RAYTHEON VS. STOCKTON 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. 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. Labor arbiter: rendered judgment ordering BMSI and RUST to pay respondents money claims NLRC: upon appeal dismissed the complaint and reversed the decision of the Labor Arbiter; ground: lack of jurisdiction On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor case. The complaint essentially reiterated the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of services in government projects and that respondent was not paid the commissions due him from the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself had combined and functioned as one company. In its Answer,8 petitioner alleged that contrary to respondents claim, it was a foreign corporation duly licensed to do business in the Philippines and denied entering into any arrangement with respondent or paying the latter any sum of money. Petitioner also denied combining with BMSI and RUST for the purpose of assuming the alleged obligation of the said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the written agreement between respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and obligations of the parties shall be governed by the laws of the State of Connecticut.10 Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages by way of compulsory counterclaim. petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for Summary Judgment12 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. RTC: denied petitioners omnibus motion; forum non conveniens not applicable CA: deferred to the discretion of the trial court when the latter decided not to desist from assuming jurisdiction on the ground of inapplicability of the principle of forum non conveniens RULING: 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 Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.34 Petitioners averments of the foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved.

Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts desistance.35 Brownwell vs Sun Life Assurance FACTS: under the provisions of the Philippine Property Act of the United States against the Sun Life Assurance Company of Canada, to compel the latter to comply with the demand of the former to pay him the sum of P310.10, which represents one-half of the proceeds of an endowment policy (No. 757199) which matured on August 20, 1946, and which is payable to one Naogiro Aihara, a Japanese national. Under the policy Aihara and his wife, Filomena Gayapan, were insured jointly for the sum of P1,000, and upon its maturity the proceeds thereof were payable to said insured, share and share alike, or P310.10 each. The defenses set up in the court of origin are: (1) that the immunities provided in section 5 (b) (2) of the Trading With the Enemy Act of the United States are of doubtful application in the Philippines, and have never been adopted by any law of the Philippines as applicable here or obligatory on the local courts; (2) that the defendant is a trustee of the funds and is under a legal obligation to see it to that it is paid to the person or persons entitled thereto, and unless the petitioner executes a suitable discharge and an adequate guarantee to indemnify and keep it free and harmless from any further liability under the policy, it may not be compelled to make the payment demanded. The Court of First Instance of Manila having approved and granted the petition, the respondent has appealed to this Court, contending that the Court of origin erred in holding that the Trading With the Enemy Act of the United States is binding upon the inhabitants of this country, notwithstanding the attainment of complete independence on July 4, 1946, and in ordering the payment prayed for. G.R. No. L-5731 June 22, 1954 HERBERT BROWNELL, JR., as Attorney General of the United States, petitioner-appellee, vs. SUN LIFE ASSURANCE COMPANY OF CANADA, respondent-appellant. Rowland F. Kirks, Stanley Gilbert, Juan T. Santos and Lino M. Patajo for appelle. Perkins, Ponce Enrile and Contreras for appellant. LABRADOR, J.: This is a petition instituted in the Court of the First Instance of Manila under the provisions of the Philippine Property Act of the United States against the Sun Life Assurance Company of Canada, to compel the latter to comply with the demand of the former to pay him the sum of P310.10, which represents one-half of the proceeds of an endowment policy (No. 757199) which matured on August 20, 1946, and which is payable to one Naogiro Aihara, a Japanese national. Under the policy Aihara and his wife, Filomena Gayapan, were insured jointly for the sum of P1,000, and upon its maturity the proceeds thereof were payable to said insured, share and share alike, or P310.10 each. The defenses set up in the court of origin are: (1) that the immunities provided in section 5 (b) (2) of the Trading With the Enemy Act of the United States are of doubtful application in the Philippines, and have never been adopted by any law of the Philippines as applicable here or obligatory on the local courts; (2) that the defendant is a trustee of the funds and is under a legal obligation to see it to that it is paid to the person or persons entitled thereto, and unless the petitioner executes a suitable discharge and an adequate guarantee to indemnify and keep it free and harmless from any further liability under the policy, it may not be compelled to make the payment demanded. The Court of First Instance of Manila having approved and granted the petition, the respondent has appealed to this Court, contending that the Court of origin erred in holding that the Trading With the Enemy Act of the United States is binding upon the inhabitants of this country, notwithstanding the attainment of complete independence on July 4, 1946, and in ordering the payment prayed for.

On July 3, 1946, the Congress of the United States passed Public Law 485-79th Congress, known as the Philippine Property Act of 1946. Section 3 thereof provides that "The Trading with the Enemy Act of October 6, 1917 (40 Stat. 411), as amended, shall continue in force in the Philippines after July 4, 1946, ...." To implement the provisions of the act, the President of the United States on July 3, 1946, promulgated Executive Order No. 9747, "continuing the functions of the Alien Property Custodian and the Department of the Treasury in the Philippines." Prior to and preparatory to the approval of said Philippine Property Act of 1946, an agreement was entered into between President Manuel Roxas of the Commonwealth and U. S. Commissioner Paul V. McNutt whereby title to enemy agricultural lands and other properties was to be conveyed by the United States to the Philippines in order to help the rehabilitation of the latter, but that in order to avoid complex legal problems in relation to said enemy properties, the Alien Property Custodian of the United States was to continue operations in the Philippines even after the latter's independence, that he may settle all claims that may exist or arise against the above-mentioned enemy properties, in accordance with the Trading With the Enemy Act of the United States. (Report of the Committee on Insural Affairs No. 2296 and Senate Report No. 1578 from the Committee on Territories and Insular Affairs, to accompany S. 2345, accompanying H. R. 6801, 79th Congress, 2nd Session.) This purpose of conveying enemy properties to the Philippines after all claims against them shall have been settled is expressly embodied in the Philippine Property Act of 1946. SEC. 3. The Trading With the Enemy Act of October 6, 1917 (40 Stat. 411) is amended, shall continue in force in the Philippines after July 4, 1946, and all powers and authority conferred upon the President of the United States or the Alien Property Custodian by the terms of the said Trading With the Enemy Act, as amended, with respect to the Philippines, shall continue thereafter to be exercised by the President of the United States, or such officer or agency as he may designate: Provided, That all property vested in or transferred to the President of the United States, the Alien Property Custodian, or any such officer or agency as the President of the United States may designate under the Trading With the Enemy Act, as amended, which was located in the Philippines at the time of such vesting, or the proceeds thereof, and which shall remain after the satisfaction of any claim payable under the Trading With the Enemy Act, as amended, and after the payment of such costs and expenses of administration as may be law be charged against such property or proceeds, shall be transferred by the President of the United States to the Republic of the Philippines: Provided further, That such property, or proceeds thereof, may be transferred by the President of the United States to the Republic of the Philippines upon indemnification acceptable to the President of the United States by the Republic of the Philippines for such claims, costs, and expenses of administration as may by law be charged against such property or proceeds thereof before final adjudication of such claims, costs and expenses of administration. Provided further, That the courts of first instance of the Republic of the Philippines are hereby given jurisdiction to make and enter all such rules as to notice or otherwise, and all such orders and decrees and to issue such process as may be necessary and proper in the premises to enforce any orders, rules, and regulations issued by the President of the United States, the Alien Property Custodian, or such officer or agency designated by the President of the United States pursuant to the Trading With the Enemy Act, as amended, with such right of appeal therefrom as may be provided by law: And provided further, That any suit authorized under the Trading With the Enemy Act, as amended, with respect to property vested in or transferred to the President of the United States, the Alien Property Custodian, or any officer or agency designated by the President of the United States hereunder, which at the time of such vesting or transfer was located with the Philippines, shall after July 4, 1946, be brought in the appropriate court of first instance of the Republic of the Philippines, against the officer or agency hereunder designated by the President of the United States with right of appeal therefrom as may be provided by law. In any litigation authorized under this section, the officer or administrative head of the agency designated hereunder may appear personally, or through attorneys appointed by him, without regard to the requirements of law other than this section. And when the proclamation of the independence of the Philippines by President Truman was made, said independence was granted "in accordance with the subject to the reservations

provided in the applicable statutes of the Unites States." The enforcement of the Trading With the Enemy Act of the United States was contemplated to be made applicable after independence, within the meaning of the reservations. On the part of the Philippines, conformity to the enactment of the Philippine Property Act of 1946 of the United States was announced by President Manuel Roxas in a joint statement signed by him and by Commissioner Mcnutt. Ambassador Romulo also formally expressed the conformity of the Philippines Government to the approval of said act to the American Senate prior to its approval. And after the grant of independence, the Congress of the Philippines approved Republic Act No. 8, entitled. AN ACT TO AUTHORIZE THE PRESIDENT OF THE PHLIPPINES TO ENTER INTO SUCH CONTRACT OR UNDERTAKINGS AS MAY BE NECESSARY TO EFFECTUATE THE TRANSFER TO THE REPUBLIC OF THE PHILIPPINES UNDER THE PHILIPPINES PROPERTY ACT OF NINETEEN HUNDRED AND FORTY-SIX OF ANY PROPERTY OR PROPERTY RIGHTS OR THE PROCEEDS THEREOF AUTHORIZED TO BE TRANSFERRED UNDER SAID ACT; PROVIDING FOR THE ADMINISTRATION AND DISPOSITION OF SUCH PROPERTIES ONCE RECEIVED; AND APPROPRIATING THE NECESSARY FUND THEREFOR. The Congress of the Philippines also approved Republic Act No. 7, which established a Foreign Funds Control Office. After the approval of the Philippine Property Act of 1946 of the United States, the Philippine Government also formally expressed, through the Secretary of Foreign Affairs, conformity thereto. (See letters of Secretary dated August 22, 1946, and June 3, 1947.) The Congress of the Philippines has also approved Republic Act No. 477, which provides for the administration and disposition of properties which have been or may hereafter be transferred to the Republic of the Philippines in accordance with the Philippines Property Act of 1946 of the United States. It is evident, therefore, that the consent of the Philippine Government to the application of the Philippine Property Act of 1946 to the Philippines after independence was given, not only by the Executive Department of the Philippines Government, but also by the Congress, which enacted the laws that would implement or carry out the benefits accruing from the operation of the United States law. The respondent-appellant, however, contends that the operation of the law after independence could not have actually taken, or may not take place, because both Republic Act No. 8 and Republic Act No. 477 do not contain any specific provision whereby the Philippine Property Act of 1946 or its provisions is made applicable to the Philippines. It is also contended that in the absence of such express provision in any of the laws passed by the Philippine Congress, said Philippine Property Act of 1946 does not form part of our laws and is not binding upon the courts and inhabitants of the country. There is no question that a foreign law may have extraterritorial effect in a country other than the country of origin, provided the latter, in which it is sought to be made operative, gives its consent thereto. This principle is supported by the unquestioned authority. The jurisdiction of the nation within its territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent in that power in which would impose such restriction. All exceptions, therefore, to the full and complete power of a nation within its own territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source. This consent may be either express or implied. (Philippine Political Law by Sinco, pp. 27-28, citing Chief Justice Marshall's statement in the Exchange, 7 Cranch 116) In the course of his dissenting opinion in the case of S. S. Lotus, decided by the Permanent Court of International Justice, John Bassett Moore said:

1. It is an admitted principle of International Law that a nation possesses and exercises within its own territory an absolute and exclusive jurisdiction, and that any exception to this right must be traced to the consent of the nation, either express or implied (Schooner Exchange vs. McFadden [812], 7 Cranch 116, 136). The benefit of this principle equally enures to all independent and sovereign States, and is attended with a corresponding responsibility for what takes place within the national territory. (Digest of International Law, by Backworth, Vol. II, pp. 1-2) The above principle is not denied by respondent-appellant. But its argument on this appeal is that while the acts enacted by the Philippine Congress impliedly accept the benefits of the operation of the United States law (Philippine Property Act of 1946), no provision in the said acts of the Philippine Congress makes said United States law expressly applicable. In answer to this contention, it must be stated that the consent of a Senate to the operation of a foreign law within its territory does not need to be express; it is enough that said consent be implied from its conduct or from that of its authorized officers. 515. No rule of International Law exists which prescribe a necessary form of ratification. Ratification can, therefore, be given tacitly as well as expressly. Tacit ratification takes place when a State begins the execution of a treaty without expressly ratifying it. It is usual for ratification to take the form of a document duly signed by the Heads of the States concerned and their Secretaries for Foreign Affairs. It is usual to draft as many documents as there are parties to the Convention, and to exchange these documents between the parties. Occasionally the whole of the treaty is recited verbatim in the ratifying documents, but sometimes only the title, preamble, and date of the treaty, and the names of the signatory representatives are cited. As ratification is only the confirmation of an already existing treaty, the essential requirements in a ratifying document is merely that it should refer clearly and unmistakably to the treaty to be ratified. The citation of title, preamble, date, and names of the representatives is, therefore quite sufficient to satisfy that requirements. (Oppenheim, pp. 818-819; emphasis ours.) International Law does not require that agreements between nations must be concluded in any particular form or style. The law of nations is much more interested in the faithful performance of international obligations than in prescribing procedural requirements. (Treaties and Executive Agreements, by Myers S. McDougal and Asher Lands, Yale Law Journal, Vol. 54, pp. 318-319) In the case at bar, our ratification of or concurrence to the agreement for the extension of the Philippine Property Act of 1946 is clearly implied from the acts of the President of the Philippines and of the Secretary of Foreign Affairs, as well as by the enactment of Republic Acts Nos. 7, 8, and 477. We must emphasize the fact that the operation of the Philippine Property Act of 1946 in the Philippines is not derived from the unilateral act of the United States Congress, which made it expressly applicable, or from the saving provision contained in the proclamation of independence. It is well-settled in the United States that its laws have no extraterritorial effect. The application of said law in the Philippines is based concurrently on said act (Philippine Property Act of 1946) and on the tacit consent thereto and the conduct of the Philippine Government itself in receiving the benefits of its provisions. It is also claimed by the respondent-appellant that the trial court erred in ordering it to pay the petitioner the amount demanded, without the execution by the petitioner of a deed of discharge and indemnity for its protection. The Trading With the Enemy Act of the United States, the application of which was extended to the Philippines by mutual agreement of the two Governments, contains an express provision to the effect that delivery of property or interest therein made to or for the account of the United States in pursuance of the provision of the law, shall be considered as a full acquittance and discharge for purposes of the obligation of the person making the delivery or payment. (Section 5(b) (2), Trading With the Enemy Act.) This express

provision of the United States law saves the respondent-appellant from any further liability for the amount ordered to be paid to the petitioner, and fully protects it from any further claim with respect thereto. The request of the respondent-appellant that a security be granted it for the payment to be made under the law is, therefore, unnecessary, because the judgment rendered in this case is sufficient to prove such acquittance and discharge. The decision appealed from should be as it is hereby affirmed, with costs against the respondentappellant. G.R. No. 133876 December 29, 1999 BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN REALTY CORPORATION and COURT OF APPEALS, respondents.

BUENA, J.: Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third party mortgagor's property situated in the Philippines by filing an action for the collection of the principal loan before foreign courts? Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court are the decision 1 of public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30 September 1997 and its resolution, 2 dated 22 May 1998, denying petitioner's motion for reconsideration. Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing institution duly licensed to do business in the Philippines, organized and existing under and by virtue of the laws of the State of California, United States of America while private respondent American Realty Corporation (ARC) is a domestic corporation. Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized and existing under the laws of England. As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as "borrowers"), all of which are existing under and by virtue of the laws of the Republic of Panama and are foreign affiliates of private respondent. Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and entered into restructuring agreements. As additional security for the restructured loans, private respondent ARC as third party mortgagor executed two real estate mortgages, 4 dated 17 February 1983 and 20 July 1984, over its parcels of land including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-78760, T-78761, T-78762 and T-78763. Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner BANTSA to file civil actions 5 before foreign courts for the collection of the principal loan, to wit: a) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No 2098) against Liberian Transport Navigation S.A., Eshley Compania Naviera S.A., El

Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation Corp., S.A., Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992. b) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A., Eduardo Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992; c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19, 1992; and d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company, S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering (Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992. In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was private not impleaded as party-defendant. On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines an application for extrajudicial foreclosure 6 of real estate mortgage. On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public auction in an extrajudicial foreclosure sale, with Integrated Credit and Corporation Services Co (ICCS) as the highest bidder for the sum of Twenty four Million Pesos (P24,000.000.00). 7 On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for damages 8 against the petitioner, for the latter's act of foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan. In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the mortgage after an ordinary suit for collection has been filed, is not applicable in the present case, claiming that: a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring agreements, was never made a party defendant in the civil cases filed in Hongkong and England; b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were filed in Hongkong and England. As such, any decisions (sic) which may be rendered in the abovementioned courts are not (sic) enforceable in the Philippines unless a separate action to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules of Court. c) Under English Law, which is the governing law under the principal agreements, the mortgagee does not lose its security interest by filing civil actions for sums of money. On 14 December 1993, private respondent filed a motion for suspension 10 of the redemption period on the ground that "it cannot exercise said right of redemption without at the same time waiving or contradicting its contentions in the case that the foreclosure of the mortgage on its properties is legally improper and therefore invalid."

In an order 11 dated 28 January 1994, the trial court granted the private respondent's motion for suspension after which a copy of said order was duly received by the Register of Deeds of Meycauayan, Bulacan. On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale, consolidated its ownership over the real properties, resulting to the issuance of Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name. On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to Stateland Investment Corporation for the amount of Thirty Nine Million Pesos (P39,000,000.00). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m), T-187783(m), T16653P(m) and T-16652P(m) were issued in the latter's name. After trial, the lower court rendered a decision 13 in favor of private respondent ARC dated 12 May 1993, the decretal portion of which reads: WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the defendant of collection suits against the principal debtors operated as a waiver of the security of the mortgages. Consequently, the plaintiff's rights as owner and possessor of the properties then covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761, all of the Register of Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant caused the extrajudicial foreclosure of the mortgages constituted thereon. Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal interest thereon from the date of the filing of the complaint up to the date of actual payment: 1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos (P99,000,000.00); 2) 3) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and Costs of suit.

SO ORDERED. On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to file a motion for reconsideration which the appellate court denied. Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA ascribes to the Court of Appeals the following assignment of errors: 1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme Court in the cases of Caltex Philippines, Inc. vs. Intermediate Appellate Court docketed as G.R. No. 74730 promulgated on August 25, 1989 and Philippine Commercial International Bank vs. IAC, 196 SCRA 29 (1991 case), although said cases were duly cited, extensively discussed and specifically mentioned, as one of the issues in the assignment of errors found on page 5 of the decision dated September 30, 1997. 2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the private respondent actual and exemplary damages totalling P171,600,000.00, as of July 12, 1998 although such huge amount was not asked nor prayed for in private respondent's complaint, is contrary to law and is totally unsupported by evidence (sic). In fine, this Court is called upon to resolve two main issues:

1. Whether or not the petitioner's act of filing a collection suit against the principal debtors for the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure. 2. Whether or not the award by the lower court of actual and exemplary damages in favor of private respondent ARC, as third-party mortgagor, is proper. The petition is bereft of merit. First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of foreclosure requires the concurrence of two requisites: an ordinary civil action for collection should be filed and subsequently a final judgment be correspondingly rendered therein. According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a final judgment must be secured and obtained in the personal action so that waiver of the remedy of foreclosure may be appreciated. To put it differently, absent any of the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of foreclosure. We do not agree. Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence laid down in Bachrach 15 and similar cases adjudicated thereafter, thus: In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he may he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for a deficiency judgment, in which case, all the properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies. In Danao vs. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in Manila Trading and Supply Co vs. Co Kim 17 and Movido vs. RFC, 18 invariably held: . . . The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor, including the subject matter of the mortgage . . . , subject to the qualification that if he fails in the remedy by him elected, he cannot pursue further the remedy he has waived. (Emphasis Ours) Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. 19

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118. In the case at bench, private respondent ARC constituted real estate mortgages over its properties as security for the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property. 20 Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another's obligation by mortgaging his own property, to be solidarily bound with the principal obligor. The signatory to the principal contractloan remains to be primarily bound. It is only upon default of the latter that the creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21 In the instant case, petitioner's contention that the requisites of filing the action for collection and rendition of final judgment therein should concur, is untenable. Thus, in Cerna vs. Court of Appeals, 22 we agreed with the petitioner in said case, that the filing of a collection suit barred the foreclosure of the mortgage: A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the personal property as security for the debt or value of the promissory note when he seeks to recover in the said collection suit. . . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go after the mortgaged property as security for the promissory note . . . . Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of filing of an ordinary action for collection operates as a waiver of the mortgagecreditor's remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is required for the rule on waiver to apply. Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by petitioner, supposedly to buttress its contention, this Court had occasion to rule that the mere act of filing a collection suit for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy of foreclosure. In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of two remedies so as not to violate the rule against splitting a cause of action. As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal. 24

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

While the law allows a mortgage creditor to either institute a personal action for the debt or a real action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively as was done by PCIB in this case. xxx xxx xxx

Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it violates the rule against splitting a cause of action. Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action wellenshrined in jurisprudence and our statute books. In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit was filed, considering that the creditor should not be afforded "plural redress for a single breach of contract." For cause of action should not be confused with the remedy created for its enforcement. 28 Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in addressing the creditor's cause. Hence, a suit brought before a foreign court having competence and jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation of the remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of justice and fair play and further discourage the noxious practice of splitting up a lone cause of action. Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law with regard to the principal agreements, the mortgagee does not lose its security interest by simply filing civil actions for sums of money. 29 We rule in the negative. This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at bench, Philippine law shall apply notwithstanding the evidence presented by petitioner to prove the English law on the matter. In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. 30 Thus, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. 31 This is what we refer to as the doctrine of processual presumption. In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and proved in accordance with Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales, 32 said foreign law would still not find applicability. Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of the forum, the said foreign law, judgment or order shall not be applied. 33

In the case at bar, it has not been shown whether the defendant pursued to the end or are still pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for this court to apply the exception laid down by the Supreme Court in Caltex by nullifying the collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only way the court may prevent the spector of a creditor having "plural redress for a single breach of contract" is by holding, as the Court hereby holds, that the defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its properties originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761. (RTC Decision pp., 10-11) In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26 Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC. 27 Again, petitioner tried to fit a square peg in a round hole. It must be stressed that far from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by declaring:

Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. 34 The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting up of a single cause of action. Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the others. Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws. 35 Clearly then, English Law is not applicable. As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real estate mortgages constituted a clear violation of the rights of herein private respondent ARC, as third-party mortgagor. Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade, property, profession, job or occupation and the same must be proved, otherwise if the proof is flimsy and non-substantial, no damages will be given. 36 Indeed, the question of the value of property is always a difficult one to settle as valuation of real property is an imprecise process since real estate has no inherent value readily ascertainable by an appraiser or by the court. 37 The opinions of men vary so much concerning the real value of property that the best the courts can do is hear all of the witnesses which the respective parties desire to present, and then, by carefully weighing that testimony, arrive at a conclusion which is just and equitable. 38 In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate court in giving due weight to the appraisal report composed of twenty three pages, signed by Mr. Lauro Marquez and submitted as evidence by private respondent. The appraisal report, as the records would readily show, was corroborated by the testimony of Mr. Reynaldo Flores, witness for private respondent. On this matter, the trial court observed: The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages which set out in detail the valuation of the property to determine its fair market value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The latter's testimony was subjected to extensive crossexamination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22). 39 In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that the factual findings of the trial court should be respected. 40 The time-tested jurisprudence is that the findings and conclusions of the trial court on the credibility of witnesses enjoy a badge of

respect for the reason that trial courts have the advantage of observing the demeanor of witnesses as they testify. 41 This Court will not alter the findings of the trial court on the credibility of witnesses, principally because they are in a better position to assess the same than the appellate court. 42 Besides, trial courts are in a better position to examine real evidence as well as observe the demeanor of witnesses. 43 Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily with the trial court. 44 In the case at bar, we see no reason that would justify this Court to disturb the factual findings of the trial court, as affirmed by the Court of Appeals, with regard to the award of actual damages. In arriving at the amount of actual damages, the trial court justified the award by presenting the following ratiocination in its assailed decision 45, to wit: Indeed, the Court has its own mind in the matter of valuation. The size of the subject real properties are (sic) set forth in their individuals titles, and the Court itself has seen the character and nature of said properties during the ocular inspection it conducted. Based principally on the foregoing, the Court makes the following observations: 1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan, which is (sic) not distant from Metro Manila the biggest urban center in the Philippines and are easily accessible through well-paved roads; 2. The properties are suitable for development into a subdivision for low cost housing, as admitted by defendant's own appraiser (TSN, May 30, 1994, p. 31); 3. The pigpens which used to exist in the property have already been demolished. Houses of strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing community. It has even been shown that the house of the Barangay Chairman is located adjacent to the property in question (Exh. 27), and the only remaining piggery (named Cherry Farm) in the vicinity is about 2 kilometers away from the western boundary of the property in question (TSN, November 19, p. 3); 4. It will not be hard to find interested buyers of the property, as indubitably shown by the fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated real estate properties to Stateland Investment Corporation, in whose favor new titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds of Meycauayan (sic), Bulacan; 5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple defendant's appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant's aforesaid estimate (Decision, Records, p. 603). It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses command great respect and consideration especially when the conclusions are supported by the evidence on record. 46 Applying the foregoing principle, we therefore hold that the trial court committed no palpable error in giving credence to the testimony of Reynaldo Flores, who according to the records, is a licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990. 47 As the records show, Flores had been with the company for 26 years at the time of his testimony.

Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29 March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair market value of the real property. Above all these, the record would likewise show that the trial judge in order to appraise himself of the characteristics and condition of the property, conducted an ocular inspection where the opposing parties appeared and were duly represented. Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as regards the valuation of the property . . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties (sic) translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter. This appears to be, as the court so holds, a better approximation of the fair market value of the subject properties. This is the amount which should be restituted by the defendant to the plaintiff by way of actual or compensatory damages . . . . 48 Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked nor prayed for in private respondent's complaint. Notwithstanding the fact that the award of actual and compensatory damages by the lower court exceeded that prayed for in the complaint, the same is nonetheless valid, subject to certain qualifications. On this issue, Rule 10, Section 5 of the Rules of Court is pertinent: Sec. 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgement; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made. The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de Talisay-Silay, Inc. 49 citing Northern Cement Corporation vs. Intermediate Appellate Court 50 is enlightening: There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on which recovery was based. The appellate court could treat the pleading as amended to conform to the evidence although the pleadings were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the recent case of National Power Corporation vs. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendant's pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the evidence. It is the view of the Court that pursuant to the above-mentioned rule and in light of the decisions cited, the trial court should not be precluded from awarding an amount higher than that claimed in

the pleading notwithstanding the absence of the required amendment. But it is upon the condition that the evidence of such higher amount has been presented properly, with full opportunity on the part of the opposing parties to support their respective contentions and to refute each other's evidence. The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings, or serve as a basis for a higher award of damages. Although the pleading may not have been amended to conform to the evidence submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the issues alleged but also the basis of issues discussed and the assertions of fact proved in the course of trial. The court may treat the pleading as if it had been amended to conform to the evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way: When evidence is presented by one party, with the expressed or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto. Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basis requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it. In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the evidence, both documentary and testimonial, formally offered by private respondent, the rudiments of fair play are deemed satisfied. In fact, the testimony of Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under these circumstances, the court acted within the bounds of its jurisdiction and committed no reversible error in awarding actual damages the amount of which is higher than that prayed for. Verily, the lower court's actuations are sanctioned by the Rules and supported by jurisprudence. Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos (P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. 51 Considering its purpose, it must be fair and reasonable in every case and should not be awarded to unjustly enrich a prevailing party. 52 In our view, an award of P50,000.00 as exemplary damages in the present case qualifies the test of reasonableness. WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary damages. According, petitioner is hereby ordered to pay private respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as exemplary damage and the costs of suit. SO ORDERED. G.R. No. L-2529 December 31, 1949

J. A. SISON, petitioner, vs. THE BOARD OF ACCOUNTANCY and ROBERT ORR FERGUZON, respondents.

Quijano, Rosete and Tizon for petitioner. Perkins, Ponce Enrile, Contreras and Gomez for respondent. Claro M. Recto as amicus curiae.

TORRES, J.: In his petition for certiorari against the Board of Accountancy and Robert Orr Ferguson, J. A. Sison prays that this Court render judgment "ordering the respondent Board of Accountancy to revoke the certificate issued to Robert Orr Ferguson, a British subject admitted without examination because there does not exist any reciprocity between the Philippines and the United Kingdom regarding the practice of accountancy." Upon perusal of the pleadings and for a clear understanding of the issue raised by petitioner the following facts, which we believe are not disputed, shall be stated: Pursuant to the provisions of Act No. 342, several persons, British subjects, and the possessors of certificates as chartered accountants issued by various incorporated private accountant's societies in England and other parts of the British Empire, were, without examination, granted by the respondents Board of Accountancy, certificates as public accountants to practice their profession in this jurisdiction. The respondent Robert Orr Ferguson was granted certificate No. 713-W on January 14, 1939 pursuant to resolution No. 24 of the Board of Accountancy, series of 1938. Subsequently, the Board of Accountancy, upon the examination of the case of those British accountants without examination, came to the conclusion that , there being no law which regulates the practice of accountancy in England, and that the practice of accountancy in England, and that the practice of accountancy in said country being limited only to the members of incorporated private accountant's societies, the certificates issued by the Institutes of chartered accountants and other similar societies in England and Wales cannot be considered on a par with the public accountant's certificates issued by the Philippine Board of Accountancy, which is government entity. In view thereof, the respondent Board of Accountancy "resolved to suspend, . . . the validity of the C.P.A. certificates of the above-mentioned candidates pending the final revocation thereof should they fail to prove to the satisfaction of the Board within sixty days' notice that : (a) Filipinos are allowed to take the professional accountant examination given by the British government, if any, and (b) Filipino certified public accountants can, upon application, be registered as chartered accountants or granted similar degrees by the British Government." (Annex B.)lawphi1.net Such action of the Board of Accountancy was based on an opinion rendered by the Secretary of Justice, on October 1, 1946 (Annex A), to the Chartered Accountants in England and Wales does not meet the requirement of section 41 of Rule 123 of the Rules of Court and that the negative statement therein, as quoted above, does not establish the existence of reciprocity, which induced the board to hold that the registration, without examination, of those British subjects as certified public accountants, is in accordance with the provision of section 122 of Act No. 3105 as amended by Commonwealth Act No. 342. However, the Secretary of justice, answering a query from the Secretary of Finance, in an opinion rendered on February 10, 1947 "on the legality of the suspension or revocation " of the certificates issued to those British subjects as contemplated in resolution No. 5, series of 1946 of the Board of Accountancy, was of the opinion that "the board may not suspend or revoke the certificates previously granted to the ten British accountants herein involved, including respondent Robert Orr Ferguson, because such action is in contravention of section 13 of Act No. 3105 as amended which explicitly provides that the suspension or revocation of the certificate issued under the said Act may be done by the board for unprofessional conduct of the holder or other sufficient cause. The

Secretary of Justice further said that he believes that "the change in administrative interpretation with respect to the existence of reciprocity between the Philippines and Great Britain as to the practice of accountancy," does not constitute sufficient cause for the suspension or revocation of the certificates in question within the meaning of said provision. The opinion of the Secretary of Justice further said that if those certificates were issued to those British persons on the assumption that there is "reciprocity between Great Britain and the Philippines as to the practice of certified public accountancy in the Philippines" a change of administrative interpretation is not favored (42 Am. Jur., 412).While in the instant case the public policy with respect to the practice of foreign accountants in this country remains unchanged, the action intended by the Board of Accountancy, to suspend or revoke the certificates already issued to such persons must be based on some other grounds, such ignorance, incapacity, deception or fraud on the part of the holder of the certificates. In the light of the above, the petitioner brought this action mainly on the ground that there is no reciprocity "between the Philippines and the United Kingdom" as regards the practice of the profession of certified public accountant, because the certificate submitted by the respondent. Robert Orr Ferguson "is not a public or financial record, and does not meet the requirements of section 41, rule 21 [123] of the Rules of the Court." And that the furthermore, the negative statement that "there is nothing in the laws of the United Kingdom to restrict the right of the Filipino certified public accountant to practice as professional accountant therein, " does not established the existence of reciprocity. Section 12 of Act No. 3105, as amended, reads: Section 12. Any person who has been engaged in the professional accountancy work in the Philippine Islands for a period of five years or more prior to the date of his application, and who holds certificates as certified public accountant, or as chartered accountant, or other similar certificates or degrees in the country of nationality, shall be entitled to registration as certified public accountant and to receive a certificate of registration as such certified public accountant from the Board, Provided such country or state does not restrict the right of the Filipino certified public accountants to practice therein or grants reciprocal rights to Filipino certified public accountants to practice therein or grants reciprocal rights to Filipinos, and provided that the application for their registration shall be filed with the Board not later than December 31,1938. From the text of the above-quoted section 12 of the Accountancy Law, it is inferred that the registration as certified public accountant and the issuance of the corresponding certificate as such certified public accountant, to a person who for five years has been engaged in professional accountancy work in the Philippines and is a holder of a certificate as certified public accountant, or as a chartered accountant, or other similar degrees in the country of his origin, is predicated on the fact that the country of origin of such foreign applicant (a) "does not restrict the right of the Filipino certified public accountant to practice therein," (b) "grants reciprocal rights to the Filipinos," and (c) the application for registration "be filed with the Board not later than December 31, 1938." In the case at bar, while the profession of certified public accountant is not controlled or regulated by the Government of Great Britain, the country of origin of respondent Robert Orr Ferguson, according to the record, said respondent had been admitted in this country to the practice of his profession as certified public accountant on the strength of his membership of the Institute of Accountants and Actuaries in Glasgow (England), incorporated by the Royal Charter of 1855. The question of his entitlement to admission to the practice of his profession in this jurisdiction, does not , therefore, come under reciprocity, as this principle is known in International Law, but it is included in the meaning of comity, as expressed in the alternative condition of the proviso of the above-quoted section 12 which says: such country or state does not restrict the right of Filipino certified public accountants to practice therein.

Mutuality, reciprocity, and comity as bases or elements. International Law is founded largely upon mutuality, reciprocity, and the principle of comity of nations. Comity, in this connection, is neither a matter of absolute obligation on the one hand, nor of mere courtesy and good will on the other; it is the recognition which one nation allows within its territory to the acts of foreign governments and tribunals, having due regard both to the international duty and convenience and the rights of its own citizens or of other persons who are under the protection of its laws. The fact of reciprocity does not necessarily influence the application of the doctrine of comity, although it may do so and has been given consideration in some instances. (30 Am. Jur., 178; Hilton vs. Guyot, 159 U. S., 113, 40 Law. ed., 95; 16 S. Ct., 139.) In Hilton vs. Guyot (supra), the highest court of the United States said that comity "is the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to International duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws. " Again, in Bank of Augusta vs. Earle, 38 U.S., 13 Pet. 519, 589, Chief Justice Taney, speaking for the court while Mr. Justice Story well-known author of the treatise on Conflict of Laws was a member of it, and largely adopting his words, said: . . . It is needless to enumerate here the instances in which by the general practice of civilized countries, the laws of the one will, by the comity of nations, be recognized and executed in another, where the rights of individuals are concerned . . . The comity thus extended to other nations is no impeachment of sovereignty. It is the voluntary act of the nation by which it is offered, and is inadmissible when contrary to its policy, or prejudicial to its interest. But it contributes so largely to promote justice between individuals, and to produce a friendly intercourse between the sovereignties to which they belong, that courts, but the comity of the nation, which is administered and ascertained in the same way, and guided by the same reasoning, by which all other principles of municipal law are ascertained and guided. The record shows that the British Minister accredited to the Philippine Republic in two notes concerning this question, addressed to the President of the Philippines in his capacity as Head of the Department of Foreign Affairs, said: . . . there is no governmental control of the accounting profession in the United Kingdom and any resident of the United Kingdom, of whatever nationality, may engage in the profession of accounting without formality; and . . . that the high standards of the accounting profession in the United Kingdom are maintained by a number of private societies whose membership is restricted to persons who have passed a different professional examination but impose no restriction whatsoever on membership with respect of nationality. (Night of November 5, 1946.) Again , the British Minister, in his note of April 15, 1947, further said: Your Excellency will recall that doubt had been expressed by the Philippine authorities concerned as to whether qualified public accountants would be allowed to practice income tax accounting in the United Kingdom. Accordingly, I requested a ruling on this point, and I am happy to inform Your Excellency that I have been authorized by His Majesty Principal Secretary of State for Foreign Affairs to state, for the information of the Government of the Philippines, that qualified Philippine citizen are allowed to practice the profession of accountancy including income tax accounting, in the United Kingdom. We are bound to take notice of the fact that fact that the Philippine and the United Kingdom, are bound by a treaty of friendship and commerce, and each nation is represented in the other by corresponding diplomatic envoy. There is no reason whatsoever to doubt the statement and assurance made by the diplomatic representative of the British Government in the Philippines, regarding the practice of the accountancy profession in the United Kingdom and the fact that

Filipino certified public accountant will be admitted to practice their profession in the United Kingdom should they choose to do so. Under such circumstances, and without necessarily construing that such attitude of the British Government in the premises, as represented by the British Minister, amounts to reciprocity, we may at least state that it comes within the realm of comity, as contemplated in our law. It appearing that the record fails to show that the suspension of this respondent is . . . based on any of the cause provided by the Accountancy Law, we find no reason why Robert Orr Ferguson, who had previously been registered as certified public accountants and issued the corresponding certificate public accountant in the Philippine Islands, should be suspended from the practice of his profession in these Islands. The petition is denied, with cost.

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