labor Law (CA No. 444 as amended) will apply, if the claim
for differentials for overtime work is solely based on said law,
and not on a collective bargaining agreement or any other
contract. In the instant case, the claim for overtime
compensation is not so much because of Commonwealth Act
No. 444, as amended but because the claim is demandable
right of the employees, by reason of the above-mentioned
collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for
filing "actions to enforce any cause of action under said law." On the other
hand, Article 291 of the Labor Code of the Philippines provides the prescriptive
period for filing "money claims arising from employer-employee relations." The
claims in the cases at bench all arose from the employer-employee relations,
which is broader in scope than claims arising from a specific law or from the
collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive
period under Article 291 of the Labor Code of the Philippines applies only to
money claims specifically recoverable under said Code, does not find support
in the plain language of the provision. Neither is the contention of the claimants
in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the
employer's violation of the employee's right," as provided by the Labor Code
supported by the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776, claimants
aver: (1) that while their complaints were filed on June 6, 1984 with POEA, the
case was decided only on January 30, 1989, a clear denial of their right to a
speedy disposition of the case; and (2) that NLRC and the POEA Administrator
should have declared AIBC and BRII in default (Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution, which
provides:
Sec. 16. All persons shall have the right to a speedy
disposition of their cases before all judicial, quasi-judicial, or
administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is not
limited to the accused in criminal proceedings but extends to all parties in all
cases, including civil and administrative cases, and in all proceedings,
including judicial and quasi-judicial hearings. Hence, under the Constitution,
any party to a case may demand expeditious action on all officials who are
tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy
disposition of cases" is a relative term. Just like the constitutional guarantee of
"speedy trial" accorded to the accused in all criminal proceedings, "speedy
disposition of cases" is a flexible concept. It is consistent with delays and
depends upon the circumstances of each case. What the Constitution prohibits
are unreasonable, arbitrary and oppressive delays which render rights
nugatory.
Caballero laid down the factors that may be taken into consideration in
determining whether or not the right to a "speedy disposition of cases" has
been violated, thus:
In the determination of whether or not the right to a "speedy
trial" has been violated, certain factors may be considered and
balanced against each other. These are length of delay,
reason for the delay, assertion of the right or failure to assert
it, and prejudice caused by the delay. The same factors may
also be considered in answering judicial inquiry whether or not
a person officially charged with the administration of justice
has violated the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
It must be here emphasized that the right to a speedy
disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious,
capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when
without cause or justified motive a long period of time is
allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a copy
of the amended complaint, claimants had been asking that AIBC and BRII be
declared in default for failure to file their answers within the ten-day period
provided in Section 1, Rule III of Book VI of the Rules and Regulations of the
POEA. At that time, there was a pending motion of AIBC and BRII to strike out
of the records the amended complaint and the "Compliance" of claimants to
the order of the POEA, requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final
disposition in the administrative level after seven years from their inception,
cannot be said to be attended by unreasonable, arbitrary and oppressive
delays as to violate the constitutional rights to a speedy disposition of the cases
of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767
claimants. Said complaint had undergone several amendments, the first being
on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were
deployed in different areas, one group in and the other groups outside of,
Bahrain. The monetary claims totalling more than US$65 million according to
Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic
pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security
System;
 10. Refund of Withholding Tax not remitted to Bureau of
Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of
Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license
to recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp.
73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and clarity
of some facts, the claimants were ordered to comply with the motion of AIBC
for a bill of particulars. When claimants filed their "Compliance and
Manifestation," AIBC moved to strike out the complaint from the records for
failure of claimants to submit a proper bill of particulars. While the POEA
Administrator denied the motion to strike out the complaint, he ordered the
claimants "to correct the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint, the
records of employment of the more than 1,700 claimants had to be retrieved
from various countries in the Middle East. Some of the records dated as far
back as 1975.
The hearings on the merits of the claims before the POEA Administrator were
interrupted several times by the various appeals, first to NLRC and then to the
Supreme Court.
Aside from the inclusion of additional claimants, two new cases were filed
against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986
(POEA Case No. L-86-05-460). NLRC, in exasperation, noted that the exact
number of claimants had never been completely established (Resolution, Sept.
2, 1991, G.R. No. 104776, Rollo, p. 57). All the three new cases were
consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating the
proceedings, thus:
These cases could have been spared the long and arduous
route towards resolution had the parties and their counsel
been more interested in pursuing the truth and the merits of
the claims rather than exhibiting a fanatical reliance on
technicalities. Parties and counsel have made these cases a
litigation of emotion. The intransigence of parties and counsel
is remarkable. As late as last month, this Commission made
a last and final attempt to bring the counsel of all the 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 (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the
disposition of the cases, to the lament of NLRC, which complained:
It is very evident from the records that the protagonists in
these consolidated cases appear to be not only the individual
complainants, on the one hand, and AIBC and Brown & Root,
on the other hand. The two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De Castro, have yet to
settle the right of representation, each one persistently
claiming to appear in behalf of most of the complainants. As a
result, there are two appeals by the complainants. Attempts
by this Commission to resolve counsels' conflicting claims of
their respective authority to represent the complainants prove
futile. The bickerings by these two counsels are reflected in
their pleadings. In the charges and countercharges of
falsification of documents and signatures, and in the
disbarment proceedings by one against the other. All these
have, to a large extent, abetted in confounding the issues
raised in these cases, jumble the presentation of evidence,
and even derailed the prospects of an amicable settlement. It
would not be far-fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for the complainants,
with the proverbial pot of gold at its end containing more than
US$100 million, the aggregate of the claims in these cases. It
is, likewise, not improbable that their misplaced zeal and
exuberance caused them to throw all caution to the wind in
the matter of elementary rules of procedure and evidence
(Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing of some
of the complainants in both petitions filed by the two lawyers. As noted by
NLRC, "the problem created by this situation is that if one of the two petitions
is dismissed, then the parties and the public respondents would not know
which claim of which petitioner was dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in a
"class suit" because "all the named complainants have similar money claims
and similar rights sought irrespective of whether they worked in Bahrain,
United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle East"
(Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one
of common or general interest to many and the parties are so numerous
that it is impracticable to bring them all before the court (Revised Rules
of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law, many of
the claimants worked outside Bahrain. Some of the claimants were deployed
in Indonesia and Malaysia under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch
as the first requirement of a class suit is not present (common or general
interest based on the Amiri Decree of the State of Bahrain), it is only logical
that only those who worked in Bahrain shall be entitled to file their claims in a
class suit.
While there are common defendants (AIBC and BRII) and the nature of the
claims is the same (for employee's benefits), there is no common question of
law or fact. While some claims are based on the Amiri Law of Bahrain, many
of the claimants never worked in that country, but were deployed elsewhere.
Thus, each claimant is interested only in his own demand and not in the claims
of the other employees of defendants. The named claimants have a special or
particular interest in specific benefits completely different from the benefits in
which the other named claimants and those included as members of a "class"
are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each
claimant is only interested in collecting his own claims. A claimants has no
concern in protecting the interests of the other claimants as shown by the fact,
that hundreds of them have abandoned their co-claimants and have entered
into separate compromise settlements of their respective claims. A principle
basic to the concept of "class suit" is that plaintiffs brought on the record must
fairly represent and protect the interests of the others (Dimayuga v. Court of
Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who
worked in Bahrain can not be allowed to sue in a class suit in a judicial
proceeding. The most that can be accorded to them under the Rules of Court
is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court,
Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the
exceptions to the condition sine qua non, requiring the joinder of all
indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision
secured is favorable to the plaintiffs. The problem arises when the decision is
adverse to them, in which case the others who were impleaded by their self-
appointed representatives, would surely claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA 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
claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put
a stop to the practice of some parties of filing multiple petitions and complaints
involving the same issues, with the result that the courts or agencies have to
resolve the same issues. Said Rule, however, applies only to petitions filed
with the Supreme Court and the Court of Appeals. It is entitled "Additional
Requirements For Petitions Filed with the Supreme Court and the Court of
Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and
Complainants." The first sentence of the circular expressly states that said
circular applies to an governs the filing of petitions in the Supreme Court and
the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-
forum shopping rule to the lower courts and administrative agencies, said
circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical
conduct against Atty. De Castro because NLRC and POEA have no jurisdiction
to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992
was filed by Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees
for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo,
pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or
administrative agency which renders and executes the money judgment
secured by the lawyer for his clients. The lawyer shall cause written notice
thereof to be delivered to his clients and to the adverse party (Revised Rules
of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien
of Atty. Del Mundo should have been filed with the administrative agency that
rendered and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro
and Atty. Katz Tierra for violation of the Code of Professional Responsibility
should be filed in a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting their
formula of "Three Hours Average Daily Overtime" in computing the overtime
payments. They claim that it was BRII itself which proposed the formula during
the negotiations for the settlement of their claims in Bahrain and therefore it is
in estoppel to disclaim said offer (Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated
April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President
and the Area Manager, Middle East, of Brown & Root Co. and
the Summary of the compensation offered by the Company to
the employees in respect of the difference of pay of the wages
of the overtime and the difference of vacation leave and the
perusal of the documents attached thereto i.e., minutes of the
meetings between the Representative of the employees and
the management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as
hereinabove stated, sample of the Service Contract executed
between one of the employees and the company through its
agent in (sic) Philippines, Asia International Builders
Corporation where it has been provided for 48 hours of work
per week and an annual leave of 12 days and an overtime
wage of 1 & 1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following
averages:
A. 1. The average duration of the actual service of the
employee is 35 months for the Philippino (sic) employees . . .
.
2. The average wage per hour for the Philippino (sic)
employee is US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all
public holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as
compensation for the difference of the wages of the overtime
done for each Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them
but by a subordinate official in the Bahrain Department of Labor; (2) that there
was no showing that the Bahrain Minister of Labor had approved said
memorandum; and (3) that the offer was made in the course of the negotiation
for an amicable settlement of the claims and therefore it was not admissible in
evidence to prove that anything is due to the claimants.
While said document was presented to the POEA without observing the rule
on presenting official documents of a foreign government as provided in
Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be
admitted in evidence in proceedings before an administrative body. The
opposing parties have a copy of the said memorandum, and they could easily
verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained in the
memorandum is another matter. Under Section 27, Rule 130 of the 1989
Revised Rules on Evidence, an offer to settle a claim is not an admission that
anything is due.
Said Rule provides:
Offer of compromise not admissible. — In civil cases, an offer
of compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the record
with unwanted evidence but a statement of public policy. There is great public
interest in having the protagonists settle their differences amicable before
these ripen into litigation. Every effort must be taken to encourage them to
arrive at a settlement. The submission of offers and counter-offers in the
negotiation table is a step in the right direction. But to bind a party to his offers,
as what claimants would make this Court do, would defeat the salutary
purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater
benefits than those stipulated in the overseas-employment contracts of the
claimants. It was of the belief that "where the laws of the host country are more
favorable and beneficial to the workers, then the laws of the host country shall
form part of the overseas employment contract." It quoted with approval the
observation of the POEA Administrator that ". . . in labor proceedings, all
doubts in the implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).
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. They contend that the principle that a law is deemed to be a part
of a contract applies only to provisions of Philippine law in relation to contracts
executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and BRII
themselves, provided that the laws of the host 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:
The Employee agrees that while in the employ of the
Employer, he will not engage in any other business or
occupation, nor seek employment with anyone other than the
Employer; that he shall devote his entire time and attention
and his best energies, and abilities to the performance of such
duties as may be assigned to him by the Employer; that he
shall at all times be subject to the direction and control of the
Employer; and that the benefits provided to Employee
hereunder are substituted for and in lieu of all other benefits
provided by any applicable law, provided of course, that total
remuneration and benefits do not fall below that of the host
country regulation or custom, it being understood that should
applicable laws establish that fringe benefits, or other such
benefits additional to the compensation herein agreed cannot
be waived, Employee agrees that such compensation will be
adjusted downward so that the total compensation hereunder,
plus the non-waivable benefits shall be equivalent to the
compensation herein agreed (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more
felicitously. While a part thereof provides that the compensation to the
employee may be "adjusted downward so that the total computation
(thereunder) plus the non-waivable benefits shall be equivalent to the
compensation" therein agreed, another part of the same provision
categorically states "that total remuneration and benefits do not fall below that
of the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should be
interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where
there is already a prepared form containing the stipulations of the
employment contract and the employees 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 their bargaining power (Fieldmen's Insurance Co., Inc. v. Songco,
25 SCRA 70 [1968]).
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 governed
(Cheshire, Private International Law, 187 [7th ed.]). In such a case, the foreign
law is adopted as a "system" to regulate the relations of the parties, including
questions of their capacity to enter into the contract, the formalities to be
observed by them, matters of performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties may just
agree that specific provisions of a foreign statute shall be deemed incorporated
into their contract "as a set of terms." By such reference to the provisions of
the foreign law, the contract does not become a foreign contract to be
governed by the foreign law. The said law does not operate as a statute but as
a set of contractual terms deemed written in the contract (Anton, Private
International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-
703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties (Reese,
Choice of Law in Torts and Contracts, 16 Columbia Journal of Transnational
Law 1, 21 [1977]). Such party expectation is protected by giving effect to
the parties' own choice of the applicable law (Fricke v. Isbrandtsen Co.,
Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear
some relationship to the parties or their transaction (Scoles and Hayes,
Conflict of Law 644-647 [1982]). There is no question that the contracts
sought to be enforced by claimants have a direct connection with the
Bahrain law because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486
(1982), the "Employment Agreement," between Norse Management Co. and
the late husband of the private respondent, expressly provided that in the event
of illness or injury to the employee arising out of and in the course of his
employment and not due to his own misconduct, "compensation shall be paid
to employee in accordance with and subject to the limitation of the Workmen's
Compensation Act of the Republic of the Philippines or the Worker's Insurance
Act of registry of the vessel, whichever is greater." Since the laws of Singapore,
the place of registry of the vessel in which the late husband of private
respondent served at the time of his death, granted a better compensation
package, we applied said foreign law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor
Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII
is inapposite to the facts of the cases at bench. The issue in that case was
whether the amount of the death compensation of a Filipino seaman should
be determined under the shipboard employment contract executed in the
Philippines or the Hongkong law. Holding that the shipboard employment
contract was controlling, the court differentiated said case from Norse
Management Co. in that in the latter case there was an express stipulation in
the employment contract that the foreign law would be applicable if it afforded
greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to due
process when said administrative agency granted Friday-pay differential,
holiday-pay differential, annual-leave differential and leave indemnity pay to
the claimants listed in Annex B of the Resolution. At first, NLRC reversed the
resolution of the POEA Administrator granting these benefits on a finding that
the POEA Administrator failed to consider the evidence presented by AIBC
and BRII, that some findings of fact of the POEA Administrator were not
supported by the evidence, and that some of the evidence were not disclosed
to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding the
case to the POEA Administrator for a new hearing, which means further delay
in the termination of the case, NLRC decided to pass upon the validity of the
claims itself. It is this procedure that AIBC and BRII complain of as being
irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted on
appeal, the same evidence which NLRC found to have been "unilaterally
submitted by the claimants and not disclosed to the adverse parties" (Rollo,
pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted to the
POEA administrator by the claimants after the cases were deemed submitted
for resolution and which were taken cognizance of by the POEA Administrator
in resolving the cases. While AIBC and BRII had no opportunity to refute said
evidence of the claimants before the POEA Administrator, they had all the
opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves
were able to present before NLRC additional evidence which they failed to
present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to
"use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the evidence
of both parties submitted before the POEA Administrator and NLRC, the latter
considered that it was not expedient to remand the cases to the POEA
Administrator for that would only prolong the already protracted legal
controversies.
Even the Supreme Court has decided appealed cases on the merits instead
of remanding them to the trial court for the reception of evidence, where the
same can be readily determined from the uncontroverted facts on record
(Development Bank of the Philippines v. Intermediate Appellate Court, 190
SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127
SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered
the POEA Administrator to hold new hearings for 683 claimants listed in Annex
D of the Resolution dated September 2, 1991 whose claims had been denied
by the POEA Administrator "for lack of proof" and for 69 claimants listed in
Annex E of the same Resolution, whose claims had been found by NLRC itself
as not "supported by evidence" (Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines,
which empowers it "[to] conduct investigation for the determination of a
question, matter or controversy, within its jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority under Article
218(c) to remand a case involving claims which had already been dismissed
because such provision contemplates only situations where there is still a
question or controversy to be resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative Law is that the technical rules of
procedure and evidence do not apply to the proceedings conducted by
administrative agencies (First Asian Transport & Shipping Agency, Inc. v.
Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152
SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code
of the Philippines and is now the bedrock of proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of procedure and
evidence in administrative proceedings, there are cardinal rules which must be
observed by the hearing officers in order to comply with the due process
requirements of the Constitution. These cardinal rules are collated in Ang
Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of Court on
the grounds that NLRC had committed grave abuse of discretion amounting to
lack of jurisdiction in issuing the questioned orders. We find no such abuse of
discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.
G.R. No. 149177 November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS
CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the April 18, 2001 Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 60827, and the July 25, 2001 Resolution2 denying the motion
for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd.
(Nippon), a Japanese consultancy firm providing technical and management
support in the infrastructure projects of foreign governments,3 entered into an
Independent Contractor Agreement (ICA) with respondent Minoru Kitamura, a
Japanese national permanently residing in the Philippines.4 The agreement
provides that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.5 Nippon then assigned respondent to work as
the project manager of the Southern Tagalog Access Road (STAR) Project in
the Philippines, following the company's consultancy contract with the
Philippine Government.6
When the STAR Project was near completion, the Department of Public Works
and Highways (DPWH) engaged the consultancy services of Nippon, on
January 28, 2000, this time for the detailed engineering and construction
supervision of the Bongabon-Baler Road Improvement (BBRI)
Project.7 Respondent was named as the project manager in the contract's
Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general
manager for its International Division, informed respondent that the company
had no more intention of automatically renewing his ICA. His services would
be engaged by the company only up to the substantial completion of the STAR
Project on March 31, 2000, just in time for the ICA's expiry. 9
Threatened with impending unemployment, respondent, through his lawyer,
requested a negotiation conference and demanded that he be assigned to the
BBRI project. Nippon insisted that respondent’s contract was for a fixed term
that had already expired, and refused to negotiate for the renewal of the ICA. 10
As he was not able to generate a positive response from the petitioners,
respondent consequently initiated on June 1, 2000 Civil Case No. 00-0264 for
specific performance and damages with the Regional Trial Court of Lipa City. 11
For their part, petitioners, contending that the ICA had been perfected in Japan
and executed by and between Japanese nationals, moved to dismiss the
complaint for lack of jurisdiction. They asserted that the claim for improper pre-
termination of respondent's ICA could only be heard and ventilated in the
proper courts of Japan following the principles of lex loci celebrationis and lex
contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for
the replacement of Kitamura by a certain Y. Kotake as project manager of the
BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v.
Frank14 that matters connected with the performance of contracts are
regulated by the law prevailing at the place of performance, 15 denied the
motion to dismiss.16 The trial court subsequently denied petitioners' motion for
reconsideration,17 prompting them to file with the appellate court, on August
14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CA-G.R.
SP No. 60205].18 On August 23, 2000, the CA resolved to dismiss the petition
on procedural grounds—for lack of statement of material dates and for
insufficient verification and certification against forum shopping. 19 An Entry of
Judgment was later issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September
19, 2000, still within the reglementary period, a second Petition
for Certiorari under Rule 65 already stating therein the material dates and
attaching thereto the proper verification and certification. This second petition,
which substantially raised the same issues as those in the first, was docketed
as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the
assailed April 18, 2001 Decision22finding no grave abuse of discretion in the
trial court's denial of the motion to dismiss. The CA ruled, among others, that
the principle of lex loci celebrationis was not applicable to the case, because
nowhere in the pleadings was the validity of the written agreement put in issue.
The CA thus declared that the trial court was correct in applying instead the
principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in
the assailed July 25, 2001 Resolution.24
Remaining steadfast in their stance despite the series of denials, petitioners
instituted the instant Petition for Review on Certiorari25 imputing the following
errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
FINDING THAT THE TRIAL COURT VALIDLY EXERCISED
JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE
THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE
PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN
TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN THE
JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO
THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF
RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL
LAWS.26
The pivotal question that this Court is called upon to resolve is whether the
subject matter jurisdiction of Philippine courts in civil cases for specific
performance and damages involving contracts executed outside the country
by foreign nationals may be assailed on the principles of lex loci
celebrationis, lex contractus, the "state of the most significant relationship
rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural
matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R.
SP No. 60205 has already barred the filing of the second petition docketed as
CA-G.R. SP No. 60827 (fundamentally raising the same issues as those in the
first one) and the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account
of the petition's defective certification of non-forum shopping, it was a dismissal
without prejudice.27 The same holds true in the CA's dismissal of the said case
due to defects in the formal requirement of verification28 and in the other
requirement in Rule 46 of the Rules of Court on the statement of the material
dates.29 The dismissal being without prejudice, petitioners can re-file the
petition, or file a second petition attaching thereto the appropriate verification
and certification—as they, in fact did—and stating therein the material dates,
within the prescribed period30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision
on the merits and leaves the parties free to litigate the matter in a subsequent
action as though the dismissed action had not been commenced. In other
words, the termination of a case not on the merits does not bar another action
involving the same parties, on the same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res
judicata effect, and even if petitioners still indicated in the verification and
certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,33 petitioners are no longer required by the
Rules to indicate in their certification of non-forum shopping in the instant
petition for review of the second certiorari petition, the status of the aforesaid
first petition before the CA. In any case, an omission in the certificate of non-
forum shopping about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not warrant the
dismissal and nullification of the entire proceedings, considering that the evils
sought to be prevented by the said certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner
Hasegawa is only authorized to verify and certify, on behalf of Nippon,
the certiorari petition filed with the CA and not the instant petition. True, the
Authorization35 dated September 4, 2000, which is attached to the
second certiorari petition and which is also attached to the instant petition for
review, is limited in scope—its wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition filed
with the appellate court, and that authority cannot extend to the instant petition
for review.36 In a plethora of cases, however, this Court has liberally applied
the Rules or even suspended its application whenever a satisfactory
explanation and a subsequent fulfillment of the requirements have been
made.37 Given that petitioners herein sufficiently explained their misgivings on
this point and appended to their Reply38 an updated Authorization39 for
Hasegawa to act on behalf of the company in the instant petition, the Court
finds the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in
the verification and certification. As respondent pointed out, and to which we
agree, Hasegawa is truly not authorized to act on behalf of Nippon in this case.
The aforesaid September 4, 2000 Authorization and even the subsequent
August 17, 2001 Authorization were issued only by Nippon's president and
chief executive officer, not by the company's board of directors. In not a few
cases, we have ruled that corporate powers are exercised by the board of
directors; thus, no person, not even its officers, can bind the corporation, in the
absence of authority from the board.40 Considering that Hasegawa verified and
certified the petition only on his behalf and not on behalf of the other petitioner,
the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.41 Substantial compliance will not suffice in a matter that
demands strict observance of the Rules.42 While technical rules of procedure
are designed not to frustrate the ends of justice, nonetheless, they are
intended to effect the proper and orderly disposition of cases and effectively
prevent the clogging of court dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule 65
petition to question the trial court's denial of their motion to dismiss. It is a well-
established rule that an order denying a motion to dismiss is interlocutory, and
cannot be the subject of the extraordinary petition for certiorari or mandamus.
The appropriate recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of an adverse
decision, to elevate the entire case by appeal in due course. 44 While there are
recognized exceptions to this rule, 45 petitioners' case does not fall among
them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners
question its jurisdiction to hear and resolve the civil case for specific
performance and damages filed by the respondent. The ICA subject of the
litigation was entered into and perfected in Tokyo, Japan, by Japanese
nationals, and written wholly in the Japanese language. Thus, petitioners posit
that local courts have no substantial relationship to the parties 46 following the
[state of the] most significant relationship rule in Private International Law. 47
The Court notes that petitioners adopted an additional but different theory
when they elevated the case to the appellate court. In the Motion to
Dismiss48 filed with the trial court, petitioners never contended that the RTC is
an inconvenient forum. They merely argued that the applicable law which will
determine the validity or invalidity of respondent's claim is that of Japan,
following the principles of lex loci celebrationis and lex contractus.49 While not
abandoning this stance in their petition before the appellate court, petitioners
on certiorari significantly invoked the defense of forum non conveniens.50 On
petition for review before this Court, petitioners dropped their other arguments,
maintained the forum non conveniens defense, and introduced their new
argument that the applicable principle is the [state of the] most significant
relationship rule.51
Be that as it may, this Court is not inclined to deny this petition merely on the
basis of the change in theory, as explained in Philippine Ports Authority v. City
of Iloilo.52 We only pointed out petitioners' inconstancy in their arguments to
emphasize their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive
phases are involved: jurisdiction, choice of law, and recognition and
enforcement of judgments. Corresponding to these phases are the following
questions: (1) Where can or should litigation be initiated? (2) Which law will
the court apply? and (3) Where can the resulting judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct
concepts.54 Jurisdiction considers whether it is fair to cause a defendant to
travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is
fair to both parties. The power to exercise jurisdiction does not automatically
give a state constitutional authority to apply forum law. While jurisdiction and
the choice of the lex fori will often coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the other.55 The
question of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state have jurisdiction
to enter a judgment.56
In this case, only the first phase is at issue—jurisdiction.1âwphi1 Jurisdiction,
however, has various aspects. For a court to validly exercise its power to
adjudicate a controversy, it must have jurisdiction over the plaintiff or the
petitioner, over the defendant or the respondent, over the subject matter, over
the issues of the case and, in cases involving property, over the res or the thing
which is the subject of the litigation.57 In assailing the trial court's jurisdiction
herein, petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the
sovereign authority which establishes and organizes the court. It is given only
by law and in the manner prescribed by law.58 It is further determined by the
allegations of the complaint irrespective of whether the plaintiff is entitled to all
or some of the claims asserted therein.59 To succeed in its motion for the
dismissal of an action for lack of jurisdiction over the subject matter of the
claim,60 the movant must show that the court or tribunal cannot act on the
matter submitted to it because no law grants it the power to adjudicate the
claims.61
In the instant case, petitioners, in their motion to dismiss, do not claim that the
trial court is not properly vested by law with jurisdiction to hear the subject
controversy for, indeed, Civil Case No. 00-0264 for specific performance and
damages is one not capable of pecuniary estimation and is properly cognizable
by the RTC of Lipa City.62 What they rather raise as grounds to question
subject matter jurisdiction are the principles of lex loci celebrationis and lex
contractus, and the "state of the most significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the ceremony"63 or the
law of the place where a contract is made.64 The doctrine of lex contractus
or lex loci contractus means the "law of the place where a contract is executed
or to be performed."65 It controls the nature, construction, and validity of the
contract66 and it may pertain to the law voluntarily agreed upon by the parties
or the law intended by them either expressly or implicitly.67 Under the "state of
the most significant relationship rule," to ascertain what state law to apply to a
dispute, the court should determine which state has the most substantial
connection to the occurrence and the parties. In a case involving a contract,
the court should consider where the contract was made, was negotiated, was
to be performed, and the domicile, place of business, or place of incorporation
of the parties.68 This rule takes into account several contacts and evaluates
them according to their relative importance with respect to the particular issue
to be resolved.69
Since these three principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the second phase, the choice
of law.70 They determine which state's law is to be applied in resolving the
substantive issues of a conflicts problem.71 Necessarily, as the only issue in
this case is that of jurisdiction, choice-of-law rules are not only inapplicable but
also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by
the fact that they have not yet pointed out any conflict between the laws of
Japan and ours. Before determining which law should apply, first there should
exist a conflict of laws situation requiring the application of the conflict of laws
rules.72 Also, when the law of a foreign country is invoked to provide the proper
rules for the solution of a case, the existence of such law must be pleaded and
proved.73
It should be noted that when a conflicts case, one involving a foreign element,
is brought before a court or administrative agency, there are three alternatives
open to the latter in disposing of it: (1) dismiss the case, either because of lack
of jurisdiction or refusal to assume jurisdiction over the case; (2) assume
jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other
State or States.74 The court’s power to hear cases and controversies is derived
from the Constitution and the laws. While it may choose to recognize laws of
foreign nations, the court is not limited by foreign sovereign law short of treaties
or other formal agreements, even in matters regarding rights provided by
foreign sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to
deprive the trial court of its jurisdiction herein. First, it is not a proper basis for
a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not
include it as a ground.77 Second, whether a suit should be entertained or
dismissed on the basis of the said doctrine depends largely upon the facts of
the particular case and is addressed to the sound discretion of the trial
court.78 In this case, the RTC decided to assume jurisdiction. Third, the
propriety of dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly considered a
matter of defense.79
Accordingly, since the RTC is vested by law with the power to entertain and
hear the civil case filed by respondent and the grounds raised by petitioners to
assail that jurisdiction are inappropriate, the trial and appellate courts correctly
denied the petitioners’ motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is
DENIED.
SO ORDERED.
G.R. No. 162894 February 26, 2008
RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.
DECISION
TINGA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure which seeks the reversal of the Decision 1 and
Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the
dismissal of the civil case filed by respondent against petitioner with the trial
court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly
organized and existing under the laws of the State of Connecticut, United
States of America, and respondent Stockton W. Rouzie, Jr., an American
citizen, entered into a contract whereby BMSI hired respondent as its
representative to negotiate the sale of services in several government projects
in the Philippines for an agreed remuneration of 10% of the gross receipts. On
11 March 1992, respondent secured a service contract with the Republic of
the Philippines on behalf of BMSI for the dredging of rivers affected by the Mt.
Pinatubo eruption and mudflows.3
On 16 July 1994, respondent filed before the Arbitration Branch of the National
Labor Relations Commission (NLRC) a suit against BMSI and Rust
International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for
alleged nonpayment of commissions, illegal termination and breach of
employment contract.4 On 28 September 1995, Labor Arbiter Pablo C.
Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondent’s
money claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the
Labor Arbiter and dismissed respondent’s complaint on the ground of lack of
jurisdiction.6 Respondent elevated the case to this Court but was dismissed in
a Resolution dated 26 November 1997. The Resolution became final and
executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an
action for damages before the Regional Trial Court (RTC) of Bauang, La
Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as
defendants herein petitioner Raytheon International, Inc. as well as BMSI and
RUST, the two corporations impleaded in the earlier labor case. The complaint
essentially reiterated the allegations in the labor case that BMSI verbally
employed respondent to negotiate the sale of services in government projects
and that respondent was not paid the commissions due him from the Pinatubo
dredging project which he secured on behalf of BMSI. The complaint also
averred that BMSI and RUST as well as petitioner itself had combined and
functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a
foreign corporation duly licensed to do business in the Philippines and denied
entering into any arrangement with respondent or paying the latter any sum of
money. Petitioner also denied combining with BMSI and RUST for the purpose
of assuming the alleged obligation of the said companies. 9 Petitioner also
referred to the NLRC decision which disclosed that per the written agreement
between respondent and BMSI and RUST, denominated as "Special Sales
Representative Agreement," the rights and obligations of the parties shall be
governed by the laws of the State of Connecticut.10 Petitioner sought the
dismissal of the complaint on grounds of failure to state a cause of action
and forum non conveniens and prayed for damages by way of compulsory
counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing
Based on Affirmative Defenses and for Summary Judgment 12 seeking the
dismissal of the complaint on grounds of forum non conveniens and failure to
state a cause of action. Respondent opposed the same. Pending the resolution
of the omnibus motion, the deposition of Walter Browning was taken before
the Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus
motion. The trial court held that the factual allegations in the complaint,
assuming the same to be admitted, were sufficient for the trial court to render
a valid judgment thereon. It also ruled that the principle of forum non
conveniens was inapplicable because the trial court could enforce judgment
on petitioner, it being a foreign corporation licensed to do business in the
Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was
opposed by respondent.17 In an Order dated 31 July 2001, 18 the trial court
denied petitioner’s motion. Thus, it filed a Rule 65 Petition19 with the Court of
Appeals praying for the issuance of a writ of certiorari and a writ of injunction
to set aside the twin orders of the trial court dated 13 September 2000 and 31
July 2001 and to enjoin the trial court from conducting further proceedings. 20
On 28 August 2003, the Court of Appeals rendered the assailed
Decision21 denying the petition for certiorari for lack of merit. It also denied
petitioner’s motion for reconsideration in the assailed Resolution issued on 10
March 2004.22
The appellate court held that although the trial court should not have confined
itself to the allegations in the complaint and should have also considered
evidence aliunde in resolving petitioner’s omnibus motion, it found the
evidence presented by petitioner, that is, the deposition of Walter Browning,
insufficient for purposes of determining whether the complaint failed to state a
cause of action. The appellate court also stated that it could not rule one way
or the other on the issue of whether the corporations, including petitioner,
named as defendants in the case had indeed merged together based solely
on the evidence presented by respondent. Thus, it held that the issue should
be threshed out during trial.23 Moreover, the appellate court deferred to the
discretion of the trial court when the latter decided not to desist from assuming
jurisdiction on the ground of the inapplicability of the principle of forum non
conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT ON THE GROUND
OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The
Ceferino Padua Law Office, counsel on record for respondent, manifested that
the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations
with the law firm even before the filing of the instant petition and that it could
no longer find the whereabouts of Atty. Karagdag or of respondent despite
diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved
to dispense with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and
BMSI included a valid choice of law clause, that is, that the contract shall be
governed by the laws of the State of Connecticut. It also mentions the presence
of foreign elements in the dispute – namely, the parties and witnesses involved
are American corporations and citizens and the evidence to be presented is
located outside the Philippines – that renders our local courts inconvenient
forums. Petitioner theorizes that the foreign elements of the dispute
necessitate the immediate application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive
phases involved in judicial resolution of conflicts-of-laws problems, namely:
jurisdiction, choice of law, and recognition and enforcement of judgments.
Thus, in the instances27 where the Court held that the local judicial machinery
was adequate to resolve controversies with a foreign element, the following
requisites had to be proved: (1) that the Philippine Court is one to which the
parties may conveniently resort; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that the
Philippine Court has or is likely to have the power to enforce its decision. 28
On the matter of jurisdiction over a conflicts-of-laws problem where the case
is filed in a Philippine court and where the court has jurisdiction over the subject
matter, the parties and the res, it may or can proceed to try the case even if
the rules of conflict-of-laws or the convenience of the parties point to a foreign
forum. This is an exercise of sovereign prerogative of the country where the
case is filed.29
Jurisdiction over the nature and subject matter of an action is conferred by the
Constitution and the law30 and by the material allegations in the complaint,
irrespective of whether or not the plaintiff is entitled to recover all or some of
the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for
damages arising from an alleged breach of contract. Undoubtedly, the nature
of the action and the amount of damages prayed are within the jurisdiction of
the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over
herein respondent (as party plaintiff) upon the filing of the complaint. On the
other hand, jurisdiction over the person of petitioner (as party defendant) was
acquired by its voluntary appearance in court.32
That the subject contract included a stipulation that the same shall be
governed by the laws of the State of Connecticut does not suggest that the
Philippine courts, or any other foreign tribunal for that matter, are precluded
from hearing the civil action. Jurisdiction and choice of law are two distinct
concepts. Jurisdiction considers whether it is fair to cause a defendant to travel
to this state; choice of law asks the further question whether the application of
a substantive law which will determine the merits of the case is fair to both
parties.33 The choice of law stipulation will become relevant only when the
substantive issues of the instant case develop, that is, after hearing on the
merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws
cases, may refuse impositions on its jurisdiction where it is not the most
"convenient" or available forum and the parties are not precluded from seeking
remedies elsewhere.34 Petitioner’s averments of the foreign elements in the
instant case are not sufficient to oust the trial court of its jurisdiction over Civil
Case No. No. 1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum
non conveniens requires a factual determination; hence, it is more properly
considered as a matter of defense. While it is within the discretion of the trial
court to abstain from assuming jurisdiction on this ground, it should do so only
after vital facts are established, to determine whether special circumstances
require the court’s desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals
respected its conclusion that it can assume jurisdiction over the dispute
notwithstanding its foreign elements. In the same manner, the Court defers to
the sound discretion of the lower courts because their findings are binding on
this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to
state a cause of action against petitioner. Failure to state a cause of action
refers to the insufficiency of allegation in the pleading. 36 As a general rule, the
elementary test for failure to state a cause of action is whether the complaint
alleges facts which if true would justify the relief demanded.37
The complaint alleged that petitioner had combined with BMSI and RUST to
function as one company. Petitioner contends that the deposition of Walter
Browning rebutted this allegation. On this score, the resolution of the Court of
Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well
as other documents produced in the hearing shows that these
evidence aliunde are not quite sufficient for us to mete a ruling that the
complaint fails to state a cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and
conclusive proofs that Raytheon Engineers and Constructors, Inc.
(REC) assumed the warranty obligations of defendant Rust
International in the Makar Port Project in General Santos City, after
Rust International ceased to exist after being absorbed by REC. Other
documents already submitted in evidence are likewise meager to
preponderantly conclude that Raytheon International, Inc., Rust
International[,] Inc. and Brand Marine Service, Inc. have combined into
one company, so much so that Raytheon International, Inc., the
surviving company (if at all) may be held liable for the obligation of
BMSI to respondent Rouzie for unpaid commissions. Neither these
documents clearly speak otherwise.38
As correctly pointed out by the Court of Appeals, the question of whether
petitioner, BMSI and RUST merged together requires the presentation of
further evidence, which only a full-blown trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
SECOND DIVISION
G.R. No. 198587, January 14, 2015
SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J.
BETIA, Petitioners, v. MA. JOPETTE M. REBESENCIO,
MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL
AND LORAINE S. SCHNEIDER-CRUZ, Respondents.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in
the Constitution.
This is a Petition for Review on Certiorari with application for the
issuance of a temporary restraining order and/or writ of preliminary
injunction under Rule 45 of the 1997 Rules of Civil Procedure praying
that judgment be rendered reversing and setting aside the June 16,
2011 Decision1 and September 13, 2011 Resolution2 of the Court of
Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation
established and existing under the laws of Jeddah, Kingdom of Saudi
Arabia. It has a Philippine office located at 4/F, Metro House Building,
Sen. Gil J. Puyat Avenue, Makati City.3 In its Petition filed with this
court, Saudia identified itself as follows:chanroblesvirtuallawlibrary
1. Petitioner SAUDIA is a foreign corporation established and existing
under the Royal Decree No. M/24 of 18.07.1385H (10.02.1962G) in
Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is
located at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati
City (Philippine Office). It may be served with orders of this
Honorable Court through undersigned counsel at 4 th and 6th Floors,
Citibank Center Bldg., 8741 Paseo de Roxas, Makati City.4 (Emphasis
supplied)
Respondents (complainants before the Labor Arbiter) were recruited
and hired by Saudia as Temporary Flight Attendants with the
accreditation and approval of the Philippine Overseas Employment
Administration.5 After undergoing seminars required by the
Philippine Overseas Employment Administration for deployment
overseas, as well as training modules offered by Saudia (e.g., initial
flight attendant/training course and transition training), and after
working as Temporary Flight Attendants, respondents became
Permanent Flight Attendants. They then entered into Cabin
Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma.
Jopette) on May 16, 1990;6 Montassah B. Sacar-Adiong (Montassah)
and Rouen Ruth A. Cristobal (Rouen Ruth) on May 22, 1993; 7 and
Loraine Schneider-Cruz (Loraine) on August 27, 1995.8
Respondents continued their employment with Saudia until they
were separated from service on various dates in 2006.9
Respondents contended that the termination of their employment
was illegal. They alleged that the termination was made solely
because they were pregnant.10
As respondents alleged, they had informed Saudia of their respective
pregnancies and had gone through the necessary procedures to
process their maternity leaves. Initially, Saudia had given its
approval but later on informed respondents that its management in
Jeddah, Saudi Arabia had disapproved their maternity leaves. In
addition, it required respondents to file their resignation letters.11
Respondents were told that if they did not resign, Saudia would
terminate them all the same. The threat of termination entailed the
loss of benefits, such as separation pay and ticket discount
entitlements.12
Specifically, Ma. Jopette received a call on October 16, 2006 from
Saudia's Base Manager, Abdulmalik Saddik
(Abdulmalik).13 Montassah was informed personally by Abdulmalik
and a certain Faisal Hussein on October 20, 2006 after being
required to report to the office one (1) month into her maternity
leave.14Rouen Ruth was also personally informed by Abdulmalik on
October 17, 2006 after being required to report to the office by her
Group Supervisor.15 Loraine received a call on October 12, 2006
from her Group Supervisor, Dakila Salvador.16
Saudia anchored its disapproval of respondents' maternity leaves
and demand for their resignation on its "Unified Employment
Contract for Female Cabin Attendants" (Unified Contract). 17 Under
the Unified Contract, the employment of a Flight Attendant who
becomes pregnant is rendered void. It
provides:chanroblesvirtuallawlibrary
(H) Due to the essential nature of the Air Hostess functions to be
physically fit on board to provide various services required in normal
or emergency cases on both domestic/international flights beside her
role in maintaining continuous safety and security of passengers,
and since she will not be able to maintain the required medical
fitness while at work in case of pregnancy, accordingly, if the Air
Hostess becomes pregnant at any time during the term of this
contract, this shall render her employment contract as void
and she will be terminated due to lack of medical
fitness.18 (Emphasis supplied)
In their Comment on the present Petition,19 respondents emphasized
that the Unified Contract took effect on September 23, 2006 (the
first day of Ramadan),20 well after they had filed and had their
maternity leaves approved. Ma. Jopette filed her maternity leave
application on September 5, 2006.21 Montassah filed her maternity
leave application on August 29, 2006, and its approval was already
indicated in Saudia's computer system by August 30, 2006. 22 Rouen
Ruth filed her maternity leave application on September 13,
2006,23 and Loraine filed her maternity leave application on August
22, 2006.24
Rather than comply and tender resignation letters, respondents filed
separate appeal letters that were all rejected.25
Despite these initial rejections, respondents each received calls on
the morning of November 6, 2006 from Saudia's office secretary
informing them that their maternity leaves had been approved.
Saudia, however, was quick to renege on its approval. On the
evening of November 6, 2006, respondents again received calls
informing them that it had received notification from Jeddah, Saudi
Arabia that their maternity leaves had been disapproved. 26

Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In
Montassah's and Rouen Ruth's cases, their resignations were
executed on Saudia's blank letterheads that Saudia had provided.
These letterheads already had the word "RESIGNATION" typed on
the subject portions of their headings when these were handed to
respondents.27
On November 8, 2007, respondents filed a Complaint against Saudia
and its officers for illegal dismissal and for underpayment of salary,
overtime pay, premium pay for holiday, rest day, premium, service
incentive leave pay, 13th month pay, separation pay, night shift
differentials, medical expense reimbursements, retirement benefits,
illegal deduction, lay-over expense and allowances, moral and
exemplary damages, and attorney's fees. 28 The case was initially
assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC
NCR Case No. 00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that
all the determining points of contact referred to foreign law and
insisted that the Complaint ought to be dismissed on the ground
of forum non conveniens.30 It added that respondents had no cause
of action as they resigned voluntarily.31
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-
Franco rendered the Decision32dismissing respondents' Complaint.
The dispositive portion of this Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, premises' considered, judgment is hereby
rendered DISMISSING the instant complaint for lack of
jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's
Sixth Division reversed the ruling of Executive Labor Arbiter
Jambaro-Franco. It explained that "[considering that complainants-
appellants are OFWs, the Labor Arbiters and the NLRC has [sic]
jurisdiction to hear and decide their complaint for illegal
termination."34 On the matter of forum non conveniens, it noted that
there were no special circumstances that warranted its abstention
from exercising jurisdiction.35 On the issue of whether respondents
were validly dismissed, it held that there was nothing on record to
support Saudia's claim that respondents resigned voluntarily.
The dispositive portion of the November 19, 2009 National Labor
Relations Commission Decision36reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
finding the appeal impressed with merit. The respondents-appellees
are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and
separation pay plus ten (10%) percent thereof as attorney's fees.
The decision of the Labor Arbiter dated December 12, 2008 is hereby
VACATED and SET ASIDE. Attached is the computation prepared by
this Commission and made an integral part of this
Decision.37cralawlawlibrary
In the Resolution dated February 11, 2010,38 the National Labor
Relations Commission denied petitioners' Motion for
Reconsideration.
In the June 16, 2011 Decision,39 the Court of Appeals denied
petitioners' Rule 65 Petition and modified the Decision of the National
Labor Relations Commission with respect to the award of separation
pay and backwages.
The dispositive portion of the Court of Appeals Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, the instant petition is hereby DENIED. The Decision
dated November 19, 2009 issued by public respondent, Sixth
Division of the National Labor Relations Commission - National
Capital Region is MODIFIED only insofar as the computation of the
award of separation pay and backwages. For greater clarity,
petitioners are ordered to pay private respondents separation pay
which shall be computed from private respondents' first day of
employment up to the finality of this decision, at the rate of one
month per year of service and backwages which shall be computed
from the date the private respondents were illegally terminated until
finality of this decision. Consequently, the ten percent (10%)
attorney's fees shall be based on the total amount of the award. The
assailed Decision is affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation
based on the foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011, 41 the Court of Appeals
denied petitioners' Motion for Reconsideration.
Hence, this Appeal was filed.

The issues for resolution are the following:

 that Saudia submitted to the Labor Arbiter,47 what Saudia now refers
First, whether the Labor Arbiter and the National Labor Relations to as "Saudia Jeddah" was then only referred to as "Saudia Head
Commission may exercise jurisdiction over Saudi Arabian Airlines Office at Jeddah, KSA,"48 while what Saudia now refers to as "Saudia
and apply Philippine law in adjudicating the present dispute; Manila" was then only referred to as "Saudia's office in Manila." 49

Second, whether respondents' voluntarily resigned or were illegally By its own admission, Saudia, while a foreign corporation, has a
terminated; and Philippine office.

Lastly, whether Brenda J. Betia may be held personally liable along Section 3(d) of Republic Act No.. 7042, otherwise known as the
with Saudi Arabian Airlines.chanRoblesvirtualLawlibrary Foreign Investments Act of 1991, provides the
following:chanroblesvirtuallawlibrary
I The phrase "doing business" shall include . . . opening offices,
whether called "liaison" offices or branches; . . . and any other
Summons were validly served on Saudia and jurisdiction over it act or acts that imply a continuity of commercial dealings or
validly acquired. arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
There is no doubt that the pleadings and summons were served on incident to, and in progressive prosecution of commercial gain or of
Saudia through its counsel.42 Saudia, however, claims that the Labor the purpose and object of the business organization. (Emphasis
Arbiter and the National Labor Relations Commission had no supplied)
jurisdiction over it because summons were never served on it but on A plain application of Section 3(d) of the Foreign Investments Act
"Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims leads to no other conclusion than that Saudia is a foreign corporation
that "Saudia Jeddah" and not "Saudia Manila" was the employer of doing business in the Philippines. As such, Saudia may be sued in
respondents because: the Philippines and is subject to the jurisdiction of Philippine
tribunals.
First, "Saudia Manila" was never a party to the Cabin Attendant
contracts entered into by respondents; Moreover, since there is no real distinction between "Saudia Jeddah"
and "Saudia Manila" — the latter being nothing more than Saudia's
Second, it was "Saudia Jeddah" that provided the funds to pay for local office — service of summons to Saudia's office in Manila sufficed
respondents' salaries and benefits; and to vest jurisdiction over Saudia's person in Philippine
tribunals.chanRoblesvirtualLawlibrary
Lastly, it was with "Saudia Jeddah" that respondents filed their
resignations.44 II

Saudia posits that respondents' Complaint was brought against the Saudia asserts that Philippine courts and/or tribunals are not in a
wrong party because "Saudia Manila," upon which summons was position to make an intelligent decision as to the law and the facts.
served, was never the employer of respondents.45 This is because respondents' Cabin Attendant contracts require the
application of the laws of Saudi Arabia, rather than those of the
Saudia is vainly splitting hairs in its effort to absolve itself of liability. Philippines.50 It claims that the difficulty of ascertaining foreign law
Other than its bare allegation, there is no basis for concluding that calls into operation the principle of forum non conveniens, thereby
"Saudia Jeddah" is distinct from "Saudia Manila." rendering improper the exercise of jurisdiction by Philippine
tribunals.51
What is clear is Saudia's statement in its own Petition that what it
has is a "Philippine Office . . . located at 4/F Metro House Building, A choice of law governing the validity of contracts or the
Sen. Gil J. Puyat Avenue, Makati City."46 Even in the position paper interpretation of its provisions dees not necessarily imply forum non
conveniens. Choice of law and forum non conveniens are entirely
different matters.
Choice of law provisions are an offshoot of the fundamental principle
of autonomy of contracts. Article 1306 of the Civil Code firmly
ensconces this:chanroblesvirtuallawlibrary
Article 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public
order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against
forum shopping. It is designed to frustrate illicit means for securing
advantages and vexing litigants that would otherwise be possible if
the venue of litigation (or dispute resolution) were left entirely to the
whim of either party.
Contractual choice of law provisions factor into transnational
litigation and dispute resolution in one of or in a combination of four
ways: (1) procedures for settling disputes, e.g., arbitration; (2)
forum, i.e., venue; (3) governing law; and (4) basis for
interpretation. Forum non conveniens relates to, but is not
subsumed by, the second of these.
Likewise, contractual choice of law is not determinative of
jurisdiction. Stipulating on the laws of a given jurisdiction as the
governing law of a contract does not preclude the exercise of
jurisdiction by tribunals elsewhere. The reverse is equally true: The
assumption of jurisdiction by tribunals does not ipso factomean that
it cannot apply and rule on the basis of the parties' stipulation.
In Hasegawa v. Kitamura:52ChanRoblesVirtualawlibrary
Analytically, jurisdiction and choice of law are two distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to travel
to this state; choice of law asks the further question whether the
application of a substantive law V'hich will determine the merits of
the case is fair to both parties. The power to exercise jurisdiction
does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often,
coincide, the "minimum contacts" for one do not always provide the
necessary "significant contacts" for the other. The question of
whether the law of a state can be applied to a transaction is different
from the question of whether the courts of that state have
jurisdiction to enter a judgment.53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the
progressive ease of communication and travel, persons from various
jurisdictions find themselves transacting with each other. Contracts
involving foreign elements are, however, nothing new. Conflict of
laws situations precipitated by disputes and litigation anchored on
these contracts are not totally novel.
Transnational transactions entail differing laws on the requirements
Q for the validity of the formalities and substantive provisions of
contracts and their interpretation. These transactions inevitably lend
themselves to the possibility of various fora for litigation and dispute
resolution. As observed by an eminent expert on transnational
law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point
of contact with, a transaction or relationship, the greater the number
of potential fora for the resolution of disputes arising out of or related
to that transaction or relationship. In a world of increased mobility,
where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily
be invoked in a single or a set of related disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic
validity of contracts. The first paragraph of Article 17 of the Civil
Code provides that "[t]he forms and solemnities of contracts . . .
shall be governed by the laws of the country in which they are
executed"55 (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling
conflict of laws situations on matters pertaining to substantive
content of contracts. It has been noted that three (3) modes have
emerged: (1) lex loci contractus or the law of the place of the
making; (2) lex loci solutionis or the law of the place of performance;
and (3) lex loci intentionis or the law intended by the parties. 56
Given Saudia's assertions, of particular relevance to resolving the
present dispute is lex loci intentionis.
An author observed that Spanish jurists and commentators
"favor lex loci intentionis."57 These jurists and commentators
proceed from the Civil Code of Spain, which, like our Civil Code, is
silent on what governs the intrinsic validity of contracts, and the
same civil law traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc.,58 manifested
preference for allowing the parties to select the law applicable to
their contract":chanroblesvirtuallawlibrary
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or
domicile of the parties. Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive
relationship to the transaction.59(Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts
require the application of the laws of Saudi Arabia. It insists that the
need to comply with these stipulations calls into operation the
doctrine of forum non conveniens and, in turn, makes it necessary
for Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational
litigation in any or a combination of four (4) ways. Moreover, forum
non conveniens relates to one of these: choosing between multiple
possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora —
along with the host of difficulties it poses — is not unique to
transnational litigation. It is a difficulty that similarly arises in
disputes well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single
jurisdiction, such rules as those on forum shopping, litis pendentia,
and res judicata come into operation. Thus, in the Philippines, the
1997 Rules on Civil Procedure provide for willful and deliberate forum
shopping as a ground not only for summary dismissal with prejudice
but also for citing parties and counsels in direct contempt, as well as
for the imposition of administrative sanctions.60 Likewise, the same
rules expressly provide that a party may seek the dismissal of a
Complaint or another pleading asserting a claim on the ground
"[t]hat there is another action pending between the same parties for
the same cause," i.e., litis pendentia, or "[t]hat the cause of action
is barred by a prior judgment,"61 i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis
pendentia, and res judicata, is a means of addressing the problem
of parallel litigation. While the rules of forum shopping, litis
pendentia, and res judicata are designed to address the problem of
parallel litigation within a single jurisdiction, forum non
conveniens is a means devised to address parallel litigation arising
in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is
inconvenient."62 It is a concept in private international law and was
devised to combat the "less than honorable" reasons and excuses
that litigants use to secure procedural advantages, annoy and harass
defendants, avoid overcrowded dockets, and select a "friendlier"
venue.63 Thus, the doctrine of forum non conveniens addresses the
same rationale that the rule against forum shopping does, albeit on
a multijurisdictional scale.
Forum non conveniens, like res judicata,64 is a concept originating in
common law.65 However, unlike the rule on res judicata, as well as
those on litis pendentia and forum shopping, forum non
conveniens finds no textual anchor, whether in statute or in
procedural rules, in our civil law system. Nevertheless, jurisprudence
has applied forum non conveniens as basis for a court to decline its
exercise of jurisdiction.66
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure
undue advantages by engaging in forum shopping on an
international scale. It is also grounded on principles of comity and
judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in
exercising jurisdiction on account of forum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs
which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that
tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation
where a tribunal is rendered incompetent in the face of the greater
capability — both analytical and practical — of a tribunal in another
jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is
as much a matter of efficiency and economy as it is a matter of
international courtesy. A court would effectively be neutering itself if
it insists on adjudicating a controversy when it knows full well that
it is in no position to enforce its judgment. Doing so is not only an
exercise in futility; it is an act of frivolity. It clogs the dockets of
a.tribunal and leaves it to waste its efforts on affairs, which, given
transnational exigencies, will be reduced to mere academic, if not
trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "a court,
in conflicts of law cases, may refuse impositions on its jurisdiction
where it is not the most 'convenient' or available forum and the
parties are not precluded from seeking remedies
elsewhere."67 In Puyat v. Zabarte,68 this court recognized the
following situations as among those that may warrant a court's
desistance from exercising jurisdiction:chanroblesvirtuallawlibrary
1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case
transpired in a foreign jurisdiction or the material witnesses have
their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a
practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non
residents or aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating
the right sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v.
Court of Appeals,70 this court underscored that a Philippine court
may properly assume jurisdiction over a case if it chooses to do so
to the extent: "(1) that the Philippine Court is one to which the
parties may conveniently resort to; (2) that the Philippine Court is
in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have power
to enforce its decision."71
The use of the word "may" (i.e., "may refuse impositions on its
jurisdiction"72) in the decisions shows that the matter of jurisdiction
rests on the sound discretion of a court. Neither the mere invocation
of forum non conveniens nor the averment of foreign elements
operates to automatically divest a court of jurisdiction. Rather, a
court should renounce jurisdiction only "after 'vital facts are
established, to determine whether special circumstances' require the
court's desistance."73 As the propriety of applying forum non
conveniens is contingent on a factual determination, it is, therefore,
a matter of defense.74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil
Procedure is exclusive in its recital of the grounds for dismissal that
are exempt from the omnibus motion rule: (1) lack of jurisdiction
over the subject matter; (2) litis pendentia; (3) res judicata; and (4)
prescription. Moreover, dismissal on account offorum non
conveniens is a fundamentally discretionary matter. It is, therefore,
not a matter for a defendant to foist upon the court at his or her own
convenience; rather, it must be pleaded at the earliest possible
opportunity.
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,76 this court stated that forum non
conveniens is not a ground for a motion to dismiss. The factual
ambience of this case however does not squarely raise the viability
of this doctrine. Until the opportunity comes to review the use of
motions to dismiss for parallel litigation, Hasegawa remains existing
doctrine.
Consistent with forum non conveniens as fundamentally a factual
matter, it is imperative that it proceed from & factually established
basis. It would be improper to dismiss an action pursuant to forum
non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that
a prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by
duplicitous litigation, the embarrassment of intruding into the affairs
of another sovereign, and the squandering of judicial efforts in
resolving a dispute already lodged and better resolved elsewhere. As
has been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non
conveniens grounds unless the plaintiff is shown to have an available
alternative forum elsewhere. On this, the moving party bears the
burden of proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the
foreign court may lack either subject matter or personal jurisdiction
over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the
fairness of its judicial procedures, or as to is operational efficiency
(due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case,
[it was found] that delays of 'up to a quarter of a century' rendered
the foreign forum... inadequate for these
purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of prudence
that a defendant not only allege supposed dangerous tendencies in
litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.
III
Forum non conveniens finds no application and does not operate to
divest Philippine tribunals of jurisdiction and to require the
application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the
stipulations of the Cabin Attendant contracts that require the
application of the laws of Saudi Arabia.
Forum non conveniens relates to forum, not to the choice of
governing law. Thai forum non conveniensmay ultimately result in
the application of foreign law is merely an incident of its application.
In this strict sense, forum non conveniens is not applicable. It is not
the primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum
non conveniens on the incidental matter of the law governing
respondents' relation with Saudia leads to the conclusion that it is
improper for Philippine tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a
forum and'its incidents must grapple with two (2) considerations:
first, the availability and adequacy of recourse to a foreign tribunal;
and second, the question of where, as between the forum court and
a foreign court, the balance of interests inhering in a dispute weighs
more heavily.
The first is a pragmatic matter. It relates to the viability of ceding
jurisdiction to a foreign tribunal and can be resolved by juxtaposing
the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity
to enforce orders and judgments, access to records, requirements
for the acquisition of jurisdiction, and even questions relating to the
integrity of foreign courts, may render undesirable or even totally
unfeasible recourse to a foreign court. As mentioned, we consider it
in the greater interest of prudence that a defendant show, in
pleading forum non conveniens, that litigation has commenced in
another jurisdiction and that a foieign tribunal has, in fact, chosen
to exercise jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of
interests inhering in a dispute: first, the vinculum which the parties
and their relation have to a given jurisdiction; and second, the public
interest that must animate a tribunal, in its capacity as an agent of
the sovereign, in choosing to assume or decline jurisdiction. The first
is more concerned with the parties, their personal circumstances,
and private interests; the second concerns itself with the state and
the greater social order.
In considering the vinculum, a court must look into the
preponderance of linkages which the parties and their transaction
may have to either jurisdiction. In this respect, factors, such as the
parties' respective nationalities and places of negotiation, execution,
performance, engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness
that it is an organ of the state. It must, thus, determine if the
interests of the sovereign (which acts through it) are outweighed by
those of the alternative jurisdiction. In this respect, the court delves
into a consideration of public policy. Should it find that public interest
weighs more heavily in favor of its assumption of jurisdiction, it
should proceed in adjudicating the dispute, any doubt or .contrary
view arising from the preponderance of linkages notwithstanding.

Our law on contracts recognizes the validity of contractual choice of
law provisions. Where such provisions exist, Philippine tribunals,
acting as the forum court, generally defer to the parties' articulated
choice.
This is consistent with the fundamental principle of autonomy of
contracts. Article 1306 of the Civ:l Code expressly provides that
"[t]he contracting parties may establish 'such stipulations, clauses,
terms and conditions as they may deem
convenient."78 Nevertheless, while a Philippine tribunal (acting as
the forum court) is called upon to respect the parties' choice of
governing law, such respect must not be so permissive as to lose
sight of considerations of law, morals, good customs, public order,
or public policy that underlie the contract central to the controversy.
Specifically with respect to public policy, in Pakistan International
Airlines Corporation v. Ople,79 this court explained
that:chanroblesvirtuallawlibrary
counter-balancing the principle of autonomy of contracting parties is
the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy,
are deemed written inta the contract. Put a little differently, the
governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with
matters heavily impressed with public interest. 80(Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he
State ... shall ensure the fundamental equality before the law of
women and men." Contrasted with Article II, Section 1 of the 1987
Constitution's statement that "[n]o person shall ... be denied the
equal protection of the laws," Article II, Section 14 exhorts the State
to "ensure." This does not only mean that the Philippines shall not
countenance nor lend legal recognition and approbation to measures
that discriminate on the basis of one's being male or female. It
imposes an obligation to actively engage in securing the
fundamental equality of men and women.
The Convention on the Elimination of all Forms of Discrimination
against Women (CEDAW), signed and ratified by the Philippines on
July 15, 1980, and on August 5, 1981, respectively,81 is part of the
law of the land. In view of the widespread signing and ratification of,
as well as adherence (in practice) to it by states, it may even be said
that many provisions of the CEDAW may have become customary
international law. The CEDAW gives effect to the Constitution's policy
statement in Article II, Section 14. Article I of the CEDAW defines
"discrimination against women" as:chanroblesvirtuallawlibrary
any distinction, exclusion or restriction made on the basis of sex
which has the effect or purpose of impairing or nullifying the
recognition, enjoyment or exercise by women, irrespective of their
marital status, on a basis of equality of men and women, of human
rights and fundamental freedoms in the political, economic, social,
cultural, civil or any other field.82cralawlawlibrary
The constitutional exhortation to ensure fundamental equality, as
illumined by its enabling law, the CEDAW, must inform and animate
all the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on
the disputes brought before it, to ensure that no discrimination is
heaped upon women on the mere basis of their being women. This
is a point so basic and central that all our discussions and
pronouncements — regardless of whatever averments there may be
of foreign law — must proceed from this premise.
So informed and animated, we emphasize the glaringly
discriminatory nature of Saudia's policy. As argued by respondents,
Saudia's policy entails the termination of employment of flight
attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to
women. Saudia's policy excludes from and restricts employment on
the basis of no other consideration but sex.
We do not lose sight of the reality that pregnancy does present
physical limitations that may render difficult the performance of
functions associated with being a flight attendant. Nevertheless, it
would be the height of iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the termination of
one's employment. It is clear to us that any individual, regardless of
gender, may be subject to exigencies that limit the performance of
functions. However, we fail to appreciate how pregnancy could be
such an impairing occurrence that it leaves no other recourse but
the complete termination of the means through which a woman
earns a living.
Apart from the constitutional policy on the fundamental equality
before the law of men and women, it is settled that contracts relating
to labor and employment are impressed with public interest. Article
1700 of the Civil Code provides that "[t]he relation between capital
and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good."

Consistent with this, this court's pronouncements in Pakistan
International Airlines Corporation83 are clear and
unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the
applicable law of the agreement, and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi, Pakistan". The first clause of
paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and'regulations to the subject matter of this
case, i.e., the employer-employee relationship between petitioner
PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to
govern their relationship. . . . Under these circumstances, paragraph
10 of the employment agreement cannot be given effect so as to
oust Philippine agencies and courts of the jurisdiction vested upon
them by Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be)
the illegal termination of respondents' employment, this case is
immutably a matter of public interest and public policy. Consistent
with clear pronouncements in law and jurisprudence, Philippine laws
properly find application in and govern this case. 'Moreover, as this
premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals
may properly assume jurisdiction over the present controversy.
Philippine jurisprudence provides ample illustrations of when a
court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'
In Philsec Investment Corporation v. Court of Appeals,85 this court
noted that the trial court failed to consider that one of the plaintiffs
was a domestic corporation, that one of the defendants was a
Filipino, and that it was the extinguishment of the latter's debt that
was the object of the transaction subject of the litigation. Thus, this
court held, among others, that the trial court's refusal to assume
jurisdiction was not justified by forum non conveniens and
remanded the case to the trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained
the trial court's assumption of jurisdiction considering that the trial
court could properly enforce judgment on the petitioner which was
a foreign corporation licensed to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no
reason to disturb the trial court's assumption of jurisdiction over a
case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the
plaintiff] resides in the Philippines and the contract allegedly
breached involve[d] employment in the Philippines."88
In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this
court held that the fact that the complainant in an illegal dismissal
case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor
Code does not include forum non conveniens as a ground for the
dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a factual
determination; and (3) the requisites for assumption of jurisdiction
as laid out in Bank of America, NT&SA90 were all satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National
Labor Relations Commission91 that the National Labor Relations Q
Commission was a seriously inconvenient forum. In that case,
private respondent Marcelo G. Santos was working in the Sultanate
of Oman when he received a letter from Palace Hotel recruiting him
for employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment
supposedly due to business reverses arising from political upheavals
in China (i.e., the Tiananmen Square incidents of 1989). Santos later
filed a Complaint for illegal dismissal impleading Palace Hotel's
General Manager, Mr. Gerhard Schmidt, the Manila Hotel
International Company Ltd. (which was, responsible for training
Palace Hotel's personnel and staff), and the Manila Hotel Corporation
(which owned 50% of Manila Hotel International Company Ltd.'s
capital stock).
In ruling against the National Labor Relations Commission's exercise
of jurisdiction, this court noted that the main aspects of the case
transpired in two (2) foreign jurisdictions, Oman and China, and that
the case involved purely foreign elements. Specifically, Santos was
directly hired by a foreign employer through correspondence sent to
Oman. Also, the proper defendants were neither Philippine nationals
nor engaged in business in the Philippines, while the main witnesses
were not residents of the Philippines. Likewise, this court noted that
the National Labor Relations Commission was in no position to
conduct the following: first, determine the law governing the
employment contract, as it was entered into in foreign soil; second, Even if we were to assume, for the sake of discussion, that it is the
determine the facts, as Santos' employment was terminated in laws of Saudi Arabia which should apply, it does not follow that
Beijing; and third, enforce its judgment, since Santos' employer, Philippine tribunals should refrain from exercising jurisdiction. To.
Palace Hotel, was incorporated under the laws of China and was not recall our pronouncements in Puyat,94 as well as in Bank of America,
even served with summons. NT&SA,95 it is not so much the mere applicability of foreign law
which calls into operation forum non conveniens. Rather, what
Contrary to Manila Hotel, the case now before us does not entail a justifies a court's desistance from exercising jurisdiction is
preponderance of linkages that favor a foreign jurisdiction. "[t]he difficulty of ascertaining foreign law"96 or the inability of a
"Philippine Court to make an intelligent decision as to the law[.]" 97
Here, the circumstances of the parties and their relation do not
approximate the circumstances enumerated in Puyat,92 which this Consistent with lex loci intentionis, to the extent that it is proper and
court recognized as possibly justifying the desistance of Philippine practicable (i.e., "to make an intelligent decision"98), Philippine
tribunals from exercising jurisdiction. tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy
First, there is no basis for concluding that the case can be more and reliability of respondents' citation) in this case, respondents
conveniently tried elsewhere. As established earlier, Saudia is doing themselves have made averments as to the laws of Saudi Arabia. In
business in the Philippines. For their part, all four (4) respondents their Comment, respondents write:chanroblesvirtuallawlibrary
are Filipino citizens maintaining residence in the Philippines and, Under the Labor Laws of Saudi Arabia and the Philippines[,] it is
apart from their previous employment with Saudia, have no other illegal and unlawful to terminate the employment of any woman by
connection to the Kingdom of Saudi Arabia. It would even be to virtue of pregnancy. The law in Saudi Arabia is even more harsh and
respondents' inconvenience if this case were to be tried elsewhere. strict [sic] in that no employer can terminate the employment of a
female worker or give her a warning of the same while on Maternity
Second, the records are bereft of any indication that respondents Leave, the specific provision of Saudi Labor Laws on the matter is
filed their Complaint in an effort to engage in forum shopping or to hereto quoted as follows:chanroblesvirtuallawlibrary
vex and inconvenience Saudia. "An employer may not terminate the employment of a female worker
or give her a warning of the same while on maternity leave." (Article
Third, there is no indication of "unwillingness to extend local judicial 155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree No.
facilities to non-residents or aliens."93 That Saudia has managed to M/51.)99cralawlawlibrary
bring the present controversy all the way to this court proves this. All told, the considerations for assumption of jurisdiction by
Philippine tribunals as outlined in Bank of America, NT&SA100 have
Fourth, it cannot be said that the local judicial machinery is been satisfied. First, all the parties are based in the Philippines and
inadequate for effectuating the right sought to be maintained. all the material incidents transpired in this jurisdiction. Thus, the
Summons was properly served on Saudia and jurisdiction over its parties may conveniently seek relief from Philippine tribunals.
person was validly acquired. Second, Philippine tribunals are in a position to make an intelligent
decision as to the law and the facts. Third, Philippine tribunals are in
Lastly, there is not even room for considering foreign law. Philippine a position to enforce their decisions. There is no compelling basis for
law properly governs the present dispute. ceding jurisdiction to a foreign tribunal. Quite the contrary, the
immense public policy considerations attendant to this case behoove
As the question of applicable law has been settled, the supposed Philippine tribunals to not shy away from their duty to rule on the
difficulty of ascertaining foreign law (which requires the application case.chanRoblesvirtualLawlibrary
of forum non conveniens) provides no insurmountable
inconvenience or special circumstance that will justify depriving IV
Philippine tribunals of jurisdiction.
 behavior to abandon one's livelihood in a time of great financial
Respondents were illegally terminated. need.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary It is clear that respondents intended to remain employed with
resignation as "the voluntary act of an employee who is in a situation Saudia. All they did was avail of their maternity leaves. Evidently,
where one believes that personal reasons cannot be sacrificed in the very nature of a maternity leave means that a pregnant
favor of the exigency of the service, and one has no other choice but employee will not report for work only temporarily and that she will
to dissociate oneself from employment. It is a formal pronouncement resume the performance of her duties as soon as the leave allowance
or relinquishment of an office, with the intention of relinquishing the expires.
office accompanied by the act of relinquishment."102 Thus, essential
to the act of resignation is voluntariness. It must be the result of an It is also clear that respondents exerted all efforts to' remain
employee's exercise of his or her own will. employed with Saudia. Each of them repeatedly filed appeal letters
(as much as five [5] letters in the case of Rebesencio109) asking
In the same case of Bilbao, this court advanced a means for Saudia to reconsider the ultimatum that they resign or be terminated
determining whether an employee resigned along with the forfeiture of their benefits. Some of them even went
voluntarily:chanroblesvirtuallawlibrary to Saudia's office to personally seek reconsideration.110
As the intent to relinquish must concur with the overt act of
relinquishment, the acts of the employee before and after the Respondents also adduced a copy of the "Unified Employment
alleged resignation must be considered in determining whether he Contract for Female Cabin Attendants."111This contract deemed void
or she, in fact, intended, to sever his or her the employment of a flight attendant who becomes pregnant and
employment.103 (Emphasis supplied) threatened termination due to lack of medical fitness. 112 The threat
On the other hand, constructive dismissal has been defined as of termination (and the forfeiture of benefits that it entailed) is
"cessation of work because 'continued employment is rendered enough to compel a reasonable person in respondents' position to
impossible, unreasonable or unlikely, as an offer involving a give up his or her employment.
demotion in rank or a diminution in pay' and other benefits."104
Saudia draws attention to how respondents' resignation letters were
In Penaflor v. Outdoor Clothing Manufacturing supposedly made in their own handwriting. This minutia fails to
Corporation,105 constructive dismissal has been described as surmount all the other indications negating any voluntariness on
tantamount to "involuntarily [sic] resignation due to the harsh, respondents' part. If at all, these same resignation letters are proof
hostile, and unfavorable conditions set by the employer." 106 In the of how any supposed resignation did not arise from respondents'
same case, it was noted that "[t]he gauge for constructive dismissal own initiative. As earlier pointed out, respondents' resignations were
is whether a reasonable person in the employee's position would feel executed on Saudia's blank letterheads that Saudia had provided.
compelled to give up his employment under the prevailing These letterheads already had the word "RESIGNATION" typed on
circumstances."107 the subject portion of their respective headings when these were
handed to respondents.113ChanRoblesVirtualawlibrary
Applying the cited standards on resignation and constructive
dismissal, it is clear that respondents were constructively dismissed. "In termination cases, the burden of proving just or valid cause for
Hence, their termination was illegal. dismissing an employee rests on the employer."114 In this case,
Saudia makes much of how respondents supposedly completed their
The termination of respondents' employment happened when they exit interviews, executed quitclaims, received their separation pay,
were pregnant and expecting to incur costs on account of child and took more than a year to file their Complaint. 115 If at all,
delivery and infant rearing. As noted by the Court of Appeals, however, these circumstances prove only the fact of their
pregnancy is a time when they need employment to sustain their occurrence, nothing more. The voluntariness of respondents'
families.108 Indeed, it goes against normal and reasonable human departure from Saudia is non sequitur.
 entitled to full backwages and benefits from the time of their
Mere compliance with standard procedures or processes, such as the termination until the finality of this Decision. They are likewise
completion of their exit interviews, neither negates compulsion nor entitled to separation pay in the amount of one (1) month's salary
indicates voluntariness. for every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1)
As with respondent's resignation letters, their exit interview forms whole year.
even support their claim of illegal dismissal and militates against
Saudia's arguments. These exit interview forms, as reproduced by Moreover, "[m]oral damages are awarded in termination cases
Saudia in its own Petition, confirms the unfavorable conditions as where the employee's dismissal was attended by bad faith, malice
regards respondents' maternity leaves. Ma. Jopette's and Loraine's or fraud, or where it constitutes an act oppressive to labor, or where
exit interview forms are particularly it was done in a manner contrary to morals, good customs or public
telling:chanroblesvirtuallawlibrary policy."120 In this case, Saudia terminated respondents' employment
a. From Ma. Jopette's exit interview form: in a manner that is patently discriminatory and running afoul of the
public interest that underlies employer-employee relationships. As
3. In what respects has the job met or failed to meet your such, respondents are entitled to moral damages.
expectations?
To provide an "example or correction for the public good" 121 as
THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY against such discriminatory and callous schemes, respondents are
LEAVE.116 likewise entitled to exemplary damages.

b. From Loraine's exit interview form: In a long line of cases, this court awarded exemplary damages to
illegally dismissed employees whose "dismissal[s were] effected in a
1. What are your main reasons for leaving Saudia? What company wanton, oppressive or malevolent manner."122 This court has
are you joining? awarded exemplary damages to employees who were terminated on
such frivolous, arbitrary, and unjust grounds as membership in or
xxx xxx xxx involvement with labor unions,123 injuries sustained in the course of
employment,124development of a medical condition due to the
Others employer's own violation of the employment contract,125and lodging
of a Complaint against the employer.126 Exemplary damages were
CHANGING POLICIES REGARDING MATERNITY LEAVE also awarded to employees who were deemed illegally dismissed by
(PREGNANCY)117 an employer in an attempt to evade compliance with statutorily
As to respondents' quitclaims, in Phil. Employ Services and established employee benefits.127 Likewise, employees dismissed for
Resources, Inc. v. Paramio,118 this court noted that "[i]f (a) there is supposedly just causes, but in violation of due process requirements,
clear proof that the waiver was wangled from an unsuspecting or were awarded exemplary damages.128
gullible person; or (b) the terms of the settlement are
unconscionable, and on their face invalid, such quitclaims must be These examples pale in comparison to the present controversy.
struck down as invalid or illegal."119 Respondents executed their Stripped of all unnecessary complexities, respondents were
quitclaims after having been unfairly given an ultimatum to resign dismissed for no other reason than simply that they were pregnant.
or be terminated (and forfeit their This is as wanton, oppressive, and tainted with bad faith as any
benefits).chanRoblesvirtualLawlibrary reason for termination of employment can be. This is no ordinary
case of illegal dismissal. This is a case of manifest gender
V discrimination. It is an affront not only to our statutes and policies
on employees' security of tenure, but more so, to the Constitution's
Having been illegally and unjustly dismissed, respondents are dictum of fundamental equality between men and women. 129
The award of exemplary damages is, therefore, warranted, not only (2) Separation pay computed from the respective dates in which
to remind employers of the need to adhere to the requirements of each of the respondents commenced employment until the
procedural and substantive due process in termination of finality of this Decision at the rate of one (1) month's salary for
employment, but more importantly, to demonstrate that gender every year of service, with a fraction of a year of at least six (6)
discrimination should in no case be countenanced. months being counted as one (1) whole year;

Having been compelled to litigate to seek reliefs for their illegal and (3) Moral damages in the amount of P100,000.00 per respondent;
unjust dismissal, respondents are likewise entitled to attorney's fees
in the amount of 10% of the total monetary award.130 (4) Exemplary damages in the amount of P200,000.00 per
respondent; and
VI
(5) Attorney's fees equivalent to 10% of the total award.
Petitioner Brenda J. Betia may not be held liable.
Interest of 6% per annum shall likewise be imposed on the total
A corporation has a personality separate and distinct from those of judgment award from the finality of this Decision until full
the persons composing it. Thus, as a rule, corporate directors and satisfaction thereof.
officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice This case is REMANDED to the Labor Arbiter to make a detailed
that they become solidarity liable with the corporation. 131 computation of the amounts due to respondents which petitioner
Saudi Arabian Airlines should pay without delay.
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang
Manggagawa ng Ever Electrical,132 this court clarified that "[b]ad SO ORDERED.chanroblesvirtuallawlibrary
faith does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud." 133

Respondents have not produced proof to show that Brenda J. Betia

acted in bad faith or with malice as regards their termination. Thus,
she may not be held solidarity liable with Saudia.cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner

Brenda J. Betia is not solidarity liable with petitioner Saudi Arabian
Airlines, and second, that petitioner Saudi Arabian Airlines is liable
for moral and exemplary damages. The June 16, 2011 Decision and
the September 13, 2011 Resolution of the Court of Appeals in CA-
G.R. SP. No. 113006 are hereby AFFIRMED in all other respects.
Accordingly, petitioner Saudi Arabian Airlines is ordered to pay
respondents:

(1) Full backwages and all other benefits computed from the
respective dates in which each of the respondents were illegally
terminated until the finality of this Decision;