G.R. No.

126996

February 15, 2000

HEIRS OF CESARIO VELASQUEZ, namely: ANASTACIA VELASQUEZ, SOFIA VELASQUEZ, ELISEO VELASQUEZ, JOSE VELASQUEZ, CORAZON VELASQUEZ, LEONORA VELASQUEZ, and NIEVES VELASQUEZ, petitioners, vs. THE COURT OF APPEALS and HEIRS OF ANATALIA DE GUZMAN, namely: SANTIAGO MENESES, ANDRES MENESES, FELICIDAD MENESES, and APOLONIO MENESES, respondents. GONZAGA-REYES, J.: Before us is a Petition for Review on Certiorari filed by petitioners assailing the December 29, 1995 decision of the Court of Appeals in CA-G.R. CV No 39729 affirming the decision of the Regional Trial Court of Pangasinan, Branch 2 40, Dagupan City in Civil Case No. D-9288 and the resolution dated November 6, 1996 denying their motion for 3 reconsideration. Spouses Leoncia de Guzman and Cornelio Aquino died intestate sometime in 1945 and 1947, respectively and were childless. Leoncia de Guzman was survived by her sisters Anatalia de Guzman (mother of the plaintiffs) and Tranquilina de Guzman (grandmother of the defendants). During the existence of their marriage, spouses Aquino were able to acquire the following real properties: a) A parcel of land (residential) situated in Guiguilonen, Mangaldan, Pangasinan. Bounded on the S. by Simeon Meneses; on the E. by Dionisio Muyargas; on the N. by road to San Jacinto; and on the W. by Juan Magalong; containing an area of 995 sq. m. more or less and assessed for the current year; b) A parcel of land (sugar cane) and coconut land situated in Poblacion, Mangaldan, Pangasinan. Bounded on the N. by Jose Lopez and Cipriano Serafica; on the E. by road to Mapandan; on the S. by Vicente Doyola and Dalmacio Gonzales; and on the W. by Eleuterio Serafica; containing an area of 27,849 sq. m., more or less; c) A parcel of land situated in Malabago, Mangaldan, Pangasinan. Bounded on the N. by Fausto Tandingan; on the E. by Segundo Toralba, Fausto Tandingan and Jacinta Biasaga; on the S. by Roberto Mamapon; and on the W. by heirs: of Estanislao Biasaga and Elena delos Reyes; containing an area of 2,077 sq. m. more or less; d) A parcel of land (sugarcane), situated in Embarcadero, Mangaldan, Pangasinan. Bounded on the N. by Basilio Duya and Bernardo Cano; on the E. by Simeon Manaois; on the S. by a road; and on the W. by Loreto de Guzman; containing an area of 2,857 sq. m., more or less; It is covered by Tax Decl. No. 231; e) A parcel of residential land situated in Bari, Mangaldan, Pangasinan. Bounded on the N. by Andres Aquino; on the E. by Arcadio Barromeo; on the S. by National Road; on the W. by Andres Aquino; containing an area of 595 sq. m., more or less and covered by Tax Decl. No. 453; f) A parcel of unirrigated riceland situated in Malabago, Mangaldan, Pangasinan. Bounded on the N. by Segundo Tandingan and Jacinto Biasaga; on the E. by Segundo Toralba, Fausto Tandingan and Jacinto Biasaga; on the S. by Roberto Mamapon; and on the W. by heirs of Estanislao Biasaga and Elena delos Reyes; containing an area of 2,077 sq. m., more or less, and covered Tax Decl. No. 1156. Sometime in 1989, the heirs of Anatalia de Guzman represented by Santiago, Andres, Felicidad and Apolonio, all surnamed Meneses filed a complaint for annulment, partition and damages against the heirs of Cesario Velasquez (son of Tranquilina de Guzman) for the latters' refusal to partition the above-mentioned conjugal properties of the Spouses Aquino. The complaint alleged that Leoncia de Guzman, before her death, had a talk with the plaintiffs' mother, Anatalia de Guzman, with plaintiff Santiago Meneses and Tranquilina de Guzman and his son Cesario Velasquez in attendance; that in the conference Leoncia told Anatalia de Guzman, Tranquilina de Guzman and Cesario Velaquez that the documents of donation and partition which she and her husband earlier executed were not signed by them as it was not their intention to give away all the properties to Cesario Velasquez because Anatalia de Guzman who is one of her sisters had several children to support; Cesario Velasquez together with his mother allegedly promised to divide the properties equally and to give the plaintiffs one-half (1/2) thereof; that they are
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entitled to 1/2 of each of all the properties in question being the children of Anatalia de Guzman, full blood sister of Leoncia de Guzman. Plaintiffs further claim that after the death of Leoncia, defendants forcibly took possession of all the properties and despite plaintiffs' repeated demands for partition, defendants refused. Plaintiffs pray for the nullity of any documents covering the properties in question since they do not bear the genuine signatures of the Aquino spouses, to order the partition of the properties between plaintiffs and defendants in equal shares and to order the defendants to render an accounting of the produce of the land in question from the time defendants forcibly took 5 possession until partition shall have been effected. Defendants filed their Amended Answer with counterclaim alleging among others that during the lifetime of spouses Cornelio Aquino and Leoncia de Guzman, they had already disposed of their properties in favor of petitioners' predecessors-in-interest, Cesario Velasquez and Camila de Guzman, and petitioners Anastacia and Jose Velasquez in the following manner: (1) The third and sixth parcels were conveyed to defendants' late parents Cesario Velasquez and Camila de Guzman, by virtue of a Escritura de Donation Propter Nuptias dated February 15, 1919; (2) The second parcel was conveyed to defendants' late parents Cesario Velasquez and Camila de Guzman by virtue of a deed of conveyance dated July 14, 1939, for which Transfer Certificate of Title No. 15129 was issued by the Registry of Deeds of Pangasinan in the names of Cesario Velasquez and Camila de Guzman; (3) The first parcel was likewise conveyed to defendants Jose Velasquez and Anastacia Velasquez by virtue of a deed of conveyance (Donation Intervivos) dated April 10, 1939; (4) As to the fourth and fifth parcels, the same were owned and possessed by third parties. Defendants denied that a conference took place between Leoncia de Guzman and plaintiff Santiago Meneses and his mother Anatalia with Tranquilina (defendants' grandmother) and Cesario Velasquez (defendants' father), nor did the latter promise to divide the properties equally with the plaintiffs or to execute a deed of partition; that they did not forcibly take possession of the subject properties since their possession thereof has been peaceful, open, continuous and adverse in character to the exclusion of all others. By way of affirmative defenses, defendants claim that the instant case is already barred by res judicata since there had been three previous cases involving the same parties, subject matter and cause of action which were all dismissed, the last of which was dismissed for failure to prosecute; that plaintiffs' action to annul the documents covering the disposition of the properties is also barred by the statute of limitations; that the action for partition presupposes the existence of a property held in common as agreed upon or admitted by the parties but the co-ownership ceases when one of the parties alleges exclusive ownership, thus the 6 action becomes one for a title and recovery of ownership and the action prescribes in four years. On May 18, 1990, a pre-trial order was issued by the trial court which defined the issues to be resolved as follows: xxx xxx xxx
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1. Whether or not the properties in question form part of the estate of Anatalia de Guzman and Sps. Cornelio Aquino and Leoncia de Guzman; 2. Whether or not plaintiff's action is already barred by the statutes of limitation and res judicata; and 3. Whether or not the properties in question can be the subject of an action for partition. After trial, the decision was rendered on April 8, 1992 which ruled as follow:
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From the evidence, the Court finds that the plaintiffs are brothers and sisters who are the children of Estanislao Meneses and Anatalia de Guzman and the defendants are the children of plaintiffs' cousin Cesario Velasquez and Camila de Guzman. The defendants' mother Tranquilina de Guzman and plaintiffs' mother Anatalia de Guzman and Leoncia de Guzman are full blooded sisters. The subject six (6) parcels of land were conjugal properties of Leoncia de Guzman and her husband Cornelio Aquino were in their possession until their death in 1945 and 1947, respectively. After the death of plaintiffs' mother Anatalia de Guzman on September 14, 1978, plaintiff Santiago Meneses came across an affidavit of Cesario Velasquez notarized by Atty. Elpidio Barrozo stating that he is an adopted son of said spouses Cornelio Aquino and

Leoncia de Guzman (Exhibit "A") which, is however, not supported by evidence (a court order). The said affidavit mentioned, among other things, a house and a parcel of land covered by Tax Declaration No. 699 located at Guiguilonen, Mangaldan, Pangasinan, (Exhibit "B"). The sugar cane and coconut land situated at Poblacion, Mangaldan, Pangasinan, containing an area of 27,849 square meters covered by Tax Declaration No. 978 (Exhibit "C") which was in the possession of spouses Cornelio Aquino and Leoncia de Guzman until their death. Sometime in 1944 Leoncia de Guzman called a conference among the plaintiffs and spouses Cesario Velasquez and Camila de Guzman and told them that all their conjugal properties shall be divided equally between Anatalia de Guzman and Tranquilina de Guzman and that she did not sign documents regarding the conveyance of their properties; and that the property (parcel B) in Malabago, Mangaldan, Pangasinan, which yielding an annual produce worth P15,000.00 was divided between Anatalia de Guzman and Tranquilina de Guzman. Spouses Cornelio Aquino and Leoncia de Guzman who were childless had Anatalia de Guzman and Tranquilina de Guzman as their legal heirs. The latter succeeded the former over the subject six (6) parcels of land in equal shares 1/2 belongs to Anatalia de Guzman and the other half, to Tranquilina de Guzman. This, notwithstanding the claim of defendants that the first parcel was donated to Jose Velasquez and Anastacia Velasquez by way of "Donations Intervivos." The second parcel, sold to Cesario Velasquez and Camila de Guzman; The third and 6th parcels, donated to Cesario Velasquez and Camila de Guzman; and The 4th and 5th parcels, sold to third parties. The claim of Cesario Velasquez that he was adopted by the Spouses Cornelio Aquino and Leoncia de Guzman is not supported by evidence. The Court finds plaintiff Santiago Meneses credible; and his testimony, credible by itself. Santiago Meneses who is 80 years old testified spontaneously in a clear, straight forward and convincing manner. The version of the defendants td the effect that spouses Cornelio de Guzman and Leoncia de Guzman left no properties cannot be given serious consideration. It is incredible and unbelievable. How did the spouses Cornelio Aquino and Leoncia de Guzman support and maintain themselves if they disposed of their valuable properties, the six (6) parcels of land in question, during their lifetime? Did they really leave no properties? These questions remained unanswered. The defendants failed to prove their allegations that the Spouses Cornelio Aquino and Leoncia de Guzman disposed of their properties during their lifetime. Defendant Eliseo Velasquez is a lawyer and his co-defendant brothers are retired government officials. On the other hand, the plaintiffs are simple, innocent country folks who have not obtained substantial level of education. The Court believes and so holds that the defendants manipulated the transfer unto themselves all the properties of Spouses Cornelio Aquino and Leoncia de Guzman; thus, depriving the plaintiffs their shares in the inheritance, to their prejudice and damage. Insofar, as the issue of whether or not partition prescribes, the court believes and so rules that it does not. xxx xxx xxx

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs:

(1) Declaring Anatalia de Guzman and Tranquilina de Guzman as the legal heirs of Spouses Cornelio Aquino and Leoncia de Guzman; and that the former succeeded the latter over the six (6) parcels of land in question in equal shares 1/2 belongs to Anatalia de Guzman or to her heirs; and 1/2, to Tranquilina de Guzman or to her heirs; (2) Declaring the Donation Intervivos in favor of Jose Velasquez and Anastacia Velasquez over the first parcel of land; the Deed of Sale to Cesario Velasquez and Camila de Guzman over the second parcel; the Deed of Donation to Cesario Velasquez and Camila de Guzman over the 3rd and 6th parcels; the Deed of Sale to third parties over the 4th and 5th parcels as null and void insofar as 1/2 of the six (6) parcels are concerned which legitimately belong to the plaintiffs; (3) Ordering the defendants to reconvey to the plaintiffs 1/2 each of the six (6) properties in question and if this is not possible, to reconvey the whole of the sugar cane and coconut land situated at Poblacion, Mangaldan, Pangasinan, containing an area of 27,849 square meters, covered by Tax Declaration No. 978 (Exhibit "C") parcel B, par. 2 of the complainant; and (4) Ordering the defendants jointly and severally to pay to plaintiffs P50,000.00, as damages, P5,000.00, as attorney's fees and P3,000.00, as litigation expenses. Dissatisfied, defendants appealed the decision to the respondent Court of Appeals which affirmed the same in a decision dated December 29, 1995. The Court of Appeals rejected the defense of res judicata which was never pleaded nor raised earlier, and for that reason was deemed waived. The appellate court also dismissed the claim of prescription as an action for partition is imprescriptible. As regards the previous transfers executed in favor of the defendants, the court affirmed the trial 9 court's finding that the transfers were repudiated before the death of Leoncia. A motion for reconsideration was filed by petitioners but the same was denied by the respondent court in a resolution dated November 6, 1996. Attributing reversible errors to the appellate court, petitioners elevated the case to this Court on the following main 10 issues: I. WHETHER OR NOT THE INSTANT CASE IS BARRED BY RES JUDICATA AND BY THE STATUTE OF LIMITATIONS. II. WHETHER OR NOT THE PROPERTIES MENTIONED IN THE COMPLAINT FORM PART OF THE ESTATE OF THE SPOUSES CORNELIO AQUINO AND LEONCIA DE GUZMAN. III. WHETHER OR NOT THE PETITIONERS HAVE ACQUIRED ABSOLUTE AND EXCLUSIVE OWNERSHIP OF THE PROPERTIES IN QUESTION. IV. WHETHER OR NOT PRIVATE RESPONDENT HEIRS OF ANATALIA DE GUZMAN ARE LEGAL HEIRS OF SPOUSES CORNELIO AQUINO AND LEONCIA DE GUZMAN. V. WHETHER OR NOT PARTITION IS THE PROPER ACTION IN THE INSTANT CASE. In their Comment, private respondents allege that the issue of res judicata has been sufficiently discussed and considered and the trial court opted to inquire into their legitimate grievance and came up with a judicious determination of the case on the merits; that the present case involves respondents who are simple, ignorant folks who have not obtained substantial level of education and are unaware of the legal intricacies and technicalities in pursuing their valid claim. They further contend that this action is not yet barred by the statute of limitation since an action for partition is imprescriptible and that the court correctly ruled that the instant action for partition is proper. We find merit in the petition.

Petitioners contend that public respondent erred when it held that the issue of res judicata was never raised either in the Answer or at the Pre-trial such that it was not under consideration. We agree with the petitioner. The records show that the defense of res judicata was raised in the petitioners' Amended Answer filed before the trial court more particularly under paragraph 18, to wit: 18. b. The case at bar is already barred by RES JUDICATA, there having been three (3) previous cases involving either the predecessors-in-interest of the parties herein or of the present parties themselves, the same subject matter, and the same cause of action, which were all dismissed, the last dismissal having been ordered by this very same Honorable Court in Civil Case No. D-8811 on October 21, 1988 for failure to prosecute which dismissal has the effect of an adjudication on the merits and therefore with prejudice as this Honorable court did not provide otherwise (Sec. 3., Rule 17) and the Plaintiffs in said case, who are the same plaintiffs in the present case did not appeal from said order of dismissal . Said Amended Answer was admitted by the trial court in its Order dated March 2, 1990 and was one of the issues stipulated for resolution in its Pre-trial Order dated May 18, 1990. Thus, it was clear error for respondent court to conclude that res judicata was never raised in the lower court. The next question is whether res judicata is present in the instant case. We rule in the affirmative. Petitioners in their Memorandum established that there were three (3) earlier cases filed by private respondents against petitioners involving the same subject matter and issues as in the instant case which were all dismissed, to wit: The first Complaint filed by Anatalia de Guzman, mother of Tranquilina de Guzman and his son Cesario Velasquez, docketed as Civil Case No. 11378 of the then Court of First Instance of Pangasinan. Said action was dismissed on August 18, 1950. Thirty four (34) years after, or on October 9, 1984, private respondent Santiago Meneses filed a second Complaint similar to the Complaint of his mother (Civil Case No. 11378) which was docketed as Civil Case No. D-7584, entitled "Heirs of Anatalia de Guzman, represented by Santiago Meneses vs. Cesario Velasquez, defendant. In the order of the Regional Trial Court, Branch 41, Dagupan City, dated May 28, 1986, this Complaint was dismissed for failure to prosecute without prejudice (Exh. "16"). Private respondent Santiago Meneses refiled the Complaint allegedly joined this time by his siblings on October 23, 1987; which was docketed as Civil Case No. P-8811 and entitled "Heirs of Anatalia de Guzman, namely: Santiago Meneses, Apolonio Meneses, Andres Meneses, Luis Meneses, Felicidad Meneses, Plaintiffs, versus Heirs of Cesario Velasquez, namely: Anastacia Velasquez, Sofia Velasquez, Eliseo Velasquez, Jose Velasquez, Leonora Velasquez, Nieves Velasquez, Defendants. (Exh. "17"). On October 21, 1988; the Court a quo dismissed this Complaint as follows: "For failure to prosecute, the case is hereby dismissed without costs." (Exh. "18"). Petitioners' allegations were never rebutted by private respondents in their Comment as the only defense raised therein was that the application of the principle of res judicata should not sacrifice justice to technicality and it is within the power of the court to suspend its own rules or to except a particular case from its operations whenever the purpose of justice requires it. We have examined the third complaint filed by private respondents on October 23, 1987 and compared it with the instant case, and we found that the allegations contained in both complaints are the same, and that there is identity of parties, subject matter and cause of action. Thus the requisites of res judicata are present, namely (a) the former judgment or order must be final; (b) it must be a judgment or order on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and (d) there must be between the first and the second actions, identity of parties, of subject matter and of cause of action. Since the dismissal of the third case did not contain any condition at all, it has the effect of an adjudication on the merits as it is 12 understood to be with prejudice. On this ground alone, the trial court should have already dismissed this case. However, considering that this case had already reached this Court by way of a petition for review on certiorari, it would be more in keeping with substantial justice if the controversy between the parties were to be resolved on the merits rather than on a procedural technicality in the light of the express mandate of the rules that they be "liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive 13 determination of every action and proceeding." Petitioners next contend that private respondent Santiago Meneses failed to prove the nullity of the Deeds of Conveyance executed by the Aquino spouses in favor of petitioners Jose and Anastacia Velasquez and their predecessors-in-interest Cesario Velasquez and Camila de Guzman since he failed to adduce any evidence to
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support his claim other than his bare allegations of its nullity. Petitioners claim that they were able to show by documentary evidence that the Aquino spouses during their lifetime disposed of the four parcels of land subject of the complaint, to wit: (a) Escritura de donation propter nuptias dated February 15, 1919 in favor of then future spouses Cesario Velasquez and Camila de Guzman (petitioners' parents) conveying to them a portion of the second parcel and the entirety of the third and sixth parcels in the complaint; (b) Deed of donation inter vivos dated April 10, 1939 conveying the first parcel in favor of petitioners Anastacia Velasquez and Jose Velasquez; (c) Escritura de Compreventa dated August 25, 1924 conveying another portion of the second parcel in favor of Cesario Velasquez and Camila de Guzman with a P500 consideration: (d) Deed of Conveyance dated July 14, 1939 in favor of Cesario Velasquez and Camila de Guzman conveying to them the remaining portion of the second parcel for a consideration of P600 and confirming in the same Deed the Escritura de donation propter nuptias and Escritura de compraventa abovementioned. Petitioners claim that the record is bereft of any evidence showing the infirmities in these formidable array of documentary evidence but the courts below declared their nullity on the basis of the "telltale" story of Santiago Meneses. They contend that in giving credence to the testimony of Santiago Meneses that all the deeds of conveyances executed by the Aquino spouses in favor of the petitioners were a nullity, Santiago would want to make it appear that the spouses Aquino, in giving dowry thru escritura de donation propter nuptias and donation inter vivos, were only fooling the innocent youngters and then future spouses Cesario Velasquez and Camila de Guzman, and the innocent minors donees Jose and Anastacia Velaquez respectively. Petitioner's submission is impressed with merit. After examination of the records, we find that there is no preponderance of evidence adduced during the trial to support the findings and conclusions of the courts below, which error justifies a review of said evidence. As a rule, factual findings of the lower courts are final and binding upon this Court. This Court is not expected nor required to 14 examine or contrast the oral and documentary evidence submitted by the parties. However, although this Court is not a trier of facts, it has the authority to review and reverse the factual findings of the lower courts if it finds that these 15 do not conform to the evidence on records, in the instant case, we are not bound to adhere to the general rule since 16 both courts clearly failed to consider facts and circumstances which should have drawn a different conclusions. In actions for partition, the court cannot properly issue an order to divide the property unless it first makes a determination as to the existence of co-ownership. The court must initially settle the issue of ownership, the first stage 17 in an action for partition. Needless to state, an action for partition will not lie if the claimant has no rightful interest over the subject property. In fact, Section 1 of Rule 69 requires the party filing the action to state in his complaint the "nature and the extent of his title" to the real estate. Until and unless the issue of ownership is definitely resolved, it 18 would be premature to effect a partition of the properties. We are unable to sustain the findings of the respondent Court that it has been adequately shown that the alleged transfers of properties to the petitioners' predecessor-in-interest made by the Aquino spouses were repudiated before Leoncia's death; thus private respondents are still entitled to share in the subject properties. There is no preponderance of evidence to support the findings and conclusions of both courts. The trial court declared the nullity of the donation inter vivos in favor of petitioners Jose and Anastacia Velasquez over the first parcel of land described in the complaint, the deed of sale to Cesario Velasquez and Camila de Guzman over the second parcel and the deed of donation propter nuptias over the third and sixth parcels and the sale to third parties of fourth and fifth parcels insofar as the 1/2 of these parcels of land are concerned which "legitimately belong to plaintiff." It would appear that the trial court relied solely on the basis of Santiago Meneses' testimony "that in 1944 when his aunt Leoncia de Guzman was still alive, she called a conference among them, the plaintiffs and their mother Anatalia, Cesario Velasquez and his mother Tranquilina, telling them that all their properties which are conjugal in nature shall be divided equally between Anatalia and Tranquilina and not to believe the documents purportedly signed by her 19 because she did not sign them". Private respondent Santiago Meneses' testimony is to the effect that Leoncia never signed any deed of conveyance of the subject properties in favor of the petitioners. However, Santiago Meneses' testimony was never corroborated by any other evidence despite his testimony that the alleged conference was also made in the presence of third parties. Moreover, if the alleged conference really took place in 1944, a year before Leoncia's death, Leoncia could have executed another set of documents revoking or repudiating whatever dispositions she had earlier made to show her alleged intention of giving her properties in equal shares to her sisters Anatalia and Tranquilina de Guzman but there was none. The trial court found the testimony of Santiago Meneses who is eighty years old to be credible, and this was affirmed by the respondent court which stated that the matter of ascribing credibility belongs to the trial court. However, the fact that a person has reached the "twilight of his life" is not always a guaranty that he would tell the truth. It is also quite common that advanced age makes a person mentally dull and completely hazy about things which has appeared to him, and at times it weakens his resistance to 20 outside influence.

On the other hand, petitioners were able to adduce the uncontroverted and ancient documentary evidence showing that during the lifetime of the Aquino spouses they had already disposed of four of the six parcels of land subject of the complaint starting in the year 1919, and the latest was in 1939 as follows: (a) Escritura de donation propter nuptias dated February 15, 1919 in favor of the future spouses Cesario Velasquez and Camila de Guzman (petitioners' parents) conveying to them a portion of the second parcel in the complaint and the entirety of the third 21 and sixth parcels; (b) Deed of donation inter vivos dated April 10, 1939 conveying the first parcel in favor of 22 petitioners Anastacia Velasquez and Jose Velasquez; (c) Escritura de Compraventa dated August 25, 1924 conveying another portion of the second parcel in favor of Cesario Velasquez and Camila de Guzman with a P500 23 consideration; (d) Deed of Conveyance dated July 14, 1939 in favor of Cesario Velasquez and Camila de Guzman conveying to them the remaining portion of the second parcel for a consideration of P600 and confirming in the same 24 Deed the Escritura de donation propter nuptias and Escritura de compraventa abovementioned. It was reversible error for the court to overlook the probative value of these notarized documents. A donation as a mode of acquiring ownership results in an effective transfer of title over the property from the donor 25 26 to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. 27 And once a donation is accepted, the donee becomes the absolute owner of the property donated. The donation of the first parcel made by the Aquino spouses to petitioners Jose and Anastacia Velasquez who were then nineteen (19) and ten (10) years old respectively was accepted through their father Cesario Velasquez, and the acceptance was incorporated in the body of the same deed of donation and made part of it, and was signed by the donor and the acceptor. Legally speaking there was delivery and acceptance of the deed, and the donation existed perfectly and irrevocably. The donation inter vivos may be revoked only for the reasons provided in Articles 760, 764 and 765 of 28 the Civil Code. The donation propter nuptias in favor of Cesario Velasquez and Camila de Guzman over the third and sixth parcels including a portion of the second parcel became the properties of the spouses Velasquez since 1919. The deed of donation propter nuptias can be revoked by the non-performance of the marriage and the other 29 causes mentioned in article 86 of the Family Code. The alleged reason for the repudiation of the deed, i.e., that the Aquino spouses did not intend to give away all their properties since Anatalia (Leoncia's sister) had several children to support is not one of the grounds for revocation of donation either inter vivos or propter nuptias, although the donation might be inofficious. The Escritura compraventa over another portion of the second parcel and the Deed of conveyance dated July 14, 1939 in favor of Cesario and Camila Velasquez over the remaining portion of the second parcel is also valid. In fact in the deed of sale dated July 14, 1939, the Aquino spouses ratified and confirmed the rights and interests of Cesario Velasquez and Camila de Guzman including the previous deeds of conveyance executed by the Aquino spouses over the second parcel in the complaint and such deed of sale became the basis for the issuance of TCT No. 15129 in the names of Cesario Velasquez and Camila de Guzman on July 25, 1939. The best proof of the ownership of the 30 land is the certificate of title and it requires more than a bare allegation to defeat the face value of TCT No. 15129 31 which enjoys a legal presumption of regularity of issuance. Notably, during the lifetime of Cesario Velasquez, he entered into contracts of mortgage and lease over the property as annotated at the back of the certificate of title which clearly established that he exercised full ownership and control over the property. It is quite surprising that it was only after more than fifty years that private respondents asserted co-ownership claim over the subject property. The Aquino spouses had disposed the four parcels of land during their lifetime and the documents were duly 32 notarized so that these documents enjoy the presumption of validity. Such presumption has not been overcome by private respondent Santiago Meneses with clear and convincing evidence. In civil cases, the party having the burden 33 of proof must establish his case by a preponderance of evidence. Petitioners were able to establish that these four parcels of land were validly conveyed to them by the Aquino spouses hence they no longer formed part of the conjugal properties of the spouses at the time of their deaths. As regards the fourth and fifth parcels, petitioners alleged that these were also conveyed to third persons and they do not claim any right thereto. In view of the foregoing, we conclude that this action of partition cannot be maintained. The properties sought to be partitioned by private respondents have already been delivered to petitioners and therefore no longer part of the hereditary estate which could be partitioned. After finding that no co-ownership exist between private respondents and petitioners, we find no reason to discuss the other arguments raised by the petitioners in support of their petition. WHEREFORE, the petition is GRANTED. The questioned decision and resolution of respondent Court of Appeals as well as the decision of the Regional Trial Court of Dagupan City are SET ASIDE. The complaint in the trial court against petitioner is ORDERED DISMISSED. SO ORDERED.

Melo, Vitug, Panganiban and Purisima, JJ., concur.1wphi1.nt

Footnotes
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Justice Emeterio C. Cui, ponente, concurred in by Justices Ricardo P. Galvez and Antonio P. Solano. Penned by Judge Deodoro J. Sison. Rollo, p. 197.

Felicidad Meneses Frianela and Apolonio G. Meneses executed a joint affidavit dated June 24, 1991 stating that the filing of the complaint was the idea of their brother Santiago; that they refused and did not authorize Santiago to include them as plaintiffs on the ground that they recognize the ownership of the late Cesario Velasquez and petitioners Jose and Anastacia Velasquez of the lands in question; that Cesario Velasquez had been in actual physical possession of the lands in question and enjoying the fruits exclusively since he acquired them; that Jose and Anastacia have been in actual possession of the land donated to them and in fact Jose had established his family house thereon for thirty (30) years now. Exhibit "13".
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Records, pp. 1-4. Records, pp. 82-94. Records, p. 115. Rollo, p. 87-90. Rollo, pp. 188-194. Rollo, p. 233. Records, p. 99. Sec. 3 Rule 17 of the old Rules of Court Sec. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the court.

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Olivares vs. Gonzales, 159 SCRA 33. Imperial vs. CA, 259 SCRA 65, 71. Cang vs. CA, 296 SCRA 128; citing PNB vs. CA, 187 SCRA 735; Ongsiako vs. IAC, 152 SCRA 627. P.M. Pastera Brokerage vs. CA, 266 SCRA 365. De Mesa v. CA, 231 SCRA 773. Fabrica vs. CA, 146 SCRA 250.

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19

TSN, November 8, 1990, pp. 16-18. Regalado, Remedial Law Compendium, Vol. II, p 553 citing People vs. Juarez (CA), 57 OG 2518. Exhibit "3". Exhibit "1" Exhibit "5". Exhibit "6". Art. 712, Civil Code. Art. 712. Ownership is acquired by occupation and by intellectual creation. Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contract, by tradition. They may also be acquired by means of prescription.

20

21

22

23

24

25

26

Art. 734, Civil Code. Tanpingco vs. IAC, 207 SCRA 652; Quijada vs. CA, 299 SCRA 695.

27

28

Art. 760. Every donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or illegitimate, may be revoked or reduced as provided in the next article, by the happening of any of these events: (1) If the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous; (2) If the child of the donor, whom the latter believed to be dead when he made the donation, should turn out to be living; (3) If the donor should subsequently adopt a minor child. Art. 764 . The donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon the latter. In this case, the property donated shall be returned to the donor, the alienations made by the donee and the mortgages imposed thereon by him being void, with the limitations established, with regard to third persons, by the Mortgage Law and the Land Registration Laws. This action shall prescribe after four years from the non compliance with the condition, may be transmitted to the heirs of the donor, and may be exercised against the donee's heirs. Art. 765. The donation may also be revoked at the instance of the donor, by reason of ingratitude in the following cases: (1) If the donee should commit some offense against the person, the honor or the property of the donor, or his wife or children under his parental authority; (2) If the donee imputes to the donor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the donee himself, his wife or children under his authority;

(3) If he unduly refuses him support when the donee is legally or morally bound to give support to the donor.
29

Art. 86. A donation by reason of marriage may be revoked by the donor in the following cases: (1) If the marriage is not celebrated or judicially declared void ab initio except donations made in the marriage settlements, which shall be governed by Article 81; (2) When the marriage takes place without the consent of the parents or guardian, as required by law; (3) When the marriage is annulled, and the donee acted in bad faith; (4) Upon legal separation, the donee being the guilty spouse; (5) If it is with a resolutory condition and the condition is complied with; (6) When the donee has committed an act of in gratitude as specified by the provisions of the Civil Code on donations in general.

30

Halili vs. CIR 257 SCRA 174. Chan vs. CA (Special 7th Division), 298 9CRA 713. Favor vs. CA, 194 SCRA 308. Sec. 1 Rule 133, Revised Rules of Court.

31

32

33

G.R. No. 128145

September 5, 2001

J.C. LOPEZ & ASSOCIATES, INC., petitioner, vs. COMMISSION ON AUDIT and NATIONAL POWER CORPORATION, respondents. BUENA, J.: This is a petition for review on certiorari of the Decision of the Commission on Audit, docketed as COA Decision No. 95-475, 1 dated September 12, 1995; the Resolutions of the Commission on Audit, docketed as COA Decision No. 96-416, 2 dated August 13, 1996; and COA Decision No. 97-075, 3 dated January 23, 1997. The factual and procedural antecedents are as follows: On January 2, 1991, petitioner entered into a contract with the National Power Corporation (NAPOCOR) for the dredging of the vicinity of the Intake Tower at the Ambuklao Hydroelectric Plant in Bokod, Benguet. The pertinent provisions of the said contract provide: "xxx xxx xxx "ARTICLE III "P A Y M E N T S

"For and in consideration of the Work to be undertaken by CONTRACTOR as specified in the preceeding (sic) Article hereof, NAPOCOR shall pay CONTRACTOR in Philippine Currency, and in accordance with the Contract Documents the unit and lump sum prices indicated hereunder in the total amount of PESOS SIXTY SEVEN MILLION FIVE HUNDRED ONE THOUSAND (P67,501,000.00), Philippine Currency. "DESCRIPTION 1. Mobilization 2. Dredging of 300,000 cu. m. of silt 3. Demobilization TOTAL CONTRACT PRICE UNIT PRICE Lump Sum P165.00/sqm. Lump Sum TOTAL PRICE P18,000,000.00 49,500,000.00 1,000.00 P67,501,000.00

"Payment shall be made in accordance with the Contract Documents, and as follows: "1. Fifteen percent (15%) of the total contract price shall be paid within thirty (30) calendar days from [the] signing of this Contract against submission of a refund bond, in the form of an irrevocable standby letter of credit in the equivalent amount. This advance payment shall be deducted from the mobilization cost which mobilization cost shall be paid upon the commencement of the dredging works. Consequently, the refund bond shall be released to CONTRACTOR. "2. Seventy five percent (75%) of the monthly billing for the work completed and duly accepted by NAPOCOR shall be paid within fifteen (15) calendar days from submission of CONTRACTOR's billing complete with supporting documents. "3. The remaining ten percent (10%) shall be paid in accordance with GP-28 of the Contract Specifications. "CONTRACTOR shall pay any and all taxes imposable under this Contract. "xxx xxx xxx."
4

Pursuant to the applicable provision of the foregoing contract, NAPOCOR paid the petitioner the amount of 5 P10,125,150.00, as per Disbursement Voucher No. 091-02-853, dated January 28, 1991, representing fifteen 6 percent (15%) of the total contract price. Subsequently, NAPOCOR paid the petitioner the amount of P7,694,850, as 7 per Disbursement Voucher No. 091-07-861, dated July 20, 1991, representing the balance of the mobilization cost. After the petitioner completed the mobilization of its resources (manpower, materials and equipment) on June 25, 1991, and the fabrication, assemblies and testing of its system on July 16, 1991, the petitioner started the actual 8 dredging works on July 18, 1991. However, due to the delays incurred by petitioner in its dredging operations, resulting in "substantial slippages of 35.0% and 51.6% in the financial and physical accomplishments, respectively," 9 petitioner's contract with NAPOCOR was terminated through a Notice of Termination dated September 24, 1991. 10 Petitioner's letter seeking reconsideration of the termination was denied by NAPOCOR. NAPOCOR ordered the petitioner to stop its dredging operations in preparation for the joint survey to determine the actual volume of silt dredged by the petitioner. The joint survey which was conducted on November 29, 1991 to December 4, 1991 11 revealed that petitioner was able to dredge 167,983.70 cubic meters of silt, amounting to P27,717,310.50. On February 20, 1992, NAPOCOR entered into a negotiated contract with a consortium led by Meralco Industrial Engineering Services Corporation (MIESCOR) to rehabilitate, operate and lease back the Ambuklao Hydroelectric 12 Plant, including the dredging of silt within the vicinity of the intake tower. Shortly thereafter, or on April 1, 1992, petitioner filed a complaint for injunction with the Regional Trial Court of Quezon City, Branch 215, docketed as Civil Case No. Q-92-11797, assailing NAPOCOR's termination of its 13 14 contract, and with prayer for the issuance of a writ of preliminary injunction. In a Resolution dated June 22, 1992, the trial court issued a writ of preliminary injunction enjoining NAPOCOR and MIESCOR from interfering with 15 petitioner's dredging operations and from proceeding with the negotiated contract between them. In resolving petitioner's application for the issuance of a writ of preliminary injunction, the trial court delved extensively on the issue of ". . . whether the dredging of the Ambuklao water reservoir is to be considered an infrastructure work, and therefore, within the coverage of P.D. 1818, and as such, may not be enjoined or whether the same is merely a 16 service undertaking and therefore, outside the ambit of [the] said decree." The trial court agreed with the opinion of

the NAPOCOR SVP and General Counsel that ". . . the dredging of the Ambuklao water reservoir is not an 17 infrastructure work envisioned in Section 1 of P.D. 1818 but a service contract or undertaking." In addition, the trial court construed that ". . . [w]hat the plaintiff [herein petitioner] apparently seeks from the Court is not to stop the dredging of the Ambuklao water reservoir but on the contrary, to continue its dredging of [the] said reservoir pursuant to the contract between plaintiff J.C. Lopez [petitioner] and defendant NAPOCOR. Far from delaying the dredging of the Ambuklao water reservoir, the continuation of the dredging [operations] by the plaintiff J.C. Lopez [petitioner] 18 would expedite the rehabilitation of the said water reservoir." Furthermore, the trial court ruled that petitioner's right to due process of law was violated when NAPOCOR unilaterally cancelled petitioner's contract and entered into a 19 contract with MIESCOR. Alleging that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing 20 the aforestated writ of preliminary injunction, MIESCOR filed a petition for certiorari dated February 1, 1993, with prayer for a temporary restraining order/preliminary injunction, with the Court of Appeals, docketed as CA-G.R. SP No. 30141. On March 18, 1993, the Court of Appeals issued a writ of preliminary injunction prohibiting the trial court from enforcing the writ of preliminary injunction which it had earlier issued, and enjoining NAPOCOR and MIESCOR 21 from undertaking further activities at the Ambuklao water reservoir until further orders from the court. On July 22, 1993, the Court of Appeals rendered a Decision setting aside the Resolutions dated June 22, 1992, and January 13, 1993, of the trial court. In its Decision, the Court of Appeals dismissed, as being without basis, the petitioner's allegation that the act of clearing or dredging the reservoir of a hydroelectric plant may be considered as a 23 mere maintenance work or service undertaking. Citing Executive Order No. 380 which defines the term "infrastructure projects" as "construction, improvement or rehabilitation of roads and bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage, water supply and sewerage systems, shore protection, power facilities, national buildings, school buildings, hospital buildings, and other related construction projects that form part of the government capital investment;" the Court of Appeals ruled that "there should not be any iota of doubt" that the enumerated undertakings [which include the dredging of the reservoir, power intake, tailrace tunnel and tailrace channel] in the Memorandum of Agreement dated February 20, 1992 between NAPOCOR and 24 MIESCOR, "fall under the protection of P.D. No. 1818 and even within the definition of 'infrastructure project' under 25 Executive Order No. 380." The Court of Appeals further ruled that the trial court's "act of granting the writ of preliminary injunction is patently erroneous, committed with grave abuse of discretion and in excess of jurisdiction, as 26 it is directly in contravention of the mandate of P.D. No. 1818 and Circular No. 2-91 implementing the same." The foregoing decision of the Court of Appeals became final and executory. Meanwhile, while NAPOCOR and MIESCOR were still seeking reconsideration of the trial court's Resolution dated June 22, 1992, issuing a writ of preliminary injunction against them, the resident corporate auditor of NAPOCOR, after conducting a post-audit examination of the pertinent transaction, issued a Notice of Suspension (NS-INFRA-9227 01) dated November 25, 1992, involving the advance payment/mobilization fee amounting to P17,820,000.00, paid by NAPOCOR to the petitioner for the dredging of the vicinity of the Intake Tower at the Ambuklao Hydroelectric Plant. Among the "errors, differences and omissions" listed in the Notice of Suspension was as follows: "xxx xxx xxx
22

"3. The contract provided for P18 M mobilization fee which amount is 26% of the total contract cost. Under PD 1594, the allowed mobilization fee is only 15% of the total contract price. The contract also provided for advance payment in violation of Sec. 88 of PD 1445. "xxx xxx xxx."
28

In reply to the foregoing findings by the corporate auditor, NAPOCOR maintained that its contract with the petitioner provided for a mobilization fee of P18,000,000.00 as a "pay item," the payment of which is provided under subparagraph 1, Article III of the dredging contract. NAPOCOR further claimed that the ". . . mobilization fee, taken as a whole, is not an advance payment. It is only so to the extent of fifteen percent (15%) as clearly reflected in the aforequoted provision of the contract. The balance of the mobilization cost (which is a pay item), after deducting the 15% advance payment, is due and payable only upon the commencement of the dredging works. Stated otherwise, the remaining mobilization cost was paid, as evidenced by the Disbursement Voucher (Annex "B"), upon the completion by the contractor of the pay item. Hence, the contract did not violate the 15% limit on advance payment as allowed 29 under PD 1594 and its implementing rules and regulations (Sec. 3, CI-4)." NAPOCOR's explanation having been found substantially insufficient, the notice of suspension of payment ripened into a disallowance of payment, prompting the petitioner to bring the matter before the Commission on Audit where it requested the lifting of the suspension on its claim for advance payment and mobilization fee in the total amount of P17,820,000.00.

On September 12, 1995, the Commission on Audit rendered a Decision,

30

the dispositive part of which provides:

"Accordingly, if J.C. Lopez's [petitioner] claim for work accomplishment, amounting to P29,196,708.75 is correct, properly documented and approved by the National Power Corporation, the mobilization cost of 31 P18,000,000.00 paid to [the] said firm should be deducted therefrom." In its Decision dated September 12, 1995, the Commission on Audit phrased the issue for its consideration, as follows: "WHETHER OR NOT THE AMOUNT OF P18 M WHICH WAS PAID AS MOBILIZATION FEE AS PROVIDED FOR IN THE PERTINENT CONTRACT IS LEGAL OR PROPER IN VIEW OF WHICH THE HEREIN REQUEST FOR [THE] LIFTING OF [THE] SUSPENSION [OF PAYMENT] WHICH MATURED 32 INTO A DISALLOWANCE, MAY BE GIVEN DUE COURSE." The Commission on Audit ruled that petitioner's appeal for the lifting of the suspension/disallowance of payment is "devoid of merit in the light of the ruling of the Court of Appeals in the Certiorari Case (CA-G.R. SP No. 30141 entitled 'Meralco Industrial Engineering Services Corporation vs. Hon. Romeo F. Zamora and J.C. Lopez, Inc.') wherein it was held that the NAPOCOR-MIESCO[R] Contract, which includes the dredging of the reservoir is an infrastructure 33 project;" and resolved that ". . . it is logical to conclude that the dredging contract of J.C. Lopez [petitioner] is 34 likewise an infrastructure project and not a mere service agreement." From the foregoing ratiocination, the Commission on Audit determined that ". . . the provision for advance payment [de]nominated as 'Mobilization Cost' under the contract in question, violates the provision of CI.4.3 of the IRR of P.D. 1594 and may not be enforced. Advance payment under the said IRR is subject to recoupment from progress billings for work accomplishment 35 submitted by the Contractor." Petitioner sought reconsideration but the same was denied by the Commission on Audit in a Resolution (COA Decision No. 96-416) dated August 13, 1996, where it was noted that petitioner's motion for reconsideration "merely reiterated the same arguments earlier raised and did not present substantial evidence not previously invoked or earlies (sic) considered and passed upon by the Commission [on Audit] when it rendered COA Decision No. 9536 475." Petitioner sought a second reconsideration but the same was again denied by the Commission on Audit in a 37 Resolution (COA Decision No. 97-075) dated January 23, 1997. Hence, this petition for certiorari where the following assignment of errors "I "THE RESPONDENT COMMISSION ON AUDIT GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE DREDGING CONTRACT BETWEEN PETITIONER AND NAPOCOR INVOLVED AN 'INFRASTRUCTURE,' WHICH MADE SUCH CONTRACT COME UNDER THE PROVISIONS OF PRESIDENTIAL DECREE NO. 1594 THAT PLACE A LIMIT ON ADVANCE PAYMENTS THAT MAY BE GRANTED; AND "II "THE RESPONDENT COMMISSION ON AUDIT GRAVELY ABUSED ITS DISCRETION IN CONCLUDING THAT THE 'MOBILIZATION' COST OF P18.0 MILLION PROVIDED IN THE CONTRACT BETWEEN NAPOCOR AND PETITIONER PARTOOK OF ADVANCES ON THE PRICE OF THE CONTRACT RATHER THAN A SEPARATE PAY ITEM." First, the petitioner argues that its dredging contract with NAPOCOR is not covered by Presidential Decree No. 1594 since it does not involve an infrastructure nor a construction project but actually constitutes a mere contract of 39 services, citing a memorandum dated March 25, 1991, written by NAPOCOR's SVP & General Counsel, discussing his opinion on whether the dredging operations at the Ambuklao Hydroelectric Plant may be classified as an infrastructure or a mere service undertaking. In the said memorandum, it was first established that the term "infrastructure project" is defined in Executive Order No. 380 as the "construction, improvement or rehabilitation of roads and bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage, water
38

are raised:

supply and sewerage systems, shore protection, power facilities, national buildings, school buildings, hospital buildings, and other related construction projects that form part of the government capital investment." Citing Webster's definition of the terms "construction, improvement and rehabilitation," NAPOCOR's general counsel argued that: "xxx xxx xxx

"The act of clearing or dredging the reservoir of a hydroelectric plant cannot be classified as construction works as (sic) the creation of structures, neither can it be considered as an improvement since no permanent additional (sic) will be installed that will enhance its capital value, or a rehabilitation as no restoration works will be done thereat. At best, the same may be classified as a maintenance work or a service undertaking which is being pursued to keep the plant efficiently running or operating to the maximum. A hydroelectric plant is design[ed] to operate under a specified efficiency or rated capacity, and therefore any removal of the debris, logs, or silt from the reservoir will not improve or enhance the operation of the plant greater than the designed efficiency or rated capacity. "Furthermore, clearing or dredging works do not constitute government capital investment. "xxx xxx xxx."
40

(Italics supplied)

Petitioner further advances that the foregoing memorandum was even embodied in the Resolution dated June 22, 1992, of the Regional Trial Court of Quezon City, Branch 94, in Civil Case No. Q-92-11797. The Office of the Solicitor General, in behalf of public respondents, Commission on Audit and NAPOCOR, on the other hand, in a Memorandum dated April 12, 1999, contends that petitioner's dredging contract involves an 41 "infrastructure project" and/or construction project covered under Presidential Decree No. 1594. The Solicitor General points out that petitioner's contract with NAPOCOR involves the dredging of silt around the intake tower of the Ambuklao Hydroelectric Plant; and since the "dredging of silt improves the efficiency of the power plant," such undertaking constitutes an "infrastructure project" as defined in Executive Order No. 380, to wit: "xxx xxx xxx

'Infrastructure projects shall mean construction, improvement or rehabilitation of roads and bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage, water supply and sewerage systems, shore protection, power facilities, national buildings, school buildings, hospital buildings, and other related construction projects that form part of the government capital investment."' (Italics 42 supplied) Furthermore, the Solicitor General asserts that in the Decision dated July 22, 1993 of the Court of Appeals in Meralco Industrial Engineering Services Corporation vs. Hon. Romeo F. Zamora and J.C. Lopez, Inc., docketed as CA-G.R. SP No. 30141, the Court of Appeals ruled as follows: "In Executive Order No. 380, issued by the former President of the Philippines, Corazon C. Aquino, dated November 27, 1989, the term 'infrastructure projects' is defined as 'construction, improvement of [should read or] rehabilitation of roads and bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage, water supply and sewerage systems, shore protection, power facilities, national buildings, school buildings, hospital buildings, and other related construction projects that form part of the government capital investment.' "The Memorandum of Agreement Ambuklao Rehabilitation Project, dated February 20, 1992, entered into between petitioners NPC and MIESCOR, specifically defined the scope of the project, to wit: "xxx xxx xxx.

"II. PROJECT: "xxx xxx xxx.

"b. CONSORTIUM shall undertake the following . . . "3. Undertake dredging of the reservoir, power intake, tailrace tunnel and tailrace channel, . . . "Clearly therefore, there should not be any iota of doubt that the above enumerated works fall under the protection of P.D. No. 1818 and even within the definition of 'infrastructure project' under Executive Order 43 No. 380." We agree with the Solicitor General. As we held in Veloso, Jr. vs. Court of Appeals, ". . . [m]aterial facts or questions which were in issue in a former action and were there admitted or judicially determined are conclusively settled by a judgment rendered therein and that such facts or questions become res judicata and may not again be litigated in a subsequent action between the same parties or their privies, regardless of the form the issue may take in the subsequent action, whether the subsequent action involves the same or a different form of proceeding, or whether the second action is upon the same or a different cause of action, subject matter, claim or demand, as the earlier action. In such cases, it is also immaterial that the two actions based on different grounds, or tried on different theories, or instituted for different purposes, and seek different reliefs. By the same token, whatever is once irrevocably established as the controlling legal principle or decision continues to be the law of the case between the same parties in the same case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the 45 facts of the case before the court." In the instant case, the issue of whether or not the dredging contract between the petitioner and NAPOCOR involves an "infrastructure project" as defined in Executive Order No. 380, was already passed upon and resolved by the Court of Appeals in Meralco Industrial Engineering Services Corporation vs. Hon. Romeo F. Zamora and J.C. Lopez, Inc., docketed as CA-G.R. SP No. 30141. Consequently, upon attaining finality, the said decision became the law of the case and constituted a bar to any re-litigation of the same issue in any other proceeding under the principle of res judicata. Second, the petitioner contends that, assuming arguendo, its dredging contract with NAPOCOR involves an infrastructure project, the P18M, representing the mobilization cost, which was already paid to it by NAPOCOR, does not violate the provisions of Presidential Decree No. 1594 because the said mobilization cost is treated as a "pay 46 item" under the terms of the contract and not as an advance on the total contract price. Petitioner asserts that the ". . . contract provided that 15% of the above total [contract] price or P10,125,150.00 was payable after the signing of 47 the contract to be deducted from the mobilization cost which in turn was payable once the actual dredging started." According to the petitioner, there is a "rational basis" for classifying the mobilization cost as a "pay item." Petitioner explains: "xxx xxx xxx.
44

"During the pre-bidding conferences, the NAPOCOR and the interested bidders considered thoroughly the huge costs of mobilizing the heavy equipment, materials, and supplies needed at the mountain site. Many of the roads and bridges that were being used in going up the mountains at that time were impassable 48 because of the 1990 earthquake,x x x x x x ." Petitioner also submits that if the mobilization cost was considered as an advance on the total contract price rather than a pay item, such determination would be an alteration of a "lawful and valid" agreement between the parties to the contract and would cause "grave injustice" to the petitioner which had already incurred the mobilization cost. On the other hand, alleging that petitioner's contract involves an infrastructure project as defined in Executive Order No. 380, the Solicitor General submits that accordingly, the said contract "falls within the ambit of P.D. 1594 49 (Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts)." The Solicitor General further asserts that " . . . [t]he mobilization lump sum as provided in the dredging contract is, and should be, 50 considered an advance-payment item which forms part of the contract price and not an addition thereto;" and "subject to the conditions provided under CI 4 of the Implementing Rules and Regulations for P.D. No. 1594 which reads in part, thus: "CI 4 ADVANCE PAYMENT

"1. The Government shall, upon a written request of the contractor which shall be submitted as a contract document, make an advance payment to the contractor in an amount equal to fifteen percent (15%) of the total contract price, to be made in lump sum or a (sic) the most two installments according to a schedule specified in the Instructions to Bidders and other relevant Tender Documents. "xxx xxx xxx.

"4. The advance payment shall be repaid by the contractor by deducting 20% from his periodic progress payments, with the first repayment to be made when the contract value of the work executed and material delivered shall equal or have exceeded twenty percent (20%) of the contract price and further refunds shall 51 be done thereafter at monthly intervals." (Italics supplied) Again, we agree with the Solicitor General. Having established that petitioner's dredging contract with NAPOCOR involves an "infrastructure project," pursuant to the aforestated Court of Appeals decision, the said contract is governed by the provisions of Presidential Decree No. 1594 and its implementing rules and regulations. CI-4 of the implementing rules and regulations of Presidential Decree No. 1594 clearly provides that upon the written request of the contractor, the government shall make an advance payment in an amount equal to fifteen percent (15%) of the total contract price, subject to recoupment from periodic progress billings submitted by the contractor. Indeed, in compliance with Presidential Decree No. 1594 and its implementing rules and regulations, it is provided under Article III of petitioner's contract with NAPOCOR that fifteen percent (15%) of the total contract price shall be paid within thirty (30) calendar days from the signing of the contract against the submission of a refund bond in the form of an irrevocable standby letter of credit in the equivalent 52 amount. And pursuant to the said provision in the contract, in a letter dated January 10, 1991, and addressed to NAPOCOR, petitioner requested for the "fifteen percent (15%) Advance Payment of our contract price." However, the provision in the contract regarding the payment of the mobilization cost as a "pay item" has gone beyond the requirements of the law, and should consequently, be struck down. While indeed, as asserted by the petitioner, contracting parties may establish such stipulations, clauses, terms and 53 conditions as they may deem convenient, however, such stipulations should not be contrary to law. Realizing the need to adopt a comprehensive, uniform, and updated set of policies, guidelines, rules and regulations covering government contracts for infrastructure and other construction projects in order to achieve a more efficient and effective implementation of these projects, Presidential Decree No. 1594 was enacted to prescribe policies, guidelines, rules and regulations for government infrastructure contracts. In resum, as a government infrastructure contract, petitioner's contract with NAPOCOR is subject to the provisions of Presidential Decree No. 1594 and its implementing rules and regulations. WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED. Davide, Jr., C .J ., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, GonzagaReyes, Ynares-Santiago, De Leon, Jr. and Sandoval-Gutierrez, JJ ., concur.

Footnotes
1

Rollo, pp. 27-31. Ibid. at p. 32. Ibid. at pp. 33-34. Ibid. at pp. 25-26.

Records, p. 36. Rollo, p. 26 Records, p. 115. Ibid. at p. 114. Ibid. at pp. 122-123. Rollo, p. 183. Ibid. at p. 184. Records, pp. 144-154. Rollo, p. 35, 184. Records, pp. 167-171. Ibid. at p. 171. Ibid. at p. 167. Ibid. at p. 169. Ibid. at p. 170. Ibid. at pp. 170-171. Ibid. at pp. 213-233. Ibid. at pp. 194-195. Ibid. at pp. 179-185. Ibid. at p. 182.

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Prohibiting Courts From Issuing Restraining Orders or Preliminary Injunctions in Cases Involving Infrastructure and Natural Resource Development Projects of, and Public Utilities Operated by, the Government.
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Records, pp. 183-184. Ibid. at p. 184. Ibid. at pp. 124-126. Ibid. at p. 125. Ibid. at p. 127. Rollo, pp. 27-31.

26

27

28

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31

Ibid. at p. 31. Ibid. at p. 30. Ibid. Ibid. Ibid. Ibid. at p. 32. Ibid. at pp. 33-34. Ibid. at p. 14. Ibid. Ibid. at pp. 16-17. Ibid. at p. 170. Ibid. at p. 171. Ibid, at pp. 171-172. 261 SCRA 196 [1996]. 261 SCRA 196, 202 [1996]. Ibid. at pp. 17-18. Ibid. at p. 18. Ibid. at p. 19. Ibid. at p. 173. Ibid. Ibid. at pp. 173-174. Records, p. 80. Article 1306, Civil Code of the Philippines.

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G.R. No. 142401

August 20, 2001

ANDREW TAN, petitioner, vs. COURT OF APPEALS and WU SEN WOEI, respondents. PANGANIBAN, J.:

Under the doctrine of conclusiveness of judgment, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a different 1 cause of action. Statement of the Case Through a Petition for Review under Rule 45 of the Rules of Court, Andrew Tan challenges the January 10, 2000 3 4 5 Decision rendered by the Court of Appeals (CA) in CA-GR CV No. 58086 and its March 8, 2000 Resolution denying reconsideration. The dispositive portion of the assailed Decision reads as follows: "WHEREFORE, the appealed judgment is REVERSED and SET ASIDE and a new one is entered, ordering the defendant-appellee to pay appellant the balance of $45,000.00 or the equivalent thereof in Philippine currency at the rate of exchange prevailing at the time of payment, with legal interest thereon from 6 September 1987 until fully paid. With costs against the defendant-appellee." The Facts The undisputed facts are summarized by the Court of Appeals as follows: "Plaintiff-appellant [respondent herein], a Taiwanese national, and defendant-appellee [petitioner herein], a Filipino, first met in Taiwan sometime in August 1987 through Kua Bei Tiu, defendant's sister-in-law. Defendant proposed that plaintiff invest money in the hatchery business he had started, and plaintiff parted with the amount of $80,000.00 or its equivalent of P1,650,700.00. Repaid only [in] the amount of $10,000.00, plaintiff-appellant lodged a complaint before the National Bureau of Investigation (NBI) to recover the balance of $70,000.00. Before the NBI, defendant Andrew Tan and his sister Helen Go signed a Joint Affidavit of Undertaking stating as follows: 'WE, HELEN GO and ANDREW TAN, both of legal age, brother and sister and both married, presently residing at No. 1427 Sto. Sepulcro St., Paco, Manila and A.T. Commercial, A.B. Fernandez Avenue, East Dagupan City, respectively, after having been duly sworn to in accordance with law do hereby depose and undertake to perform the following: 'That I, ANDREW TAN is indebted to WU SEN WOEI, a Taiwanese national residing at 12 Lane, 194, 6th Floor, Sing Tien Road, Kuehsiung, Taiwan in the total amount of SEVENTY THOUSAND U.S. DOLLARS ($70,000.00); 'That we, brother and sister, acknowledge the said amount as a just and valid obligation and therefore undertake to pay the same under the following terms which is in accordance with our present financial capacity; 'Within one (1) week from the date of this affidavit, we bind ourselves to pay WU SEN WOEI the amount of TWENTY THOUSAND U.S. DOLLARS ($20,000.00) Cash; 'Every month thereafter, or starting August 1990, we bind ourselves to pay WU SEN WOEI the amount of TEN THOUSAND U.S. DOLLARS ($10,000.00), for the month of September 1990, TEN THOUSAND U.S. DOLLARS ($10,000.00), for the month of October 1990, TEN THOUSAND U.S. DOLLARS ($10,000.00), for the month of November 1990, TEN THOUSAND U.S. DOLLARS ($10,000.00), and for the month of DECEMBER, 1990, TEN THOUSAND U.S. DOLLARS ($10,000.00) and then all our indebtedness to WU SEN WOEI would be totally paid, all in cash; 'That we agree that the place of payment should be the NBI office before Atty. VICTOR BESSAT so that this undertaking would be fully complied with; 'After we have fully complied with the terms of this Affidavit of Undertaking, WU SEN WOEI should also return to us all the documents in his possession in connection with this indebtedness.
2

'That we are executing this joint affidavit of undertaking in order to amicably settle this obligation of ANDREW TAN to WU SEN WOEI; 'IN WITNESS WHEREOF, we have hereunto set our hands this 19th day of July 1990, at the Office of the National Bureau of Investigation, Taft Avenue, Manila. (Sgd.) HELEN GO MRS. HELEN GO GUARANTOR: (Sgd.) Illegible MR. BENJAMIN GO WITNESSES: (Sgd.) Illegible ATTY. ERIC QUINTOS (Exh. '6', Record, p. 317) "Defendant claims that he was coerced into signing the above Undertaking. He then assailed the validity of said Undertaking in Civil Case No. D-9864 entitled 'Andrew Tan, plaintiff vs. Wu Sen Woei, represented by Raul Estrella, Attorney-in-Fact, John Doe and Paul Doe, defendants-appellees' which he filed before the Regional Trial Court of Dagupan City, Branch 43. The RTC found Tan's and Go's consent to the Undertaking as vitiated and rendered judgment declaring the Undertaking as a nullity. The decision was appealed to this Court in CA-G.R. CV No. 47880. This Court through its Fourth Division in a Decision dated October 3, 1997 reversed and set aside the appealed judgment, and dismissed Andrew Tan's complaint. (Rollo, pp. 67-75) "In the meantime, based on the Undertaking, herein plaintiff-appellant Wu Sen Woei was further able to collect $25,000.00, Weaving a balance of $45,000.00 (Complaint, par. 8, Record, p. 3) Hence he filed the instant suit docketed as Civil Case No. 91-55981 to collect the said balance of $45,000.00 plus interest and attorney's fees, alleging in his Complaint that defendant had defrauded him by not actually investing the 7 money into the hatchery business." Ruling of the Court of Appeals The Court of Appeals held in its Decision that, based on the doctrine of conclusiveness of judgment, Tan's claim that the Affidavit of Undertaking had been executed under duress was rendered ineffective by the ruling in CA-GR CV No. 47880. The CA had ruled therein that the said Affidavit was an admission against interest, a clear acknowledgment by Tan of his obligation to Wu Sen Woei. Thus, the appellate court deemed it pointless to determine whether there was, instead, a consummated partnership between the two parties. Issues In his Memorandum, petitioner raises the following issues for this Court's consideration: "I. Whether or not the Court of Appeals committed a grave and serious error of judgment in applying the doctrine of conclusiveness of judgment and "II. Whether or not the Court of Appeals committed a serious error in totally disregarding the evidence presented by petitioner in the appealed case decided by the Regional Trial Court of Manila in the application 9 of the above doctrine." Since the two issues are interrelated, they shall be discussed jointly. The Court's Ruling
8

(Sgd.) Illegible MR. ANDREW TAN

(Sgd.) Illegible WU SEN WOEI'

The petition is not meritorious. Main Issue: Validity of Affidavit of Undertaking Clearly, the present case is closely related to the civil action for annulment of document filed by petitioner before the Regional Trial Court (RTC) of Dagupan against respondent on April 3, 1991. In that action, the RTC-Dagupan 10 declared null and void the Affidavit of Undertaking executed by Tan in favor of Wu Sen Woei. Upon appeal, 11 12 however, the Court of Appeals reversed the RTC judgment and upheld the validity of the Affidavit. That CA 13 Decision became final and executory. In the present case, the appellate court relied on its earlier Decision in CAGR CV No. 47880 by applying the doctrine on conclusiveness of judgment. Indeed, the CA's earlier Decision concerning the validity of Andrew Tan's Affidavit of Undertaking has become 14 conclusive on the parties, pursuant to Section 47 (c) of Rule 39 of the Rules of Court. The parties are bound by the matters adjudged and those that are actually and necessarily included therein. Under the doctrine of conclusiveness of judgment, which is also known as "preclusion of issues" or "collateral estoppel" issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action. The concept clearly applies to the present case, because petitioner again seeks refuge in the alleged nullity of the same Affidavit of Undertaking which, as earlier mentioned, was already ruled upon with finality. In other words, the question on the validity of the Affidavit has been settled. The same question, therefore, cannot be raised again even in a different proceeding involving the same parties. Although the action instituted in this case (collection of a sum of money) is technically different from that action instituted by Andrew Tan before the Regional Trial Court of Dagupan (for annulment of document), "the concept of conclusiveness of judgment still applies because under this principle, the identity of causes of action is not required but merely identity of issues. Simply put, conclusiveness of judgment bars the relitigation of particular facts or issues 15 in another litigation between the same parties on a different claim or cause of action." Significantly, petitioner no longer questioned the CA Decision in CA-GR CV No. 47880. Thus, it has become final and executory and no longer subject to review. Moreover, petitioner's assertion that the Affidavit of Undertaking had been executed under duress is contradicted by the events that took place following its execution. Petitioner did not immediately question its validity. In fact, of the $70,000 that he undertook to pay Wu Sen Woei, the former has been able to make payments in the amount of $25,000, pursuant to the terms of the Affidavit. His counsel even executed a letter requesting an extension of time and a reduction of the monthly installments that were due, as follows: "Dear Mr. Wu: This has reference in the affidavit of Undertaking executed by our client, Andrew Tan, in your favor through the intercession of Atty. Victor Bessat. We would like to inform you that our client is now in tight financial situation due to the economic dislocation caused by the recent earthquake and the flooding of most of Region I which caused massive destruction on his prawn business and construction business. He had suffered losses in an amount of no less than P500,000. In view thereof, our client is not in a financial position to comply with the terms of the undertaking. Hence, in behalf of our client, we are constrained to request for an extension of time for him to pay the agreed amount and to reduce the monthly payment from US$10,000 to US$2,000 a month. This is the amount and mode of payment which he can personally meet considering his financial predicament. We hope you can understand the plight of our client. He does not wish to evade his obligation and would comply with it in the manner allowable under his present financial situation. We hope to hear from you soon.

Very truly yours, (Sgd.) ATTY. A.V. GONZALES 16 Counsel" These circumstances clearly negate any infirmity in the Affidavit as well as the absence of any obligation on the part of petitioner to fulfill his liability therein. Deserving scant consideration is petitioner's suggestion that there was a partnership between himself and Wu Sen Woei, and that both should thus jointly bear the losses of the business. The existence of a partnership is belied by the Affidavit of Undertaking in which petitioner admitted his indebtedness to private respondent in the amount of $70,000 and agreed to reimburse the amount according to the conditions stated therein. Had the nature of their agreement been otherwise, such as a business partnership, petitioner would not have acknowledged being indebted to Wu Sen Woei" and "undertake[n] to pay the same x x x" under the terms specified therein. WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED. Melo, Vitug, Gonzaga-Reyes and Sandoval-Gutierrez, JJ ., concur.

Footnotes
1

Celendro v. Court of Appeals, 310 SCRA 835, 843-844, July 20, 1999. Rollo, pp. 10-33. Rollo, pp. 37-45.

Seventh Division. Written by J. Portia Alio-Hormachuelos; concurred in by JJ. Corona Ibay-Somera (Division chairman) and Wenceslao I. Agnir, Jr. (member).
5

Rollo, pp. 46-47. Assailed Decision, p. 9; rollo, p. 45. Assailed Decision, pp. 2-4, rollo, pp. 38-40. Rollo, pp. 94-116. Petitioners Memorandum was signed by Atty. Danilo P. Cariaga. Memorandum for petitioner, p. 14; rollo, p. 108. CA-GR CV No. 47880.

10

11

Fourth Division. Written by J. Antonio M. Martinez (Division chairman) and concurred in by JJ Corona Ibay-Somera and Oswaldo D. Agcaoili (members).
12

Annex C of the Petition; rollo, pp. 48-57. See petitioner's Memorandum, p. 2; rollo, p. 95.

13

14

Formerly Rule 39, Section 49 (c). SEC. 49. Effect of Judgments. The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows: (c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.

15

Mata v. Court of Appeals, 318 SCRA 416, 429, November 18, 1999, per Kapunan, J. Assailed Decision, pp. 7-8; rollo, pp. 43-44.

16

G.R. No. 137908

November 22, 2000

RAMON D. OCHO, petitioner, vs. BERNARDINO, ERNESTO, PERFECTA, TEOSITA, MANUEL, EPIFANIO, JR. and DELFIN, all surnamed CALOS, respondents. DECISION KAPUNAN, J.: Petitioner Ramon D. Ocho files this petition for review on certiorari seeking to reverse and set aside the Decision, dated 27 August 1998, of the Court of Appeals in CA-G.R. SP No. 43976 insofar as it directed petitioner and Vicente Polinar to restore and return to the government their respective subject lands as they are not qualified to be farmerbeneficiaries under the Comprehensive Agrarian Reform Law (Republic Act No. 6657). Likewise sought to be reversed and set aside is the appellate courts Resolution, dated 19 February 1999, which denied petitioners motion for reconsideration. The antecedent facts are as follows: Spouses Epifanio and Valentina Calos (now both deceased), together with their children, Bernardino, Ernesto, Teosita, Perfecta, Manuel, Epifanio, Jr., and Delfin, all surnamed Calos (respondents), filed a complaint before the Department of Agrarian Reform Provincial Adjudicator in Cagayan de Oro City entitled "Annulment of Deeds of Assignment, Emancipation Patents and Transfer Certificate of Titles, Retention and Recovery of Possession and Ownership." Aside from herein petitioner, the other respondents named therein were: Jenny Liza Dorman, Alejandro Capephe, Susanito Capaphe, Apolonio Samellano, Vicente Polinar, Ambrocio Ricablanca, Alberto Pasiliao, Procopio Tampepe, The Heirs of Pelagio Salmorin, Roberto Salmorin, Margarito Noveno, Virgilio Hoy, Saturnino Medidas, Jr., Donato Pasiliao, Jaime Dotosme, Amado Flores, Eliseo Arcojada, Silvino Dumaguing, Gonzalo Go, the Land Bank of the Philippines, Register of Deeds of Bukidnon and Municipal Agrarian Reform Officer of Valencia, Bukidnon. The case was docketed as DARAB Case No. (X)-014. In their amended complaint, the Caloses averred that their parents, Epifanio and Valentina, were the original owners of a parcel of land with an area of 23.7109 hectares located in Valencia, Malaybalay, Bukidnon (now Hagcol, Valencia, Bukidnon), and covered by Original Certificate of Title No. P-2066 issued by virtue of Homestead Patent No. V-42876 on 2 December 1955. Pursuant to Presidential Decree No. 27, the said land was placed under the Operation Land Transfer and subsequently distributed to qualified farmer-beneficiaries. The original farmer-

beneficiaries, however, allegedly unlawfully conveyed their respective rights over the lands granted to them to third persons. The amended complaint thus sought the nullification of the Emancipation Patents and Transfer Certificates of Title issued to these third persons, including petitioner, to wit: 1. TCT-No. ET-5217 issued by virtue of Emancipation Patent No. A-163402 issued on January 13, 1989, to Pelagio N. Salmorin Sr. containing an area of 25,586 square meters; 2. TCT-ET-5218 issued by virtue of Emancipation Patent No. A-162990 issued on January 13, 1989 to Susanito H. Capephe containing an area of 10,956 square meters; 3. TCT-No. ET-5219 issued by virtue of Emancipation Patent No. A-162995 issued on January 13, 1989 to Alejandro V. Capephe containing an area of 50,001 square meters; 4. TCT-No. ET-5221 issued by virtue of Emancipation Patent No. A-162997 issued on January 13, 1989 to Apolonio B. Samellano containing an area of 30,639 square meters; 5. TCT-No. ET-5222 issued by virtue of Emancipation Patent No. A-162991 issued on January 13, 1989 to Jennyliza B. Dorman with an area of 36,487 square meters; 6. TCT-No. ET-5223 issued by virtue of Emancipation Patent No. A-163405 issued on January 16, 1989 to Ramon D. Ocho with an area of 22,708 square meters; 7. TCT-No. ET-5224 issued by virtue of Emancipation Patent No. A-163403 issued on January 16, 1989 to Alberto F. Pasillao with an area of 400 square meters; 8. TCT-No. ET-5220 issued by virtue of Emancipation Patent No. A-162999 issued on January 13, 1989 to Ambrocio T. Ricablanca with an area of 1,181 square meters; 9. TCT-No. T-28281 to Vicente Polinar with an area of 600 square meters issued on 4 April 1989; 10. TCT-No. T-28282 to Vicente Polinar with an area of 2,061 square meters issued on April 4, 1989; 11. TCT-No. T-28283 to Vicente Polinar with an area of 600 square meters issued on 4 April 1989; 12. TCT-No. T-29284 to Vicente Polinar with an area of 1,568 square meters issued on April 4, 1989; 13. TCT-No. T-29605 with an area of 1,384 square meters of Gonzalo Go; 14. TCT-No. T-29606 with an area of 1,779 square meters of Gonzalo Go; 15. TCT-No. T-29607 with an area of 4,844 square meters of Gonzalo Go; 16. TCT-No. T-28288 to Vicente Polinar with an area of 1,720 square meters issued on April 4, 1989; 17. TCT-No. T-28289 to Vicente Polinar with an area of 1,663 square meters issued on April 4, 1989; 18. TCT-No. T-28290 to Vicente Polinar with an area of 5,145 square meters issued on April 4, 1989; 19. TCT-No. T-28291 to Vicente Polinar with an area of 1,989 square meters issued on April 4, 1989.
2

The Caloses also posited in their amended complaint that the subject land was beyond the coverage of the agrarian reform law as the same was covered by a homestead patent. Accordingly, they maintained that they have the right to recover the homestead land of their deceased parents Epifanio and Valentina.

After all the parties had been heard, the Provincial Adjudicator rendered his decision, dated 24 May 1993, the dispositive portion of which reads: WHEREFORE, PREMISES ABOVE CONSIDERED, judgment is hereby rendered: 1. All Emancipation Patents, Certificates of Land Transfer, Transfer for Certificates of Titles or other titles issued involving the land under litigation, bearing Original Certificate of Title No. P-2066 issued by virtue of Homestead Patent No. V-42876, are hereby ordered cancelled and/or revoked for being null and void ab initio; 2. Defendant Vicente Polinar is hereby ordered to reimburse defendant Gonzalo Go for the amount he has paid for the purchase of the three (3) parcels of land herein involved, with interest and all expenses for the transfer of ownership; 3. Complainants are hereby ordered to reimburse the Land Bank of the Philippines for whatever amount they received as payment of the land in litigation; 4. The Land Bank of the Philippines is hereby ordered to pay the Complainants for whatever amortization amount the original beneficiaries paid to the LBP, representing rental of the land; and 5. All persons, respondents, beneficiaries or otherwise, in occupation, possession, cultivation or otherwise of subject land are hereby ordered to turn over the same land to the Complainants, and vacate subject land. SO ORDERED.
3

From the decision of the Provincial Adjudicator, petitioner, together with Jennyliza Dorman, Alejandro Capephe, Susanito Capephe, Apolonio Samellano, Saturnino Medidas, Jr., Amado Flores, Vicente Polinar, Virgilio Hoy, Eliseo Arcojada, Ambrocio Ricablanca and the Municipal Agrarian Reform Officer (MARO), elevated the case to the Department of Agrarian Reform Adjudication Board (DARAB). The case was docketed as DARAB Case No. 1859 and consolidated with several other cases involving substantially similar facts and issues. After considering the pleadings filed by the parties, the DARAB reversed the decision of the Provincial Adjudicator. With respect to the case at hand, the DARAB upheld the validity of the Emancipation Patents and their corresponding Transfer Certificates of Title, including that of petitioner. The dispositive portion of the decision of the DARAB reads: WHEREFORE, finding reversible errors committed by the Honorable Adjudicator a quo, the decisions appealed from are hereby REVERSED as follows: 1. Maintaining the validity of all Emancipation Patents and their corresponding Transfer Certificates of Title which have been ordered cancelled; 2. Ordering the Register of Deeds for the Province of Bukidnon, as well as Zamboanga del Sur, with respect to the case of Moras, et. al. vs. Hon. Secretary of Agrarian Reform, DARAB Case No. 1781, not to cancel the subject Emancipation Patents; 3. Maintaining the validity of Certificates of Land Transfer issued by the Department of Agrarian Reform in the names of Defendants-Appellants and other identified tenants-beneficiaries who are Defendants-Appellants in those cases and they shall be maintained in their peaceful possession and cultivation, and if they have effectively been ejected, they shall be restored to their possession under the same terms and conditions prevailing at the time of their ejectment; 4. Ordering the DARAB Sheriffs for the Province of Bukidnon, and Zamboanga del Sur with respect to DARAB Case No. 1781, as well as the concerned Municipal Agrarian Reform Officers, with the assistance of the PNP Command in the locality concerned, if necessary, to implement this decision. SO ORDERED.
4

The Caloses then appealed the decision of the DARAB to the CA. The appellate court substantially affirmed the decision of the DARAB as it (CA) upheld the titles over the subject lands of some of the respondents therein except that of petitioner and of Vicente Polinar. The CA found that petitioner and Vicente Polinar are not qualified to be farmer-beneficiaries as they are already owners of other agricultural lands. Accordingly, the CA ordered petitioner and Vicente Polinar to restore and return to the government their respective subject lands. The dispositive portion of the CA decision reads: WHEREFORE, the assailed decision is AFFIRMED insofar as the petitioners and the following private respondents are concerned: JENNY LIZA DORMAN, ALEJANDRO CAPEPHE, SUSANITO CAPEPHE, APOLONIO SAMELLANO, VIRGILIO HOY, SATURNINO MEDIDAS, JR., AMADO FLORES, ELISEO ARCOJADA, AMBROCIO RICABLANCA and the MUNICIPAL AGRARIAN REFORM OFFICER, The same judgment is REVERSED and SET ASIDE as to RAMON OCHO and VICENTE POLINAR, and another one entered directing the said respondents to restore and surrender to the government their landholdings under TCT No. ET-5223 in the case of Ramon Ocho and TCT Nos. T-28281, T-28282, T-28283, T-28284, T-28288, T28289, T-28290 and T-282891 in the case of Vicente Polinar. The D.A.R. is directed to re-distribute the same to qualified beneficiaries, giving preference to herein petitioners. The appeal is DISMISSED as to: ALBERTO PASILIAO, ALEJANDRO TAMPEPE, HEIRS OF PELAGIO SALMORIN, DONATO PASILIAO, JAIME DOTOSME, SILVINO DUMAGUING and GONZALO GO. SO ORDERED.
5

Both the Caloses and petitioner filed their respective motions for reconsideration but these were denied by the CA for 6 lack of merit in its Resolution of 19 February 1999. Petitioner now assails the decision of the CA raising the following arguments: I. The second action docketed as DAR Adm. Case No. (X)-014 filed by the Caloses before Honorable Provincial Adjudicator Fidel H. Borres, Jr. is barred by the Final Resolution rendered in their first action docketed as DAR Adm. Case No. 006-90 before DAR Provincial Legal Officer, Atty. Francisco L. Vasig, Jr.; II. The Claim of the Caloses that Ramon Ocho is owner of three (3) parcels of land which matter was already determined and decided with finality in the Resolution of DAR Adm. Case No. 006-90 [cannot] be subject to review by any court; and III. The Caloses in filing this second action DAR Adm. Case No. (X)-014 after the Resolution in DAR Adm. 7 Case No. 006-90 had lapsed into Finality were engaged in Forum-Shopping. In support of the foregoing arguments, petitioner avers that prior to the filing of the Caloses of the complaint a quo, i.e., "Annulment of Deeds of Assignment, Emancipation Patents and Transfer Certificate of Titles, Retention and Recovery of Possession and Ownership," they (Caloses) already instituted a complaint for alleged "Anomalies/Irregularities in OLT Transfer Action and Other Related Activities," also involving the same parties and subject lands. The case was docketed as Adm. Case No. 006-90. The Hearing Officer in Adm. Case No. 006-90 issued a Resolution, dated 11 February 1991, with the following pertinent findings: Complainants claim that Ramon Ocho is a big landowner or owns other lands before acquiring the land now covered by TCT No. ET-5223 in his name is untrue. The records show that the parcel of land located at Impalutao, Impasugong, Bukidnon with an area of 50,000 square meters more or less, is owned by his daughter, Rona D. Ocho and covered by Transfer Certificate of Title No. T-25754 in the name of the latter. Likewise, the other parcel of land situated in Malaybalay, Bukidnon with an area of 77,053 square meters is owned by his son Rico D. Ocho being 8 covered by TCT No. 25756 in the latters name.

Petitioner essentially contends that the above findings constitute res judicata as the said resolution already became final and executory and the issue of his ownership of other agricultural lands may no longer be relitigated. The CA allegedly erred when it made a finding that he (petitioner) is the owner of other agricultural lands and directed him to return to the government his subject lands as he is not qualified to be a farmer-beneficiary under R.A. No. 6657. The instant petition is meritorious. The doctrine of res judicata as embodied in Section 47, Rule 39 of the Rules of Court states: Sec. 47. Effect of judgments or final orders.- The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows: (a) x x x (b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and (c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. It must be pointed out at this point that, contrary to the insistence of the Caloses, the doctrine of res judicata applies 9 to both judicial and quasi-judicial proceedings. The doctrine actually embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under 10 paragraph (c) thereof. In the present case, the second concept conclusiveness of judgment applies. The said concept is explained in this manner: [A] fact or question which was in issue in a former suit and was there judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in 11 the first suit. xxx Although the action instituted by the Caloses in Adm. Case No. 006-90 (Anomalies/Irregularities in OLT Transfer Action and Other Related Activities) is different from the action in Adm. Case No. (X)-014 (Annulment of Deeds of Assignment, Emancipation Patents and Transfer Certificate of Titles, Retention and Recovery of Possession and Ownership), the concept of conclusiveness of judgment still applies because under this principle "the identity of 12 causes of action is not required but merely identity of issues." Simple put, conclusiveness of judgment bars the relitigation of particular facts or issues in another litigation between 13 the same parties on a different claim or cause of action. In Lopez vs. Reyes, we expounded on the concept of conclusiveness of judgment as follows: The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of litigation. Thus it extends to questions necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment, although no specific finding may have been made in reference thereto, and although such matters were directly referred to in the pleadings and were not actually or formally presented.1wphi1 Under this rule, if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties, and if a judgment necessarily presupposes certain premises,

they are as conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion upon which such conclusion is based is as effectually passed upon as the ultimate question 14 which is solved. There is no question that the issue of whether petitioner is the owner of other agricultural lands had already been passed upon by the proper quasi-judicial authority (the hearing officer of the DAR) in Adm Case No. 006-90. Said decision became final and executory when the Caloses failed to file an appeal thereof after their motion for 15 reconsideration was denied. Applying the rule on conclusiveness of judgment, the issue of whether petitioner is the owner of other agricultural lands may no longer be relitigated. As held in Legarda vs. Savellano:
16

xxx It is a general rule common to all civilized system of jurisprudence, that the solemn and deliberate sentence of the law, pronounced by its appointed organs, upon a disputed fact or a state of facts, should be regarded as a final and conclusive determination of the question litigated, and should forever set the controversy at rest. Indeed, it has been well said that this maxim is more than a mere rule of law; more even than an important principle of public policy; and that it is not too much to say that it is a fundamental concept in the organization of every jural system. Public policy and sound practice demand that, at the risk of occasional errors, judgments of courts should become final at some 17 definite date fixed by law. The very object for which courts were constituted was to put an end to controversies. The findings of the Hearing Officer in Adm. Case No. 006-90, which had long attained finality, that petitioner is not the owner of other agricultural lands foreclosed any inquiry on the same issue involving the same parties and property. The CA thus erred in still making a finding that petitioner is not qualified to be a farmer-beneficiary because he owns other agricultural lands. WHEREFORE, premises considered, the petition is given DUE COURSE. The Decision, dated 27 August 1998, and Resolution, dated 19 February 1999, of the Court of Appeals are REVERSED insofar as it directs petitioner Ramon Ocho to restore and return to the government his subject land. Petitioners TCT No. ET -5223 is hereby declared VALID. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

Footnotes
1

Namely, Pelagio Salmorin, Apolonio Salmorin, Roberto Salmorin, Margarito Noveno and Procopio Tampepe.
2

Rollo, pp. 85-86. Id., p. 126. Id., pp. 196-197. Id., pp. 50-51. Emphases in the original. Id., pp. 52-53. Id., pp. 21-22. Id., p. 67.

A.G. Development Corp. vs. CA, 281 SCRA 155, 160 (1997). Camara, et al. vs. Court of Appeals, et al., 310 SCRA 608 (1999). Calalang vs. Register of Deeds of Quezon City, 231 SCRA 88 (1994). Id., p. 99. 76 SCRA 179 (1977). Id., p. 186-187. Emphasis supplied. Rollo, pp. 79-80. 158 SCRA 194 (1988). Id., p. 200.

10

11

12

13

14

15

16

17

G.R. No. 114323 July 23, 1998 OIL AND NATURAL GAS COMMISSION, petitioner, vs. COURT OF APPEALS and PACIFIC CEMENT COMPANY, INC., respondents.

MARTINEZ, J.: This proceeding involves the enforcement of a foreign judgment rendered by the Civil Judge of Dehra Dun, India in favor of the petitioner, OIL AND NATURAL GAS COMMISSION and against the private respondent, PACIFIC CEMENT COMPANY, INCORPORATED. The petitioner is a foreign corporation owned and controlled by the Government of India while the private respondent is a private corporation duly organized and existing under the laws of the Philippines. The present conflict between the petitioner and the private respondent has its roots in a contract entered into by and between both parties on February 26, 1983 whereby the private respondent undertook to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300) metric tons of oil well cement. In consideration therefor, the petitioner bound itself to pay the private respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED U.S. DOLLARS ($477,300.00) by opening an irrevocable, divisible, and confirmed letter of credit in favor of the latter. The oil well cement was loaded on board the ship MV SURUTANA NAVA at the port of Surigao City, Philippines for delivery at Bombay and Calcutta, India. However, due to a dispute between the shipowner and the private respondent, the cargo was held up in Bangkok and did not reach its point destination. Notwithstanding the fact that the private respondent had already received payment and despite several demands made by the petitioner, the private respondent failed to deliver the oil well cement. Thereafter, negotiations ensued between the parties and they agreed that the private respondent will replace the entire 4,300 metric tons of oil well cement with Class "G" cement cost free at the petitioner's designated port. However, upon inspection, the Class "G" cement did not conform to the petitioner's specifications. The petitioner then informed the private respondent that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract which stipulates: Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the execution

or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer ( sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Member of the Commission shall appoint another person to act as arbitrator in accordance with the terms of the contract/supply order. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. Subject as aforesaid the provisions of the Arbitration Act, 1940, or any Statutory modification or re-enactment there of and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause. The arbitrator may with the consent of parties enlarge the time, from time to time, to make and publish the award. The venue for arbitration shall be at Dehra dun. * On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in petitioner's favor setting forth the arbitral award as follows: NOW THEREFORE after considering all facts of the case, the evidence, oral and documentarys adduced by the claimant and carefully examining the various written statements, submissions, letters, telexes, etc. sent by the respondent, and the oral arguments addressed by the counsel for the claimants, I, N.N. Malhotra, Sole Arbitrator, appointed under clause 16 of the supply order dated 26.2.1983, according to which the parties, i.e. M/S Oil and Natural Gas Commission and the Pacific Cement Co., Inc. can refer the dispute to the sole arbitration under the provision of the Arbitration Act. 1940, do hereby award and direct as follows: The Respondent will pay the following to the claimant: 1. Amount received by the Respondent against the letter of credit No. 11/19 dated 28.2.1983 US $ 477,300.00 2. Re-imbursement of expenditure incurred by the claimant on the inspection team's visit to Philippines in August 1985 US $ 3,881.00 3. L.C. Establishment charges incurred by the claimant US $ 1,252.82 4. Loss of interest suffered by claimant from 21.6.83 to 23.7.88 US $ 417,169.95 Total amount of award US $ 899,603.77
1

In addition to the above, the respondent would also be liable to pay to the claimant the interest at the rate of 6% on the above amount, with effect from 24.7.1988 up to the actual date of payment by the Respondent in full settlement of the claim as awarded or the date of the decree, whichever is earlier. I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the expenses on Arbitration, legal expenses, stamps duly incurred by the claimant. The cost will be shared by the parties in equal proportion. Pronounced at Dehra Dun to-day, the 23rd of July 1988.
2

To enable the petitioner to execute the above award in its favor, it filed a Petition before the Court of the Civil Judge in Dehra Dun. India (hereinafter referred to as the foreign court for brevity), praying that the decision of the arbitrator be made "the Rule of Court" in India. The foreign court issued notices to the private respondent for filing objections to the petition. The private respondent complied and sent its objections dated January 16, 1989. Subsequently, the said court directed the private respondent to pay the filing fees in order that the latter's objections could be given consideration. Instead of paying the required filing fees, the private respondent sent the following communication addressed to the Civil judge of Dehra Dun: The Civil Judge Dehra Dun (U.P.) India Re: Misc. Case No. 5 of 1989 M/S Pacific Cement Co., Inc. vs. ONGC Case Sir: 1. We received your letter dated 28 April 1989 only last 18 May 1989. 2. Please inform us how much is the court fee to be paid. Your letter did not mention the amount to be paid. 3. Kindly give us 15 days from receipt of your letter advising us how much to pay to comply with the same. Thank you for your kind consideration. Pacific Cement Co., Inc. By: Jose Cortes, Jr. President
3

Without responding to the above communication, the foreign court refused to admit the private respondent's objections for failure to pay the required filing fees, and thereafter issued an Order on February 7, 1990, to wit: ORDER

Since objections filed by defendant have been rejected through Misc. Suit No. 5 on 7.2.90, therefore, award should be made Rule of the Court. ORDER Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven only) along with 9% interest per annum till the last date of 4 realisation. Despite notice sent to the private respondent of the foregoing order and several demands by the petitioner for compliance therewith, the private respondent refused to pay the amount adjudged by the foreign court as owing to the petitioner. Accordingly, the petitioner filed a complaint with Branch 30 of the Regional Trial Court (RTC) of Surigao City for the enforcement of the aforementioned judgment of the foreign court. The private respondent moved to dismiss the complaint on the following grounds: (1) plaintiffs lack of legal capacity to sue; (2) lack of cause of action; and (3) plaintiffs claim or demand has been waived, abandoned, or otherwise extinguished. The petitioner filed its opposition to the said motion to dismiss, and the private respondent, its rejoinder thereto. On January 3, 1992, the RTC issued an order upholding the petitioner's legal capacity to sue, albeit dismissing the complaint for lack of a valid cause of action. The RTC held that the rule prohibiting foreign corporations transacting business in the Philippines without a license from maintaining a suit in Philippine courts admits of an exception, that is, when the 5 foreign corporation is suing on an isolated transaction as in this case. Anent the issue of the sufficiency of the petitioner's cause of action, however, the RTC found the referral of the dispute between the parties to the arbitrator under Clause 16 of their contract erroneous. According to the RTC, [a] perusal of the shove-quoted clause (Clause 16) readily shows that the matter covered by its terms is limited to "ALL QUESTIONS AND DISPUTES, RELATING TO THE MEANING OF THE SPECIFICATION, DESIGNS, DRAWINGS AND INSTRUCTIONS HEREIN BEFORE MENTIONED and as to the QUALITY OF WORKMANSHIP OF THE ITEMS ORDERED or as to any other questions, claim, right or thing whatsoever, but qualified to "IN ANY WAY ARISING OR RELATING TO THE SUPPLY ORDER/CONTRACT, DESIGN, DRAWING, SPECIFICATION, etc.," repeating the enumeration in the opening sentence of the clause. The court is inclined to go along with the observation of the defendant that the breach, consisting of the non-delivery of the purchased materials, should have been properly litigated before a court of law, pursuant to Clause No. 15 of the Contract/Supply Order, herein quoted, to wit: "JURISDICTION All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose jurisdiction and the place from which this 6 supply order is situated." The RTC characterized the erroneous submission of the dispute to the arbitrator as a "mistake of law or fact amounting to want of jurisdiction". Consequently, the proceedings had before the arbitrator were null and void and the foreign court had therefore, adopted no legal award which could be the source of an 7 enforceable right. The petitioner then appealed to the respondent Court of Appeals which affirmed the dismissal of the complaint. In its decision, the appellate court concurred with the RTC's ruling that the arbitrator did not have jurisdiction over the dispute between the parties, thus, the foreign court could not validly adopt the arbitrator's award. In addition, the appellate court observed that the full text of the judgment of the foreign court contains the dispositive portion only and indicates no findings of fact and law as basis for the award. Hence, the said judgment cannot be enforced by any Philippine court as it would violate the constitutional provision that no decision shall be rendered by any court without 8 expressing therein clearly and distinctly the facts and the law on which it is based. The appellate court ruled further that the dismissal of the private respondent's objections for non-payment of the required legal fees, without the foreign court first replying to the private respondent's query as to the amount of legal fees to be paid, constituted want of notice or violation of due process. Lastly, it pointed out that the arbitration proceeding was defective because the

arbitrator was appointed solely by the petitioner, and the fact that the arbitrator was a former employee of the latter 9 gives rise to a presumed bias on his part in favor of the petitioner. A subsequent motion for reconsideration by the petitioner of the appellate court's decision was denied, thus, this petition for review on certiorari citing the following as grounds in support thereof: RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE LOWER COURT'S ORDER OF DISMISSAL SINCE: A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY COGNIZABLE BY THE PROVISIONS OF CLAUSE 16 OF THE CONTRACT; B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS AN AFFIRMATION OF THE FACTUAL AND LEGAL FINDINGS OF THE ARBITRATOR AND THEREFORE ENFORCEABLE IN THIS JURISDICTION; C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A PRESUMPTIVE RIGHT 10 UNDER A FOREIGN JUDGMENT. The threshold issue is whether or not the arbitrator had jurisdiction over the dispute between the petitioner and the private respondent under Clause 16 of the contract. To reiterate, Clause 16 provides as follows: Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer ( sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or 11 difference. The dispute between the parties had its origin in the non-delivery of the 4,300 metric tons of oil well cement to the petitioner. The primary question that may be posed, therefore, is whether or not the non-delivery of the said cargo is a proper subject for arbitration under the above-quoted Clause 16. The petitioner contends that the same was a matter within the purview of Clause 16, particularly the phrase, ". . . or as to any other questions, claim, right or thing whatsoever, in any way arising or relating to the supply order/contract , design, drawing, specification, instruction . . .". 12 It is argued that the foregoing phrase allows considerable latitude so as to include non-delivery of the cargo which was a "claim, right or thing relating to the supply order/contract". The contention is bereft of merit. First of all, the petitioner has misquoted the said phrase, shrewdly inserting a comma between the words "supply order/contract" and "design" where none actually exists. An accurate reproduction of the phrase reads, ". . . or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions . . .". The absence of a comma between the words "supply order/contract" and "design" indicates that the former cannot be taken separately but should be viewed in conjunction with the words "design, drawing, specification, instruction or these conditions". It is thus clear that to fall within the purview of this phrase, the "claim, right or thing whatsoever" must arise out of or relate to the design, drawing, specification, or instruction of the supply order/contract. The petitioner also insists that the non-delivery of the cargo is not only covered by the foregoing phrase but also by the phrase, ". . . or otherwise concerning the materials or the execution or failure to execute the same during the stipulated/extended period or after completion/abandonment thereof . . .". The doctrine of noscitur a sociis, although a rule in the construction of statutes, is equally applicable in the ascertainment of the meaning and scope of vague contractual stipulations, such as the aforementioned phrase. According to the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be

reviewed by reference to associated words. A close examination of Clause 16 reveals that it covers three matters which may be submitted to arbitration namely, (1) all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered; or (2) any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions; or (3) otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof. The first and second categories unmistakably refer to questions and disputes relating to the design, drawing, instructions, specifications or quality of the materials of the supply/order contract. In the third category, the clause, "execution or failure to execute the same", may be read as "execution or failure to execute the supply order/contract". But in accordance with the doctrine of noscitur a sociis, this reference to the supply order/contract must be construed in the light of the preceding words with which it is associated, meaning to say, as being limited only to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract. The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain only to matters involving the technical aspects of the contract is but a logical inference considering that the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with the required skill and expertise which may be otherwise absent in the regular courts. This Court agrees with the appellate court in its ruling that the non-delivery of the oil well cement is a matter properly cognizable by the regular courts as stipulated by the parties in Clause 15 of their contract: All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the exclusive jurisdiction of the court, within the local limits of whose jurisdiction 14 and the place from which this supply order is situated. The following fundamental principles in the interpretation of contracts and other instruments served as our guide in arriving at the foregoing conclusion: Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be 15 understood as bearing that import which is most adequate to render it effectual. Art. 1374. The various stipulations of a contract shall be interpreted together, attributing the 16 doubtful ones that sense which may result from all of them taken jointly. Sec. 11. Instrument construed so as to give effect to all provisions . In the construction of an instrument, where there are several provisions or particulars, such a construction is, if possible, to 17 be adopted as will give effect to all. Thus, this Court has held that as in statutes, the provisions of a contract should not be read in isolation from the rest 18 of the instrument but, on the contrary, interpreted in the light of the other related provisions. The whole and every part of a contract must be considered in fixing the meaning of any of its harmonious whole. Equally applicable is the canon of construction that in interpreting a statute (or a contract as in this case), care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions. The rule is that a construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and 19 harmonious whole. The petitioner's interpretation that Clause 16 is of such latitude as to contemplate even the non-delivery of the oil well cement would in effect render Clause 15 a mere superfluity. A perusal of Clause 16 shows that the parties did not intend arbitration to be the sole means of settling disputes. This is manifest from Clause 16 itself which is prefixed with the proviso, "Except where otherwise provided in the supply order/contract . . .", thus indicating that the jurisdiction of the arbitrator is not all encompassing, and admits of exceptions as may be provided elsewhere in the

13

supply order/contract. We believe that the correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be confined to all claims or disputes arising from or relating to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or disputes. The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to the specifications of the contract is a matter clearly falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300 metric tons of oil well cement were not delivered to the petitioner, an agreement was forged between the latter and the private respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon inspection, however, the replacement cement was rejected as it did not conform to the specifications of the contract. Only after this latter circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to arbitration was no longer the mere non-delivery of the cargo at the first instance but also the failure of the replacement cargo to conform to the specifications of the contract, a matter clearly within the coverage of Clause 16. The private respondent posits that it was under no legal obligation to make replacement and that it undertook the 20 latter only "in the spirit of liberality and to foster good business relationship". Hence, the undertaking to deliver the replacement cement and its subsequent failure to conform to specifications are not anymore subject of the supply order/contract or any of the provisions thereof. We disagree. As per Clause 7 of the supply order/contract, the private respondent undertook to deliver the 4,300 metric tons of oil 21 well cement at "BOMBAY (INDIA) 2181 MT and CALCUTTA 2119 MT". The failure of the private respondent to deliver the cargo to the designated places remains undisputed. Likewise, the fact that the petitioner had already paid for the cost of the cement is not contested by the private respondent. The private respondent claims, however, that it never benefited from the transaction as it was not able to recover the cargo that was unloaded at the port of Bangkok. 22 First of all, whether or not the private respondent was able to recover the cargo is immaterial to its subsisting duty to make good its promise to deliver the cargo at the stipulated place of delivery. Secondly, we find it difficult to believe this representation. In its Memorandum filed before this Court, the private respondent asserted that the Civil Court of 23 Bangkok had already ruled that the non-delivery of the cargo was due solely to the fault of the carrier. It is, therefore, but logical to assume that the necessary consequence of this finding is the eventual recovery by the private respondent of the cargo or the value thereof. What inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken precisely because of the private respondent's recognition of its duty to do so under the supply order/contract, Clause 16 of which remains in force and effect until the full execution thereof. We now go to the issue of whether or not the judgment of the foreign court is enforceable in this jurisdiction in view of the private respondent's allegation that it is bereft of any statement of facts and law upon which the award in favor of the petitioner was based. The pertinent portion of the judgment of the foreign court reads: ORDER Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven only) along with 9% interest per annum till the last date of 24 realisation. As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 shall be a part of the decree". This is a categorical declaration that the foreign court adopted the findings of facts and law of the arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and defenses of the parties, and the arbitrator's evaluation of the same. Inasmuch as the foregoing is deemed to have been incorporated into the foreign court's judgment the appellate court was in error when it described the latter to be 25 a "simplistic decision containing literally, only the dispositive portion". The constitutional mandate that no decision shall be rendered by any court without expressing therein dearly and distinctly the facts and the law on which it is based does not preclude the validity of "memorandum decisions" which adopt by reference the findings of fact and conclusions of law contained in the decisions of inferior tribunals. In 26 Francisco v. Permskul, this Court held that the following memorandum decision of the Regional Trial Court of Makati did not transgress the requirements of Section 14, Article VIII of the Constitution:

MEMORANDUM DECISION After a careful perusal, evaluation and study of the records of this case, this Court hereby adopts by reference the findings of fact and conclusions of law contained in the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 and finds that there is no cogent reason to disturb the same. WHEREFORE, judgment appealed from is hereby affirmed in toto.
27

(Emphasis supplied.)

This Court had occasion to make a similar pronouncement in the earlier case of Romero v. Court of 28 Appeals, where the assailed decision of the Court of Appeals adopted the findings and disposition of the Court of Agrarian Relations in this wise: We have, therefore, carefully reviewed the evidence and made a re-assessment of the same, and We are persuaded, nay compelled, to affirm the correctness of the trial court's factual findings and the soundness of its conclusion. For judicial convenience and expediency, therefore, We hereby adopt by way of reference, the findings of facts and conclusions of the court a quo spread in its 29 decision, as integral part of this Our decision. (Emphasis supplied) Hence, even in this jurisdiction, incorporation by reference is allowed if only to avoid the cumbersome 30 reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court. This is particularly true when the decision sought to be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived at, as in this case, where Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages. Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the 31 country in which the judgment is relied on. This Court has held that matters of remedy and procedure are governed 32 by the lex fori or the internal law of the forum. Thus, if under the procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be rendered by adopting the arbitrator's findings, then the same must be accorded respect. In the same vein, if the procedure in the foreign court mandates that an Order of the Court becomes final and executory upon failure to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign court simply because our rules provide otherwise. The private respondent claims that its right to due process had been blatantly violated, first by reason of the fact that the foreign court never answered its queries as to the amount of docket fees to be paid then refused to admit its objections for failure to pay the same, and second, because of the presumed bias on the part of the arbitrator who was a former employee of the petitioner. Time and again this Court has held that the essence of due process is to be found in the reasonable opportunity to be 33 heard and submit any evidence one may have in support of one's defense or stated otherwise, what is repugnant 34 to due process is the denial of opportunity to be heard. Thus, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy and he waived his right to 35 do so. In the instant case, the private respondent does not deny the fact that it was notified by the foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for its objections to be given consideration. Instead of paying the legal fees, however, the private respondent sent a communication to the foreign court inquiring about the correct amount of fees to be paid. On the pretext that it was yet awaiting the foreign court's reply, almost a year passed without the private respondent paying the legal fees. Thus, on February 2, 1990, the foreign court rejected the objections of the private respondent and proceeded to adjudicate upon the petitioner's claims. We cannot subscribe to the private respondent's claim that the foreign court violated its right to due process when it failed to reply to its queries nor when the latter rejected its objections for a clearly meritorious ground. The private respondent was afforded sufficient opportunity to be heard. It was not incumbent upon the foreign court to reply to the private respondent's written communication. On the contrary, a genuine concern for its cause should have prompted the private respondent to ascertain with all due diligence the correct amount of legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea that they were not accorded the right to procedural 36 due process cannot elicit either approval or sympathy from this Court.

The private respondent bewails the presumed bias on the part of the arbitrator who was a former employee of the petitioner. This point deserves scant consideration in view of the following stipulation in the contract: . . . . It will be no objection any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the 37 matter in dispute or difference. (Emphasis supplied.) Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient Airlines, Inc. v. Court of Appeals that:
38

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. 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 39 jurisdiction and has regularly performed its official duty. Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of overcoming the presumption of its validity which it failed to do in the instant case. The foreign judgment being valid, there is nothing else left to be done than to order its enforcement, despite the fact that the petitioner merely prays for the remand of the case to the RTC for further proceedings. As this Court has ruled on the validity and enforceability of the said foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of evidence to prove otherwise are no longer necessary. WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals sustaining the trial court's dismissal of the OIL AND NATURAL GAS COMMISSION's complaint in Civil Case No. 4006 before Branch 30 of the RTC of Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the amounts adjudged in the foreign judgment subject of said case. SO ORDERED. Regalado, Melo and Puno, JJ., concur. Mendoza, J., took no part. # Footnotes 1 Supply Order contract, ANNEX "C" to PETITION in G.R. No. 114323, p. 5; Rollo, p. 114. * Note: The contract and the foreign judgments or awards by the Indian courts follow the British spelling of words for which sic will no longer be indicated. 2 Arbitral Award dated July 23, 1988, ANNEX "D" of the Petitions, p. 17; Rollo, p. 143-144. 3 DECISION in CA-G.R. CV No. 37080 promulgated on October 29, 1993, p. 10; Rollo, p. 103; RTC Records, pp. 143-144. 4 ANNEX "F" of the Petition; Rollo, p, 157.

5 ORDER in Civil Case No. 4006, ANNEX "G" of the Petition, p, 1; Rollo, p. 158. 6 Ibid., p. 4; Rollo, p. 161. 7 Ibid., p. 5; Rollo, p. 162. 8 Art. VIII, Section 14 of the 1987 Constitution. 9 CA Decision, Supra, pp. 8-12; Rollo, pp. 101-105. 10 Petition, Supra, p. 9; Rollo, p. 73. 11 See Supply Order Contract. 12 Petition, Supra, pp. 11-12; Rollo, pp. 75-76. 13 Motoomul, et al. vs. Dela Paz, et al., 187 SCRA 743, 753 [1990]; Luzon Stevedoring Co. vs. Trinidad, 43 Phil. 804 [1922]. 14 Terms and Conditions of Supply Order, "ANNEX C-1" of the Petition, p. 8; Rollo, p. 125-126; RTC Records, pp. 17-26. 15 Art. 1373 of the Civil Code. 16 Art. 1374 of the Civil Code. 17 Rule 130, Section 11 of the Rules of Court. 18 De Leon vs. Court of Appeals, 205 SCRA 612, 620 [1992]. 19 JMM Promotions & Management, Inc. vs. NLRC, 228 SCRA 129, 134 [1993]. 20 Private Respondent's Memorandum in G.R. No. 114323, p. 17. 21 (Footnote not available per copy of SC decision.) 22 Supra, Private Respondent's Memorandum, p. 18. 23 Ibid. 24 Court of Dehra Dun, Suit No. 677 of 1988, ONGC vs. Pacific Cement, 7-2-90; Rollo, p. 157. 25 CA Decision. 26 173 SCRA 324 [1989]. 27 Ibid., p. 326. 28 147 SCRA 183 [1987]. 29 Ibid., p. 189. 30 Francisco v. Permskul, 173 SCRA 324, 333.

31 Francisco, Vicente J., The Revised RULES OF COURT in the Philippines, Volume II, pp. 891892, 1966 ed, citing 31 Am. Jur. 153-154. 32 Northwest Orient Airlines, Inc. vs. Court of Appeals, 241 SCRA 192, 199 [1995]. 33 Roces vs. Aportadera, 243 SCRA 108 [1995]; Mutuc vs. Court of Appeals, 190 SCRA 43, 49 [1990]; Richards vs. Asoy, 152 SCRA 45 [1987]; Tajonera vs. Lamaroza, 110 SCRA 438 [1981]. 34 Korean Airlines Co., Ltd. vs. Court of Appeals, 247 SCRA 599, 603 [1995]. 35 Roces vs. Aportadera, supra, p. 114; Stayfast Sunset View Condominium Corporation vs. NLRC, 228 SCRA 466 [1993]; Villareal vs. Court of Appeals, 219 SCRA 292 [1993]. 36 B.R. Sebastian Enterprises, Inc. vs. Court of Appeals, 206 SCRA 28 [1992]. 37 Supply Order, Supra. 38 241 SCRA 192, 199 [1995]. 39 Ibid.

G.R. No. 137378

October 12, 2000

PHILIPPINE ALUMINUM WHEELS, INC., petitioner, vs. FASGI ENTERPRISES, INC., respondent. DECISION VITUG, J.: On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and existing under and by virtue of the laws of the State of California, United States of America, entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated ("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation. The agreement provided for the purchase, importation and distributorship in the United States of aluminum wheels manufactured by PAWI. Pursuant to the contract, PAWI shipped to FASGI a total of eight thousand five hundred ninety four (8,594) wheels, with an FOB value of US$216,444.30 at the time of shipment, the first batch arriving in two containers and the second in three containers. Thereabouts, FASGI paid PAWI the FOB value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in noncompliance with stated requirements, viz; "A. contrary to the terms of the Distributorship Agreement and in violation of U.S. law, the country of origin (the Philippines) was not stamped on the wheels; "B. the wheels did not have weight load limits stamped on them as required to avoid mounting on excessively heavy vehicles, resulting in risk of damage or bodily injury to consumers arising from possible shattering of the wheels; "C. many of the wheels did not have an indication as to which models of automobile they would fit; "D. many of the wheels did not fit the model automobiles for which they were purportedly designed; "E. some of the wheels did not fit any model automobile in use in the United States; "F. most of the boxes in which the wheels were packed indicated that the wheels were approved by the Specialty Equipment Manufacturer's Association (hereafter, `SEMA'); in fact no SEMA approval has been obtained and this indication was therefore false and could result in fraud upon retail customers purchasing 1 the wheels."

On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and recovery of damages in the amount of US$2,316,591.00 before the United States District Court for the Central District of California. In January 1980, during the pendency of the case, the parties entered into a settlement, entitled "Transaction" with the corresponding Italian translation "Convenzione Transsativa," where it was stipulated that FPS and PAWI would accept the return of not less than 8,100 wheels after restoring to FASGI the purchase price of US$268,750.00 via four (4) irrevocable letters of credit ("LC"). The rescission of the contract of distributorship was to 2 be effected within the period starting January up until April 1980. In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed the company's inability to comply with the foregoing agreement and proposed a revised schedule of payment. The message, in part, read: "We are most anxious in fulfilling all our obligations under compromise agreement executed by our Mr. Giancarlo Dallera and your Van Curen. We have tried our best to comply with our commitments, however, because of the situation as mentioned in the foregoing and currency regulations and restrictions imposed by our government on the outflow, of foreign currency from our country, we are constrained to request for a revised schedule of shipment and opening of L/Cs. "After consulting with our bank and government monetary agencies and on the assumption that we submit the required pro-forma invoices we can open the letters of credit in your favor under the following schedule: "A) First L/C - it will be issued in April 1980 payable 90 days thereafter "B) Second L/C - it will be issued in June 1980 payable 90 days thereafter "C) Third L/C - it will be issued in August 1980 payable 90 days thereafter "D) Fourth L/C - it will be issued in November 1980 payable 90 days thereafter "We understand your situation regarding the lease of your warehouse. For this reason, we are willing to defray the extra storage charges resulting from this new schedule. If you cannot renew the lease [of] your present warehouse, perhaps you can arrange to transfer to another warehouse and storage charges transfer thereon will be for our account. We hope you understand our position. The delay and the revised schedules were caused by circumstances 3 totally beyond our control." On 21 April 1980, again through a telex message, PAWI informed FASGI that it was impossible to open a letter of credit on or before April 1980 but assured that it would do its best to comply with the suggested schedule of 4 payments. In its telex reply of 29 April 1980, FASGI insisted that PAWI should meet the terms of the proposed schedule of payments, specifically its undertaking to open the first LC within April of 1980, and that "If the letter of credit is not opened by April 30, 1980, then x x x [it would] immediately take all necessary legal action to protect [its] 5 position." Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in April 1980 allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to pursue its complaint for damages against PAWI before the California district court. Pre-trial conference was held on 24 November 1980. In the interim, the parties, realizing the protracted process of litigation, resolved to enter into another arrangement, this time entitled "Supplemental Settlement Agreement," on 26 November 1980. In substance, the covenant provided that FASGI would deliver to PAWI a container of wheels for every LC opened and paid by PAWI: "3. Agreement "3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand, Seven Hundred Fifty and 00/100 Dollars ($268,750.00), plus interest and storage costs as described below. Sellers shall pay such amount by delivering to FASGI the following four (4) irrevocable letters of credit, confirmed by Crocker Bank, Main Branch, Fresno, California, as set forth below: "(i) on or before June 30, 1980, a documentary letter of credit in the amount of (a) Sixty-Five Thousand, Three Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b) plus interest on that amount at the annual rate of 16.25% from January 1, 1980 until July 31, 1980, (c) plus Two Thousand Nine Hundred Forty Dollars and 00/100 ($2,940.00)

and (d) with interest on that sum at the annual rate of 16.25% from May 1, 1980 to July 31, 1980, payable on or after August 31, 1980; "(ii) on or before September 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,940.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until December 21, 1980, and on the amount set forth in (b) from May 1, 1980 until December 21, 1980, payable ninety days after the date of the bill of lading under the letter of credit; "(iii) on or before November 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,490.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until February 21, 1981, and on the amount set forth in (b) from May 1, 1980 until February 21, 1981, payable ninety days after the date of the bill of lading under the latter of credit; "(iv) on or before January 1, 1981, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Five Thousand, Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until April 21, 1981, and on the amount set forth in (b) from May 1, 1980 until April 21, 1981, payable ninety days after the date of the bill 6 of lading under the latter of credit." Anent the wheels still in the custody of FASGI, the supplemental settlement agreement provided that "3.4 (a) Upon execution of this Supplemental Settlement Agreement, the obligations of FASGI to store or maintain the Containers and Wheels shall be limited to (i) storing the Wheels and Containers in their present warehouse location and (ii) maintaining in effect FASGI's current insurance in favor of FASGI, insuring against usual commercial risks for such storage in the principal amount of the Letters of Credit described in Paragraph 3.1. FASGI shall bear no liability, responsibility or risk for uninsurable risks or casualties to the Containers or Wheels. "x x x xxx xxx

"(e) From and after February 28, 1981, unless delivery of the Letters of Credit are delayed past such date pursuant to the penultimate Paragraph 3.1, in which case from and after such later date, FASGI shall have no obligation to 7 maintain, store or deliver any of the Containers or Wheels." The deal allowed FASGI to enter before the California court the foregoing stipulations in the event of the failure of PAWI to make good the scheduled payments; thus "3.5 Concurrently with execution and delivery hereof, the parties have executed and delivered a Mutual Release (the `Mutual Release'), and a Stipulation for Judgment (the `Stipulation for Judgment') with respect to the Action. In the event of breach of this Supplemental Settlement Agreement by Sellers, FASGI shall have the right to apply immediately to the Court for entry of Judgment pursuant to the Stipulation for Judgment in the full amount thereof, less credit for any payments made by Sellers pursuant to this Supplemental Settlement Agreement. FASGI shall have the right thereafter to enforce the Judgment against PAWI and FPS in the United States and in any other country where assets of FPS or PAWI may be located, and FPS and PAWI hereby waive all defenses in any such country to execution or enforcement of the Judgment by FASGI. Specifically, FPS and PAWI each consent to the jurisdiction of the Italian and Philippine courts in any action brought by FASGI to seek a judgment in those countries based upon a 8 judgment against FPS or PAWI in the Action." In accordance with the aforementioned paragraph 3.5 of the agreement, the parties made the following stipulation before the California court: "The undersigned parties hereto, having entered into a Supplemental Settlement Agreement in this action,

"IT IS HEREBY STIPULATED by and between plaintiff FASGI Enterprises, Inc. (`FASGI') and defendants Philippine Aluminum Wheels, Inc., (`PAWI'), and each of them, that judgment may be entered in favor of plaintiff FASGI and against PAWI, in the amount of Two Hundred Eighty Three Thousand Four Hundred Eighty And 01/100ths Dollars ($283,480.01). "Plaintiff FASGI shall also be entitled to its costs of suit, and to reasonable attorneys' fees as determined by the Court 9 added to the above judgment amount." The foregoing supplemental settlement agreement, as well as the motion for the entry of judgment, was executed by FASGI president Elena Buholzer and PAWI counsel Mr. Thomas Ready. PAWI, again, proved to be remiss in its obligation under the supplemental settlement agreement. While it opened the first LC on 19 June 1980, it, however, only paid on it nine (9) months after, or on 20 March 1981, when the letters of credit by then were supposed to have all been already posted. This lapse, notwithstanding, FASGI promptly shipped to PAWI the first container of wheels. Again, despite the delay incurred by PAWI on the second LC, FASGI readily delivered the second container. Later, PAWI totally defaulted in opening and paying the third and the fourth LCs, scheduled to be opened on or before, respectively, 01 September 1980 and 01 November 1980, and each to be paid ninety (90) days after the date of the bill of lading under the LC. As so expressed in their affidavits, FASGI counsel Frank Ker and FASGI president Elena Buholzer were more inclined to believe that PAWI's failure to pay was due not to any restriction by the Central Bank or any other cause than its inability to pay. These doubts were based on the telex message of PAWI president Romeo Rojas who attached a copy of a communication from the Central Bank notifying PAWI of the bank's approval of PAWI's request to open LCs to cover payment for the re-importation of the wheels. The communication having been sent to FASGI before the supplemental settlement agreement was executed, FASGI speculated that at the time PAWI subsequently entered into the supplemental settlement agreement, its request to open LCs had already been approved by the Central Bank. Irked by PAWI's persistent default, FASGI filed with the US District Court of the Central District of California the following stipulation for judgment against PAWI. "PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the Courtroom of the Honorable Laughlin E. Waters of the above Court, plaintiff FASGI ENTERPRISES, INC. (hereinafter `FASGI') will move the Court for entry of Judgment against defendant PHILIPPINE ALUMINUM WHEELS, INC. (hereinafter `PAWI'), pursuant to the Stipulation for Judgment filed concurrently herewith, executed on behalf of FASGI and PAWI by their respective attorneys, acting as their authorized agents. "Judgment will be sought in the total amount of P252,850.60, including principal and interest accrued through May 17, 1982, plus the sum of $17,500.00 as reasonable attorneys' fees for plaintiff in prosecuting this action. "The Motion will be made under Rule 54 of the Federal Rules of Civil Procedure, pursuant to and based upon the Stipulation for Judgment, the Supplemental Settlement Agreement filed herein on or about November 21, 1980, the Memorandum of Points and Authorities and Affidavits of Elena Buholzer, Franck G. Ker and Stan Cornwell all filed herewith, and upon all the records, files and pleadings in this action. "The Motion is made on the grounds that defendant PAWI has breached its obligations as set forth in the Supplemental Settlement Agreement, and that the Supplemental Settlement Agreement expressly permits FASGI to enter the Stipulation for Judgment in the event that PAWI has not performed under the Supplemental Settlement 10 Agreement." On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality of judgment was issued, on 07 September 1982, by the US District Judge of the District Court for the Central District of California. PAWI, by this time, was approximately twenty (20) months in arrears in its obligation under the supplemental settlement agreement. Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign judgment" in February 1983, before the Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of 11 September 1990, dismissed the case, thereby denying the enforcement of the foreign judgment within Philippine jurisdiction, on the ground that the decree was tainted with collusion, fraud, and 11 clear mistake of law and fact. The lower court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order 12 was made requiring FASGI to return to PAWI the third and fourth containers of wheels. This situation, the trial court maintained, amounted to an unjust enrichment on the part of FASGI. Furthermore, the trial court said, the

supplemental settlement agreement and the subsequent motion for entry of judgment upon which the California court had based its judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization. FASGI appealed the decision of the trial court to the Court of Appeals. In a decision, dated 30 July 1997, the appellate court reversed the decision of the trial court and ordered the full enforcement of the California judgment. Hence this appeal. Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment 14 rendered by a tribunal of another country; however, the rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are 15 reciprocally respected and rendered efficacious under certain conditions that may vary in different countries. In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court 16 and in the system of laws under which it is sitting or fraud in procuring the judgment. A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the Rules of Court of the Philippines provides: Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: xxxx (b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc., one of the early Philippine cases on the enforcement of foreign judgments, this Court has ruled that a judgment for a sum of money rendered in a foreign court is presumptive evidence of a right between the parties and their successors-in-interest by subsequent title, but when suit for its enforcement is brought in a Philippine court, such judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. In Northwest Orient Airlines, 18 Inc., vs. Court of Appeals, the Court has said that a party attacking a foreign judgment is tasked with the burden of overcoming its presumptive validity. PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the action or subject matter of the litigation even when he 19 honestly believes that such a settlement will best serve his client's interest. In the instant case, the supplemental settlement agreement was signed by the parties, including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged in the California case on 26 November 1980 or two (2) days after the pre-trial conference held on 24 November 1980.1wphi1 If Mr. Ready was indeed not authorized by PAWI to enter into the supplemental settlement agreement, PAWI could have forthwith signified to FASGI a disclaimer of the settlement. Instead, more than a year after the execution of the supplemental settlement agreement, particularly on 09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the agreement when Mr. Rojas sought forbearance for the impending delay in the opening of the first letter of credit under the schedule stipulated in the agreement.
17 13

It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to 20 promptly repudiate the action of his attorney, he will not afterwards be heard to complain about it. Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages and incurring heavy litigation expenses normally generated in a full-blown trial. PAWI, under the agreement was afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations. PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his authority to enter into a stipulation for judgment before the California court on 06 August 1982 on the ground that it had by then already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of PAWI to withdraw from the motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982 until the certificate of finality of judgment was issued by the California court on 07 September 1982, no notification was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power of passing judgment on the correctness of the 21 application of law and the evaluation of the facts of the judgment issued by another tribunal. Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based on 22 facts not controverted or resolved in the case where judgment is rendered, or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious case or defense. In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action - such as fraud in obtaining the consent to a contract - is deemed already adjudged, and it, therefore, cannot 23 militate against the recognition or enforcement of the foreign judgment. Even while the US judgment was against both FPS and PAWI, FASGI had every right to seek enforcement of the judgment solely against PAWI or, for that matter, only against FPS. FASGI, in its complaint, explained: "17. There exists, and at all times relevant herein there existed, a unity of interest and ownership between defendant PAWI and defendant FPS, in that they are owned and controlled by the same shareholders and managers, such that any individuality and separateness between these defendants has ceased, if it ever existed, and defendant FPS is the alter ego of defendant PAWI. The two entities are used interchangeably by their shareholders and managers, and plaintiff has found it impossible to ascertain with which entity it is dealing at any one time. Adherence to the fiction of separate existence of these defendant corporations would permit an abuse of the corporate privilege and would promote injustice against this plaintiff because assets can easily be shifted between the two companies thereby 24 frustrating plaintiff's attempts to collect on any judgment rendered by this Court." Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS to be "joint and several" or solidary. The enforcement of the judgment against PAWI alone would not, of course, preclude it from pursuing and recovering whatever contributory liability FPS might have pursuant to their own agreement. PAWI would argue that it was incumbent upon FASGI to first return the second and the third containers of defective 25 wheels before it could be required to return to FASGI the purchase price therefor, relying on their original 26 agreement (the "Transaction"). Unfortunately, PAWI defaulted on its covenants thereunder that thereby occasioned the subsequent execution of the supplemental settlement agreement. This time the parties agreed, under paragraph 27 3.4(e) thereof, that any further default by PAWI would release FASGI from any obligation to maintain, store or deliver the rejected wheels. The supplemental settlement agreement evidently superseded, at the very least on this point, the previous arrangements made by the parties. PAWI cannot, by this petition for review, seek refuge over a business dealing and decision gone awry. Neither do the courts function to relieve a party from the effects of an unwise or unfavorable contract freely entered into. As has so aptly been explained by the appellate court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear emphasis that the settlement which has become the basis for the foreign judgment has not been the start of a business venture but the end of a failed one, and each party, naturally, has had to negotiate from either position

of strength or weakness depending on its own perception of who might have to bear the blame for the failure and the 28 consequence of loss. Altogether, the Court finds no reversible error on the part of the appellate court in its appealed judgment. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs. SO ORDERED. Melo, (Chairman), Panganiban, Purisima, and Gonzaga-Reyes, JJ., concur.

Footnotes
1

Complaint for Damages filed by FASGI before the US District Court for the Central District of California, Case No. 79-03661-HP, entitled "FASGI Enterprises vs. PAWI and FPS, filed on 21 September 1979." (Rollo, p. 68)
2

Pertinent provisions of the "Transaction" executed between the parties include: "2) FPS and PAWI accept the return to them of the products supplied to FASGI, at the forfeitglobal price of USA$268,750 and more precisely $13,273 for the wheels and bolts supplied by FPS and to be returned to them, and $253,477 for wheels and caps supplied by PAWI and to be returned to them. "3) FASGI therefore agrees to return to PAWI not less than 8,100 wheels plus relative caps, still in their original packing; agrees to return to FPS the 120 wheels and bolts received; "4) PAWI reserves the right, recognized by FASGI, to take back the materials supplied - four containers - either in one lot or in four separate lots, respectively by January, February, March and April 1980. In case PAWI should opt for the second alternative, it must pay to FASGI the sum of US$6,000 for storage and custody, provided the withdrawal takes place not later than the 30th of April, 1980. "x x x xxx xxx

"6) In case all the goods are returned in one lot by January 1980, in payment of the same and before their shipment from Fresno, PAWI will issue four Letters of Credit, irrevocable, each one of the same amount, payable at 90-120-150-180 days from the date of the invoice that FASGI will issue for the goods returned. "If on the other hand the goods are returned in four lots, the four Letters of Credit, increased each one by $1,500 covering the amount referred to point 4), will be issued at 90 days from the date of each shipment, which must be in January, February, March, April 1980. "However, in both cases, each Letter of Credit must include also the USA current interests retroactive from the first January 1980 to the each Letter of Credit maturity, in addition to the fixed amount. Above interests will be calculated on the base of USA current `prime rate', increased by two points. "The Letters of Credit must be accepted and confirmed by Crocker Bank of Fresno, California. "7) The same method of payment will apply to FPS goods, and precisely Letter of Credit as above confirmed with expiry 60 days from shipment date and relative interests from the first January 1980.

"8) FASGI will issue the appropriate invoices for goods returning with interests calculated from the first January 1980 on the base of USA current rate and precisely the `prime rate' increased by two points. "9) The judicial proceedings initiated by FASGI ENTERPRISES before the Los Angeles Court will be abandoned with compensatory costs. The Parties undertake to sign any documents necessary to formalize the renunciation of any legal action. "x x x xxx xxx

"11) With the issue of the aforesaid Letters of Credit accepted as above and of the payments having taken place and the return of the wheels as stated above having been carried out, any and every reason or claim between the Parties, relative to the agreement of exclusive sale as given in point 1) of the PREMISE, the summons brought before the Los Angeles Court will be resolved, settled and concluded." (Rollo, pp. 100-101)
3

Rollo, pp. 106. Rollo, p. 107. Rollo, p. 109. Rollo, pp. 88-90. Rollo, pp. 91-92. Rollo, p. 93. Rollo, pp. 113-114. Rollo, pp. 117-118. Rollo, pp. 237-244. Ibid.

10

11

12

13

Penned by Justice Emeterio C. Cui, concurred by Justice Corona Ibay Somera and Justice Salvador J. Valdez, Jr.
14

Cuculu vs. Louisiana Ins. Co. (La) Mart NS 464 Ibid. Private International Law, Jovito R. Salonga, Rex Bookstore, Manila, Philippines, 1995 Edition, p. 543. 33 SCRA 46. 241 SCRA 192. Caballero vs. Deiparine, 60 SCRA 136; Acenas vs. Sison, 8 SCRA 711. Dungo vs. Lopena, 116 Phil. 1305. Salonga, supra., at 558.

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16

17

18

19

20

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22

Labayen vs. Talisay-Silay Milling Co., 40 O.G., 2nd Supp. No. 3, p. 109. Salonga, supra. Rollo, p. 71. See Petition for Review on Certiorari, G.R. No. 137378, pp. 14-15. "Transaction," supra.

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25

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27

(e) From and after February 28, 1981, unless delivery of the Letters of Credit are delayed past such date pursuant to the penultimate paragraph of Paragraph 3.1, in which case from and after such later date, FASGI shall have no obligation to maintain, store or deliver any of the containers or wheels.
28

Decision, Court of Appeals, 30 July 1997, Rollo, p. 53.

G.R. No. 110263

July 20, 2001

ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, vs. COURT OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, respondents. DELEON, JR., J.: Before us is a petition for review on certiorari of the Decision of the Court of Appeals dated May 19,1993 in CA-G.R. 2 CY No. 35871 affirming the Decision dated October 14,1991 of the Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the enforcement of the money of the judgment of the High Court of Malaysia in Kuala Lumpur against private respondent Philippine National Construction Corporation.1wphi1.nt The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while private respondent Philippine National Construction Corporation is a corporation duly incorporated and existing under Philippine laws.
1

It appears that sometime in 1983, petitioner initiated a suit for collection against private respondent, then known as Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur entitled "Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development 3 Corporation of the Philippines." Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to guarantee the completion of the Felda Project and the nonpayment of the loan it extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan By Pass; Project. On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and against the private respondent which is also designated therein as the "2nd Defendant. " The judgment reads in full: SUIT NO. C638 of 1983 Between Asiavest Merchant Bankers (M) Berhad And 1. Asiavest -CDCP Sdn. Bhd. 2. Construction & Development Corporation of the Philippines JUDGMENT The 2nd Defendant having entered appearance herein and the Court having under Order 14, rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiffs against the 2nd Defendant. IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5, 108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and ninety and Sen twenty-three) together with interest at the rate of 12% per annum on (i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and (ii) the sum of $2,521,423.32 from the 11 day of March 1983 to the date of payment; and $350.00 (Ringgit Three Hundred and Fifty) costs. Dated the 13th day of September, 1985. Senior Assistant Registrar, High Court, Kuala Lumpur This Judgment is filed by Messrs. Skrine & Co., 3 Floor, Straits Trading Building, No.4, Leboh Pasar, Besar, Kuala 4 Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83) On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the private respondent (also designated therein as the "2nd Defendant") to pay petitioner interest on the sums covered by the said Judgment, thus: SUIT NO. C638 of 1983 Between Asiavest Merchant Bankers (M) Berhad And 1. Asiavest -CDCP Sdn. Bhd. Defendants Plaintiffs
rd th

Plaintiffs Defendant

2. Construction & Development Corporation of the Philippines BEFORE THE SENIOR ASSISTANT REGISTRAR CIK SUSILA S. PARAM THIS 13th DAY OF SEPTEMBER 1985 ORDER Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND UPON READING the Summons in Chambers dated the 16th day of August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day of August 1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS ORDERED that the Plaintiffs be at liberty to sign final judgment against the 2nd Defendant for the sum of $5,108,290.23 AND IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs the costs of suit at $350.00 AND IT WAS FURTHER ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the application of the Plaintiffs for payment of interest coming on for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at a rate to be assessed AND the same coming on for assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at the rate of 12% per annum on: (i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and (ii) the sum Of $2,521,423.32 from the 11th day of March 1983 to the date of Payment. Dated the 13th day of September,1985. Senior Assistant Registrar, High Court, Kuala Lumpur.
6 5

IN CHAMBERS

Following unsuccessful attempts to secure payment from private respondent under the judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to enforce the judgment of 7 the High Court of Malaya. Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5, 1988, contending that the alleged judgment of the High Court of Malaya should be denied recognition or enforcement since on in face, it is tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear 8 mistake of law or fact. Dismissal was, however, denied by the trial court considering that the grounds relied upon are 9 not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court. On May 22, 1989, private respondent filed its Answer with Compulsory Counter claim's and therein raised the 11 grounds it brought up in its motion to dismiss. In its Reply filed on June 8, 1989, the petitioner contended that the High Court of Malaya acquired jurisdiction over the Person of private respondent by its voluntary submission the court's jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondent's counsel waived any and all objections to the High Court's jurisdiction in a pleading filed before the court. In due time, the trial court rendered its Decision dated October 14, 1991 dismissing petitioner's complaint. Petitioner interposed an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the decision of the trial court in a Decision dated May 19, 1993. Hence, the instant Petition which is anchored on two (2) assigned errors, I THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT ACQUIRE PERSONAL JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD
12 10

to wit:

SERVED SUMMONS ON PNCC AT ITS MALAYSlA OFFICE, AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT. II THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO (SIC) THE MALAYSIAN COURT JUDGMENT. Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment 13 rendered by a tribunal of another country; however, the rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are 14 reciprocally respected and rendered efficacious under certain conditions that may vary in different countries. In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that the trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a 15 prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment. A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum Under 16 Section 50(b), Rule 39 of the Revised Rules of Court, which was the governing law at the time the instant case was decided by the trial court and respondent appellate court, a judgment, against a person, 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. In addition, under Section 3(n), Rule 131 of the Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved, the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive validity. In the instant case, petitioner sufficiently established the existence of the money judgment of the High Court of Malaya by the evidence it offered. Vinayak Prabhakar Pradhan, presented as petitioner's sole witness, testified to the 17 effect that he is in active practice of the law profession in Malaysia; that he was connected with Skrine and 18 Company as Legal Assistant up to 1981; that private respondent, then known as Construction and Development 19 Corporation of the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur; that the writ of summons were served on March 17, 1983 at the registered office of private respondent and on March 20 21, 1983 on Cora S. Deala, a financial planning officer of private respondent for Southeast Asia operations; that upon the filing of the case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman, Kuala Lumpur, entered their conditional appearance for private respondent questioning the regularity of the service of the writ of summons but subsequently withdrew the same when it realized that the writ was 21 properly served; that because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an application for summary judgment and submitted affidavits and documentary evidence in support of 22 its claim; that the matter was then heard before the High Court of Kuala Lumpur in a series of dates where private 23 respondent was represented by counsel; and that the end result of all these proceedings is the judgment sought to be enforced. In addition to the said testimonial evidence, petitioner offered the following documentary evidence: (a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High Court dated September 13, 1985 directing private respondent to pay petitioner the sum of $5,108,290.23 Malaysian 24 Ringgit plus interests from March 1983 until fully paid; (b) A certified and authenticated copy of the Order dated September 13,1985 issued by the Malaysian High 25 Court in Civil Suit No. C638 of 1983; (c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged payable to 26 petitioner by private respondent;

(d) Letter and Statement of Account of petitioner's counsel in Malaysia indicating the costs for prosecuting 27 and implementing the Malaysian High Court's Judgment; (e) Letters between petitioner's Malaysian counsel, Skrine and Co., and its local counsel, Sycip Salazar Law 28 Offices, relative to institution of the action in the Philippines; (f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorney's fees paid by 29 and due from petitioner; (g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner's suit against 30 private respondent before the Malaysian High Court; (h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private respondent 31 with the Malaysian High Court; (i) Summons in Chambers and Affidavit of Khaw Chay Tee, cotmsel for private respondent, submitted during 32 the proceedings before the Malaysian High Court; (j) Record of the Court's Proceedings in Civil Case No. C638 of 1983.
33

(k) Petitioner 's verified Application for Summary Judgment dated August 14, 1984;

34

and

(l) Letter dated November 6, 1985 from petitioner's Malaysian Counsel to private respondent's counsel in 35 Malaysia. Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell upon the party who disputes its validity, herein private respondent, to prove otherwise. Private respondent failed to sufficiently discharge the burden that fell upon it - to prove by clear and convincing evidence the grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment, namely, (a) that jurisdiction was not acquired by the Malaysian Court over the person of private respondent due to alleged improper service of summons upon private respondent and the alleged lack of authority of its counsel to appear and represent private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud and clear mistake of fact or law; and (c) not only were the requisites for enforcement or recognition allegedly not complied with but also that the Malaysian judgment is allegedly contrary to the Constitutional prescription that the "every 36 decision must state the facts and law on which it is based." Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo. Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive Secretary and a member of the staff of the Corporate Secretariat Section of the Corporate Legal Division, of private respondent, both of whom failed to shed light and amplify its defense or claim for non-enforcement of the foreign judgment against it. Mr. Calupitan's testimony centered on the following: that from January to December 1982 he was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for road construction under the joint venture 37 of private respondent and Asiavest Holdings; that under the joint venture, Asiavest Holdings would handle the financial aspect of the project, which is fifty-one percent (51 %) while private respondent would handle the technical 38 aspect of the project, or forty-nine percent (49%); and, that Cora Deala was not authorized to receive summons for 39 and in behalf of the private respondent. Ms. Abelardo's testimony, on the other hand, focused on the following: that there was no board resolution authorizing Allen and Gledhill to admit all the claims of petitioner in the suit brought 40 before the High Court of Malaya, though on cross-examination she admitted that Allen and Gledhill were the 41 retained lawyers of private respondent in Malaysia. The foregoing reasons or grounds relied upon by private respondent in preventing enforcement and recognition of the Malaysian judgment primarily refer to matters of remedy and procedure taken by the Malaysian High Court relative to the suit for collection initiated by petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was 42 rendered differs from that of the courts of the country in which the judgment is relied on. Ultimately, matters of

remedy and procedure such as those relating to the service of summons or court process upon the defendant, the authority of counsel to appear and represent a defendant and the formal requirements in a decision are governed by 43 the lex fori or the internal law of the forum, i.e., the law of Malaysia in this case. In this case, it is the procedural law of Malaysia where the judgment was rendered that determines the validity of the service of court process on private respondent as well as other matters raised by it. As to what the Malaysian procedural law is, remains 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. Sections 24 and 25 of Rule 132 of the Revised 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 private respondent to present evidence as to what that Malaysian procedural law is and to show that under it, the assailed service of summons upon a financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of validity and regularity of service of summons and the decision thereafter rendered by 44 the High Court of Malaya must stand. On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not only did the private respondent's witnesses admit that the said law firm of Allen and Gledhill were its counsels in its 45 transactions in Malaysia, but of greater significance is the fact that petitioner offered in evidence relevant Malaysian 46 jurisprudence to the effect that (a) it is not necessary under Malaysian law for counsel appearing before the Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, (b) that counsel appearing before the Malaysian High Court has full authority to compromise the suit, and (c) that counsel appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine 47 law to appear and compromise judgments on behalf of their clients before said court. Furthermore, there is no basis for or truth to the appellate court's conclusion that the conditional appearance of private respondent's counsel who was allegedly not authorized to appear and represent, cannot be considered as voluntary submission to the jurisdiction of the High Court of Malaya, inasmuch as said conditional appearance was not premised on the alleged lack of authority of said counsel but the conditional appearance was entered to question the regularity of the service of the writ of summons. Such conditional appearance was in fact subsequently withdrawn 48 when counsel realized that the writ was properly served. On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of the High Court of Malaya, no clear evidence of the same was adduced or shown. The facts which the trial court found "intriguing" amounted to mere conjectures and specious observations. The trial court's finding on the absence of judgment against Asiavest-CDCP Sdn. Bhd. is contradicted by evidence on record that recovery was also sought against 49 Asiavest-CDCP Sdn. Bhd. but the same was found insolvent. Furthermore, even when the foreign judgment is based on the drafts prepared by counsel for the successful party, such is not per se indicative of collusion or fraud. Fraud to hinder the enforcement within the jurisdiction of a foreign judgment must be extrinsic, i. e., fraud based on 50 facts not controverted or resolved in the case where judgment is rendered, or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he 51 has a meritorious defense. Intrinsic fraud is one which goes to the very existence of the cause of action is deemed 52 already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment. Evidence is wanting on the alleged extrinsic fraud. Hence, such unsubstantiated allegation cannot give rise to liability therein. Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of the absence of any statement of facts and law upon which the award in favor of the petitioner was based. As aforestated, the lex fori or 53 the internal law of the forum governs matters of remedy and procedure. Considering that under the procedural rules of the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and law upon which the judgment is based, then the same must be accorded respect and the courts in the jurisdiction cannot invalidate the judgment of the foreign court simply because our rules provide otherwise. All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such foreign judgment, being the party challenging the judgment rendered by the High Court of Malaya. But instead of doing so, private respondent merely argued, to which the trial court agreed, that the burden lay upon petitioner to prove the validity of the money judgment. Such is clearly erroneous and would render meaningless the presumption of validity accorded a 54 foreign judgment were the party seeking to enforce it be required to first establish its validity. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated May 19,1993 in CA-G.R CY No. 35871 sustaining the Decision dated October 14, 1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya

in Kuala Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby rendered ORDERING private respondent Philippine National Construction Corporation to pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts adjudged in the said foreign Judgment, subject of the said case. Costs against the private respondent. SO ORDERED. Bellosillo, Mendoza, and Buena, JJ. , concur.

Footnotes:
1

Penned by Associate Justices Segundino G. Chua and concurred in by Associate Justice Serafin V.C. Guingona and Ramon Mabutas, Jr., Sixteenth Division, in C-A G.R. CV No. 35871, Rollo, pp. 31-37.
2

Penned by Judge Benjamin V. Pelayo, Records, pp. 444-454. Docketed as Suit No. C638 of 1983. Records, pp. 126-127. Records, pp. 129-130. TSN, March 5, 1990, p. 31. Records, pp. 1-4. Records, pp. 17-25. Order dated February 8, 1989, Records, p. 49. Records, pp. 69-72. Records, pp. 73-74. Rollo, pp. 13-14. Cucullu v. Louisiana Insurance Co. (La) 5 Mart NS 464, Am Dec 199.

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30 Am Jur 2d Enforcement and Execution of Judgments 779; Hilton v. Guyot, 159 US 113, 40 L Ed 95, 16 S Ct 139.
15

Private International Law, Jovito R. Salonga, 1995 Edition, p. 543; 30 Am Jur 2d Executions and Enforcement of Judgments 780; Southern v. Southern, 43 NC App 159, 258 SE2d 422.
l6

Now Sec. 48, Rule 39 of the 1997 Rules of Civil Procedure. Sec. 48. Effect of foreign judgments or final orders.-The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: xxx xxx xxx

(b ) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title.1wphi1.nt In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
17

TSN, March 5, 1990, p. 3. TSN, March 5, 1990, p. 4. T5N, March 5, 1990, p. 4. TSNs, March 5, 1990, pp. 21-22; September 4, 1990, pp. 6-7. TSN, March 5, 1990, pp. 10, 23-26. TSN, March 5, 1990, pp. 10-11, 26-28. TSN, March 5, 1990, pp. 19-20, 28-30, 37 Exhibits "A", "A-1" and "A-2", Records, pp. 125-127. Exhibits "B", "B-1" and "B-2", Records, pp. 128-130. Exhibits "C", "C-1" and "C-2", Records, pp. 131-133. Exhibits "D", "D-1" and "D-2", Records, pp. 134.136. Exhibits "E", "E-1", "E-2", "E-4", "E-5", "E-6", "E-7" and "E-8", Records, pp. 137-144. Exhibits "F" and "F-1", Records, pp. 147-148. Exhibits "G", "G-1" and "G-2", Records, pp. 149-159. Exhibits "H" and "H-1", Records, pp. 160. Exhibits "I" and "I-1 " and "I-2", Records, pp. 162-167. Exhibits "J", "J-1" to "J-4", Records, pp. 168-173. Exhibits "K" and "K-1 ", Records, pp. 174- 179. Exhibit "L", Records, p. 217. Citing Article VIII, Section 14 of the 1987 Constitution. TSNs, July 30, 1990, pp. 4-5; September 4, 1990, p. 3. TSN, July 30, 1990, pp. 5-6, 8. TSN, July 30, 1990, p. 15.

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TSN, October 5, 1990, pp. 6-10 TSN, October 5, 1990, p. 11. 30 Am Jur Executions and Enforcement of Judgments 843; In re Osborne, 205 NC 716, 172 SE 491. 0il and Natural Gas Commission v. Court of Appeals. 293 SCRA 26, 45 [19981]. .Northwest Orient Airlines, Inc. v. Court of Appeals, 241 SCRA 192, 199 [1995]. TSNs, September 4, 1990, p. 11; October 5, 1990, pp. 11-12.

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Matthews v. Munster XX QBD 141, 1887, Great Atlantic Insurance Co. v. Home Insurance Co. and others, 2 ALR 485 [1981]; Waugh and others v. H.B. Clifford and Sons Ltd. and others, 1 ALR 1095 [1982]; Exhibits "M", "M-1" and "M-2", Records, pp. 355-385.
47

Also Sovereign General Insurance Sdn. Bhd.v. Koh Tian Bee, 1 MLJ 304 (1988), Exhibit "M-3", Records, pp. 386-389.
48

TSN, March 5, 1990, pp. 10, 23-26. TSN, March 5, 1990, pp. 22-25; Exhibits "G", and "G-2", Records, pp. 149-159. Labayen v. Talisay-Silay Mining Co., 40 O.G. 1 2nd Supp. No. 3, p. 109.

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30 Am Jur 2d Executions and Enforcement of Judgments 840; Pentz v. Kuppinger (2nd Dist) 31 Cal App 3d 590, 107 Cal Rptr 540.
52

Private International Law, Jovito R. Salonga, 1995 Edition, p. 558; Beale, Conflict of Law, Vol. II, p. 1402; Abouloff v. Oppenwhimer and Another [1852], 58 L.J. Q.B. 1.
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Northwest Orient Airlines, Inc. v. Court of Appeals, supra. Asiavest Limited v. Court of Appeals, 296 SCRA 539, 549 [1998]

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