G.R. No.

102223 August 22, 1996

COMMUNICATION MATERIALS AND DESIGN, INC.,
ASPAC MULTI-TRADE, INC., (formerly ASPAC-ITEC
PHILIPPINES, INC.) and FRANCISCO S.
AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC.,
and ITEC, INC., respondents.

Agreement". 1 Pursuant to the contract, ITEC engaged ASPAC

as its "exclusive representative" in the Philippines for the sale
of ITEC's products, in consideration of which, ASPAC was paid
a stipulated commission. The agreement was signed by G.A.
Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC
respectively, for and in behalf of their companies. 2 The said
agreement was initially for a term of twenty-four months.
After the lapse of the agreed period, the agreement was
renewed for another twenty-four months.

TORRES, JR., J.:p

Business Corporations, according to Lord Coke, "have no
souls." They do business peddling goods, wares or even
services across national boundaries in "souless forms" in
quest for profits albeit at times, unwelcomed in these strange
lands venturing into uncertain markets and, the risk of
dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the
Decision of the Court of Appeals on June 7, 1991, sustaining
the RTC Order dated February 22, 1991, denying the
petitioners' Motion to Dismiss, and directing the issuance of a
writ of preliminary injunction, and its companion Resolution
of October 9, 1991, denying the petitioners' Motion for
Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC.,
(CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for
brevity) are both domestic corporations, while petitioner
Francisco S. Aguirre is their President and majority
stockholder. Private Respondents ITEC, INC. and/or ITEC,
INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly
organized and existing under the laws of the State of
Alabama, United States of America. There is no dispute that
ITEC is a foreign corporation not licensed to do business in
the Philippines.
On August 14, 1987, ITEC entered into a contract with
petitioner
ASPAC
referred
to
as
"Representative

Through a "License Agreement" 3 entered into by the

same parties on November 10, 1988, ASPAC was able
to incorporate and use the name "ITEC" in its own
name. Thus , ASPAC Multi-Trade, Inc. became legally
and publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic
products, exported by ITEC, to their sole customer, the
Philippine Long Distance Telephone Company, (PLDT,
for brevity).
To facilitate their transactions, ASPAC, dealing under its
new appellation, and PLDT executed a document
entitled "PLDT-ASPAC/ITEC PROTOCOL" 4 which defined
the project details for the supply of ITEC's Interface
Equipment in connection with the Fifth Expansion
Program of PLDT.
One year into the second term of the parties'
Representative Agreement, ITEC decided to terminate
the same, because petitioner ASPAC allegedly violated
its contractual commitment as stipulated in their
agreements. 5
ITEC charges the petitioners and another Philippine
Corporation, DIGITAL BASE COMMUNICATIONS, INC.
(DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information
of ITEC's products specifications to develop their own
line of equipment and product support, which are

similar, if not identical to ITEC's own, and offering

them to ITEC's former customer.
On January 31, 1991, the complaint 6 in Civil Case No.
91-294, was filed with the Regional Trial Court of
Makati, Branch 134 by ITEC, INC. Plaintiff sought to
enjoin, first, preliminarily and then, after trial,
permanently; (1) defendants DIGITAL, CMDI, and
Francisco Aguirre and their agents and business
associates, to cease and desist from selling or
attempting to sell to PLDT and to any other party,
products which have been copied or manufactured "in
like manner, similar or identical to the products, wares
and equipment of plaintiff," and (2) defendant ASPAC,
to cease and desist from using in its corporate name,
letter heads, envelopes, sign boards and business
dealings, plaintiff's trademark, internationally known
as ITEC; and the recovery from defendants in solidum,
damages of at least P500,000.00, attorney's fees and
litigation expenses.
In due time, defendants filed a motion to dismiss 7 the
complaint on the following grounds:

After conducting hearings on the prayer for preliminary

injunction, the court a quo on February 22, 1991,
issued its Order: 10 (1) denying the motion to dismiss
for being devoid of legal merit with a rejection of both
grounds relied upon by the defendants in their motion
to dismiss, and (2) directing the issuance of a writ of
preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case
to the respondent Court of Appeals on a Petition
forCertiorari and Prohibition 11 under Rule 65 of the
Revised Rules of Court, assailing and seeking the
nullification and the setting aside of the Order and the
Writ of Preliminary Injunction issued by the Regional
Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the
facts of record, to disagree with the (lower
court's) ruling. We therefore are unable to find in
respondent Judge's issuance of said writ the
grave abuse of discretion ascribed thereto by
the petitioners.

(1) That plaintiff has no legal capacity to sue as it is a

foreign corporation doing business in the Philippines
without the required BOI authority and SEC license,
and (2) that plaintiff is simply engaged in forum
shopping which justifies the application against it of
the principle of "forum non conveniens".

In fine, We find that the petition prima

facie does not show that Certiorari lies in the
present case and therefore, the petition does
not deserve to be given due course.

On February 8, 1991, the complaint was amended by

virtue of which ITEC INTERNATIONAL, INC. was
substituted as plaintiff instead of ITEC, INC. 8

WHEREFORE, the present petition should be, as

it is hereby, denied due course and accordingly,
is hereby dismissed. Costs against the
petitioners.

In their Supplemental Motion to Dismiss, 9 defendants

took note of the amendment of the complaint and
asked the court to consider in toto their motion to
dismiss and their supplemental motion as their answer
to the amended complaint.

SO ORDERED. 12
Petitioners filed a motion for reconsideration 13 on June
7, 1991, which was likewise denied by the respondent
court.

WHEREFORE,
the
present
motion
for
reconsideration should be, as it is hereby,
denied for lack of merit. For the same reason,
the
motion
to
have
the
motion
for
reconsideration set for oral argument likewise
should be and is hereby denied.
SO ORDERED. 14
Petitioners are now before us via Petition for Review
on Certiorari 15 under Rule 45 of the Revised Rules of
Court.
It is the petitioners' submission that private
respondents are foreign corporations actually doing
business in the Philippines without the requisite
authority and license from the Board of Investments
and the Securities and Exchange Commission, and
thus, disqualified from instituting the present action in
our courts. It is their contention that the provisions of
the Representative Agreement, petitioner ASPAC
executed with private respondent ITEC, are similarly
"highly restrictive" in nature as those found in the
agreements which confronted the Court in the case
of Top-Weld
Manufacturing, Inc. vs. ECED
S.A. et
al., 16 as to reduce petitioner ASPAC to a mere conduit
or extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign
corporations are doing business in the Philippines
because when the respondents entered into the
disputed contracts with the petitioner, they were
carrying out the purposes for which they were
created, i.e., to manufacture and market welding
products and equipment. The terms and conditions of
the contracts as well as the respondents' conduct
indicate that they established within our country a
continuous business, and not merely one of a
temporary character. The respondents could be
exempted from the requirements of Republic Act 5455
if the petitioner is an independent entity which buys

and distributes products not only of the petitioner, but

also of other manufacturers or transacts business in its
name and for its account and not in the name or for
the account of the foreign principal. A reading of the
agreements between the petitioner and the
respondents shows that they are highly restrictive in
nature, thus making the petitioner a mere conduit or
extension of the respondents.
It is alleged that certain provisions of the
"Representative Agreement" executed by the parties
are similar to those found in the License Agreement of
the parties in the Top-Weld case which were considered
as "highly restrictive" by this Court. The provisions in
point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the
purchase price set by ITEC from time to time.
Unless otherwise expressly agreed to in writing
by ITEC the purchase price is net to ITEC and
does not include any transportation charges,
import charges or taxes into or within the
Territory. All orders from customers are subject
to formal acceptance by ITEC at its Huntsville,
Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the
Territory any product which competes with an
existing ITEC product or any product which ITEC
has under active development.

3.1.2. Actively solicit all potential customers

within the Territory in a systematic and business
like manner.
3.1.3. Inform ITEC of all request for proposals,
requests for bids, invitations to bid and the like
within the Territory.
3.1.4. Attain the Annual Sales Goal for the
Territory established by ITEC. The Sales Goals
for the first 24 months is set forth on
Attachment two (2) hereto. The Sales Goal for
additional twelve month periods, if any, shall be
sent to the Sales Agent by ITEC at the beginning
of each period. These Sales Goals shall be
incorporated into this Agreement and made a
part hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement
REPRESENTATIVE is authorized to solicit sales
within the Territory on ITEC's behalf but is
authorized to bind ITEC only in its capacity as
Representative and no other, and then only to
specific customers and on terms and conditions
expressly authorized by ITEC in writing. 17
Aside from the abovestated provisions, petitioners
point out the following matters of record, which
allegedly bear witness to the respondents' activities
within the Philippines in pursuit of their business
dealings:
a. While petitioner ASPAC was the authorized
exclusive representative for three (3) years, it
solicited from and closed several sales for and

on behalf of private respondents as to their

products only and no other, to PLDT, worth no
less than US $ 15 Million (p. 20, tsn, Feb. 18,
1991);
b. Contract No. 1 (Exhibit for Petitioners) which
covered these sales and identified by private
respondents' sole witness, Mr. Clarence Long, is
not in the name of petitioner ASPAC as such
representative, but in the name of private
respondent ITEC, INC. (p. 20, tsn, Feb. 18,
1991);
c. The document denominated as "PLDTASPAC/ITEC PROTOCOL (Annex C of the original
and amended complaints) which defined the
responsibilities of the parties thereto as to the
supply, installation and maintenance of the ITEC
equipment sold under said Contract No. 1 is, as
its very title indicates, in the names jointly of
the petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of
US $ 15 Million, private respondent ITEC, Inc.
issued in its letter head, a Confirmation of
payment dated November 13, 1989 and its
Invoice dated November 22, 1989 (Annexes 1
and 2 of the Motion to Dismiss and marked as
Exhibits 2 and 3 for the petitioners), both of
which were identified by private respondent's
sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991). 18
Petitioners contend that the above acts or activities
belie the supposed independence of petitioner ASPAC
from private respondents. "The unrebutted evidence
on record below for the petitioners likewise reveal the
continuous character of doing business in the
Philippines by private respondents based on the
standards laid down by this Court in Wang
Laboratories, Inc. vs. Hon. Rafael
T . Mendoza,
et

al. 19 and again in TOP-WELD. (supra)" It thus appears

that as the respondent Court of Appeals and the trial
court's failure to give credence on the grounds relied
upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion
amounting to an excess of jurisdiction of said courts.
Petitioners likewise
argue
that
since
private
respondents have no capacity to bring suit here, the
Philippines is not the "most convenient forum"
because the trial court is devoid of any power to
enforce its orders issued or decisions rendered in a
case that could not have been commenced to begin
with, such that in insisting to assume and exercise
jurisdiction over the case below, the trial court had
gravely abused its discretion and even actually
exceeded its jurisdiction.
As against petitioner's insistence that private respondent is
"doing business" in the Philippines, the latter maintains that
it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f)
(2) of the Rules and Regulations Implementing the Omnibus
Investments Code of 1987, the following:
(1) A foreign firm is deemed not engaged in
business in the Philippines if it transacts
business through middlemen, acting in their
own names, such as indebtors, commercial
bookers commercial merchants.
(2) A foreign corporation is deemed not "doing
business" if its representative domiciled in the
Philippines has an independent status in that it
transacts business in its name and for its
account. 20
Private respondent argues that a scrutiny of its
Representative Agreement with the Petitioners will
show that although ASPAC
was named
as

representative of ITEC., ASPAC actually acted in its

own name and for its own account. The following
provisions are particularly mentioned:
3.1.7.1. In the event that REPRESENTATIVE
imports directly from ITEC, REPRESENTATIVE will
pay for its own account; all customs duties and
import fees imposed on any ITEC products; all
import expediting or handling charges and
expenses imposed on ITEC products; and any
stamp tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for
acting as representative under this Agreement,
REPRESENTATIVE
shall
receive
a
sales
commission equivalent to a per centum of the
FOB value of all ITEC equipment sold to
customers within the territory as a direct result
of REPRESENTATIVE's sales efforts. 21
More importantly, private respondent charges ASPAC
of admitting its independence from ITEC by entering
and ascribing to provision No. 6 of the Representative
Agreement.
6.0 Representative as Independent Contractor
6.1. When performing any of its duties under
this Agreement, REPRESENTATIVE shall act as an
independent contractor and not as an
employee, worker, laborer, partner, joint
venturer of ITEC as these terms are defined by
the laws, regulations, decrees or the like of any
jurisdiction, including the jurisdiction of the
United States, the state of Alabama and the
Territory. 22
Although it admits that the Representative Agreement
contains provisions which both support and belie the

independence of ASPAC, private respondent echoes

the respondent court's finding that the lower court did
not commit grave abuse of discretion nor acted in
excess of jurisdiction when it found that the ground
relied upon by the petitioners in their motion to
dismiss does not appear to be indubitable. 23
The issues before us now are whether or not private
respondent ITEC is an unlicensed corporation doing
business in the Philippines, and if it is, whether or not
this fact bars it from invoking the injunctive authority
of our courts.
Considering the above, it is necessary to state what is
meant by "doing business" in the Philippines. Section
133 of the Corporation Code, provides that "No foreign
corporation, transacting business in the Philippines
without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit
or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or
proceeded against before Philippine Courts or
administrative tribunals on any valid cause of action
recognized under Philippine laws." 24
Generally, a "foreign corporation" has no legal
existence within the state in which it is foreign. This
proceeds from the principle that juridical existence of a
corporation is confined within the territory of the state
under whose laws it was incorporated and organized,
and it has no legal status beyond such territory. Such
foreign corporation may be excluded by any other
state from doing business within its limits, or
conditions may be imposed on the exercise of such
privileges. 25 Before a foreign corporation can transact
business in this country, it must first obtain a license
to transact business in the Philippines, and a
certificate from the appropriate government agency. If
it transacts business in the Philippines without such a
license, it shall not be permitted to maintain or
intervene in any action, suit, or proceeding in any

court or administrative agency of the Philippines, but it

may be sued on any valid cause of action recognized
under Philippine laws. 26
In a long line of decisions, this Court has not altogether
prohibited foreign corporation not licensed to do
business in the Philippines from suing or maintaining
an action in Philippine Courts. What it seeks to prevent
is a foreign corporation doing business in the
Philippines without a licensed from gaining access to
Philippine Courts. 27
The purpose of the law in requiring that foreign
corporations doing business in the Philippines be
licensed to do so and that they appoint an agent for
service of process is to subject the foreign corporation
doing business in the Philippines to the jurisdiction of
its courts. The object is not to prevent the foreign
corporation from performing single acts, but to prevent
it from acquiring a domicile for the purpose of business
without taking steps necessary to render it amenable
to suit in the local courts. 28 The implication of the law
is that it was never the purpose of the legislature to
exclude a foreign corporation which happens to obtain
an isolated order for business from the Philippines, and
thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations. 29
There is no exact rule or governing principle as to what
constitutes "doing" or "engaging" or "transacting"
business. Indeed, such case must be judged in the
light of its peculiar circumstances, upon its peculiar
facts and upon the language of the statute applicable.
The true test, however, seems to be whether the
foreign corporation is continuing the body or
substance of the business or enterprise for which it
was organized. 30
Article 44 of the Omnibus Investments Code of 1987
defines the phrase to include:

soliciting orders, purchases, service contracts,

opening offices, whether called "liaison" offices
or branches; appointing representatives or
distributors who are domiciled in the Philippines
or who in any calendar year stay in the
Philippines for a period or periods totalling one
hundred
eighty
(180)
days
or
more;
participating in the management, supervision or
control of any domestic business firm, entity or
corporation in the Philippines, and any other act
or acts that imply a continuity or commercial
dealings or arrangements and contemplate to
that extent the performance of acts or works, or
the exercise of some of the functions normally
incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of
the business organization.
Thus, a foreign corporation with a settling agent in the
Philippines which issued twelve marine policies
covering different shipments to the Philippines 31 and a
foreign corporation which had been collecting
premiums on outstanding policies 32 were regarded as
doing business here.
The same rule was observed relating to a foreign
corporation with an "exclusive distributing agent" in
the Philippines, and which has been selling its products
here since 1929, 33 and a foreign corporation engaged
in the business of manufacturing and selling
computers worldwide, and had installed at least 26
different products in several corporations in the
Philippines, and allowed its registered logo and
trademark to be used and made it known that there
exists a designated distributor in the Philippines. 34
In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was
held that the uninterrupted performance by a foreign
corporation of acts pursuant to its primary purposes
and functions as a regional area headquarters for its

home office, qualifies such corporation as one doing

business in the country.
These foregoing instances should be distinguished
from a single or isolated transaction or occasional,
incidental, or casual transactions, which do not come
within the meaning of the law, 36 for in such case, the
foreign corporation is deemed not engaged in business
in the Philippines.
Where a single act or transaction, however, is not
merely incidental or casual but indicates the foreign
corporation's intention to do other business in the
Philippines, said single act or transaction constitutes
"doing" or "engaging in" or "transacting" business in
the Philippines. 37
In determining whether a corporation does business in
the Philippines or not, aside from their activities within
the forum, reference may be made to the contractual
agreements entered into by it with other entities in the
country. Thus, in the Top-Weld case (supra), the foreign
corporation's LICENSE AND TECHNICAL AGREEMENT
and DISTRIBUTOR AGREEMENT with their local
contacts were made the basis of their being regarded
by this Tribunal as corporations doing business in the
country. Likewise, in Merill Lynch Futures, Inc. vs. Court
of Appeals, etc. 38 the FUTURES CONTRACT entered
into by the petitioner foreign corporation weighed
heavily in the court's ruling.
With the abovestated precedents in mind, we are
persuaded to conclude that private respondent had
been "engaged in" or "doing business" in the
Philippines for some time now. This is the inevitable
result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various
business contacts in the country, particularly ASPAC
and Telephone Equipment Sales and Services, Inc.
(TESSI, for brevity). The latter is a local electronics firm
engaged by ITEC to be its local technical

representative, and to create a service center for ITEC

products sold locally. Its arrangements, with these
entities indicate convincingly ITEC's purpose to bring
about the situation among its customers and the
general public that they are dealing directly with ITEC,
and that ITEC is actively engaging in business in the
country.
In its Master Service Agreement 39 with TESSI, private
respondent required its local technical representative
to provide the employees of the technical and service
center with ITEC identification cards and business
cards, and to correspond only on ITEC, Inc., letterhead.
TESSI personnel are instructed to answer the
telephone with "ITEC Technical Assistance Center.",
such telephone being listed in the telephone book
under the heading of ITEC Technical Assistance Center,
and all calls being recorded and forwarded to ITEC on a
weekly basis.
What is more, TESSI was obliged to provide ITEC with a
monthly report detailing the failure and repair of ITEC
products, and to requisition monthly the materials and
components needed to replace stock consumed in the
warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC
and the respondents shows that there are provisions
which are highly restrictive in nature, such as to
reduce petitioner ASPAC to a mere extension or
instrument of the private respondent.
The "No Competing Product" provision of the
Representative Agreement between ITEC and ASPAC
provides: "The Representative shall not represent or
offer for sale within the Territory any product which
competes with an existing ITEC product or any product
which ITEC has under active development." Likewise
pertinent is the following provision: "When acting
under this Agreement, REPRESENTATIVE is authorized
to solicit sales within the Territory on ITEC's behalf but

is authorized to bind ITEC only in its capacity as

Representative and no other, and then only to specific
customers and on terms and conditions expressly
authorized by ITEC in writing."
When ITEC entered into the disputed contracts with
ASPAC and TESSI, they were carrying out the purposes
for which it was created, i.e., to market electronics and
communications products. The terms and conditions of
the contracts as well as ITEC's conduct indicate that
they established within our country a continuous
business, and not merely one of a temporary
character. 40
Notwithstanding such finding that ITEC is doing
business in the country, petitioner is nonetheless
estopped from raising this fact to bar ITEC from
instituting this injunction case against it.
A foreign corporation doing business in the Philippines
may sue in Philippine Courts although not authorized
to do business here against a Philippine citizen or
entity who had contracted with and benefited by said
corporation. 41 To put it in another way, a party is
estopped to challenge the personality of a corporation
after having acknowledged the same by entering into
a contract with it. And the doctrine of estoppel to deny
corporate existence applies to a foreign as well as to
domestic corporations. 42 One who has dealt with a
corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity:
The principle will be applied to prevent a person
contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes
chiefly in cases where such person has received the
benefits of the contract. 43
The rule is deeply rooted in the time-honored axiom
of Commodum ex injuria sua non habere debet no
person ought to derive any advantage of his own
wrong. This is as it should be for as mandated by law,

"every person must in the exercise of his rights and in

the performance of his duties, act with justice, give
everyone his due, and observe honesty and good
faith." 44
Concededly, corporations act through agents, like
directors and officers. Corporate dealings must be
characterized by utmost good faith and fairness.
Corporations cannot just feign ignorance of the legal
rules as in most cases, they are manned by
sophisticated officers with tried management skills and
legal experts with practiced eye on legal problems.
Each party to a corporate transaction is expected to
act with utmost candor and fairness and, thereby allow
a reasonable proportion between benefits and
expected burdens. This is a norm which should be
observed where one or the other is a foreign entity
venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing
law at the time they enter into a contract and at the
time it is to become operative. (Twiehaus v. Rosner,
245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98).
Moreover, a person is presumed to be more
knowledgeable about his own state law than his alien
or foreign contemporary. In this case, the record shows
that, at least, petitioner had actual knowledge of the
applicability of R.A. No. 5455 at the time the contract
was executed and at all times thereafter. This
conclusion is compelled by the fact that the same
statute is now being propounded by the petitioner to
bolster its claim. We, therefore sustain the appellate
court's view that "it was incumbent upon TOP-WELD to
know whether or not IRTI and ECED were properly
authorized to engage in business in the Philippines
when
they
entered
into
the
licensing
and
distributorship agreements." The very purpose of the
law was circumvented and evaded when the petitioner
entered into said agreements despite the prohibition of

R.A. No. 5455. The parties in this case being equally

guilty of violating R.A. No. 5455, they are in pari
delicto, in which case it follows as a consequence that
petitioner is not entitled to the relief prayed for in this
case.
The doctrine of lack of capacity to sue based on the
failure to acquire a local license is based on
considerations of sound public policy. The license
requirement was imposed to subject the foreign
corporation doing business in the Philippines to the
jurisdiction of its courts. It was never intended to favor
domestic corporations who enter into solitary
transactions with unwary foreign firms and then
repudiate their obligations simply because the latter
are not licensed to do business in this country. 45
In Antam Consolidated Inc. vs. Court of Appeals, et
al. 46 we expressed our chagrin over this commonly
used scheme of defaulting local companies which are
being sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke the
lack of capacity to sue of such foreign companies.
Obviously, the same ploy is resorted to by ASPAC to
prevent the injunctive action filed by ITEC to enjoin
petitioner from using knowledge possibly acquired in
violation of fiduciary arrangements between the
parties.
By entering into the "Representative Agreement" with
ITEC, Petitioner is charged with knowledge that ITEC
was not licensed to engage in business activities in the
country, and is thus estopped from raising in defense
such incapacity of ITEC, having chosen to ignore or
even presumptively take advantage of the same.
In Top-Weld, we ruled that a foreign corporation may
be exempted from the license requirement in order to
institute an action in our courts if its representative in
the country maintained an independent status during
the existence of the disputed contract. Petitioner is

deemed to have acceded to such independent

character when it entered into the Representative
Agreement with ITEC, particularly, provision 6.2
(supra).
Petitioner's insistence on the dismissal of this action
due to the application, or non application, of the
private
international
law
rule
of
forum non
conveniens defies well-settled rules of fair play.
According to petitioner, the Philippine Court has no
venue to apply its discretion whether to give
cognizance or not to the present action, because it has
not acquired jurisdiction over the person of the plaintiff
in the case, the latter allegedly having no personality
to sue before Philippine Courts. This argument is
misplaced because the court has already acquired
jurisdiction over the plaintiff in the suit, by virtue of his
filing the original complaint. And as we have already
observed, petitioner is not at liberty to question
plaintiff's standing to sue, having already acceded to
the same by virtue of its entry into the Representative
Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the
Philippine Court, based on the facts of the case,
whether to give due course to the suit or dismiss it, on
the principle of forum non convenience. 47 Hence, the
Philippine Court may refuse to assume jurisdiction in
spite of its having acquired jurisdiction. Conversely,
the court may assume jurisdiction over the case if it
chooses to do so; provided, that the following
requisites are met: 1) That the Philippine Court is one
to which the parties may conveniently resort to; 2)
That the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and, 3)
That the Philippine Court has or is likely to have power
to enforce its decision. 48
The aforesaid requirements having been met, and in
view of the court's disposition to give due course to
the questioned action, the matter of the present forum

not being the "most convenient" as a ground for the

suit's dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant
Petition is hereby DISMISSED. The decision of the Court
of Appeals dated June 7, 1991, upholding the RTC
Order dated February 22, 1991, denying the
petitioners' Motion to Dismiss, and ordering the
issuance of the Writ of Preliminary Injunction, is hereby
affirmed in toto.
SO ORDERED.

G.R. No. 113074 January 22, 1997

ALFRED HAHN, petitioner,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE
AKTIENGSELLSCHAFT (BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of
Appeals dismissing a complaint for specific performance

which petitioner had filed against private respondent on the

ground that the Regional Trial Court of Quezon City did not
acquire jurisdiction over private respondent, a nonresident
foreign corporation, and of the appellate court's order
denying petitioner's motion for reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business
under the name and style "Hahn-Manila." On the other hand,
private
respondent
Bayerische
Motoren
Werke
Aktiengesellschaft (BMW) is a nonresident foreign corporation
existing under the laws of the former Federal Republic of
Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private
respondent a "Deed of Assignment with Special Power of
Attorney," which reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and
holder of the BMW trademark and device in the
Philippines which ASSIGNOR uses and has been using
on the products manufactured by ASSIGNEE, and for
which ASSIGNOR is the authorized exclusive Dealer of
the ASSIGNEE in the Philippines, the same being
evidenced by certificate of registration issued by the
Director of Patents on 12 December 1963 and is
referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and
consequently record said transfer of the said BMW
trademark and device in favor of the ASSIGNEE herein
with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in
consideration of the stipulations hereunder stated, the
ASSIGNOR hereby affirms the said assignment and
transfer in favor of the ASSIGNEE under the following
terms and conditions:

1. The ASSIGNEE shall take appropriate steps against

any user other than ASSIGNOR or infringer of the BMW
trademark in the Philippines; for such purpose, the
ASSIGNOR shall inform the ASSIGNEE immediately of
any such use or infringement of the said trademark
which comes to his knowledge and upon such
information the ASSIGNOR shall automatically act as
Attorney-In-Fact of the ASSIGNEE for such case, with
full power, authority and responsibility to prosecute
unilaterally or in concert with ASSIGNEE, any such
infringer of the subject mark and for purposes hereof
the ASSIGNOR is hereby named and constituted as
ASSIGNEE's Attorney-In-Fact, but any such suit without
ASSIGNEE's
consent
will
exclusively
be
the
responsibility and for the account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall
continue business relations as has been usual in the
past without a formal contract, and for that purpose,
the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the
only limitation that, for the present, in view of
ASSIGNEE's limited production, the latter shall not be
able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business
relations as has been usual in the past without a formal
contract." But on February 16, 1993, in a meeting with a
BMW representative and the president of Columbia Motors
Corporation (CMC), Jose Alvarez, petitioner was informed that
BMW was arranging to grant the exclusive dealership of BMW
cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner
received confirmation of the information from BMW which, in
a letter, expressed dissatisfaction with various aspects of
petitioner's business, mentioning among other things, decline
in sales, deteriorating services, and inadequate showroom
and warehouse facilities, and petitioner's alleged failure to
comply with the standards for an exclusive BMW
dealer. 2 Nonetheless, BMW expressed willingness to continue
business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this

was not acceptable to petitioner, BMW would have no

alternative but to terminate petitioner's exclusive dealership
effective June 30, 1993.
Petitioner protested, claiming that the termination of his
exclusive dealership would be a breach of the Deed of
Assignment. 3 Hahn insisted that as long as the assignment of
its trademark and device subsisted, he remained BMW's
exclusive dealer in the Philippines because the assignment
was made in consideration of the exclusive dealership. In the
same letter petitioner explained that the decline in sales was
due to lower prices offered for BMW cars in the United States
and the fact that few customers returned for repairs and
servicing because of the durability of BMW parts and the
efficiency of petitioner's service.
Because of Hahn's insistence on the former business relation,
BMW withdrew on March 26, 1993 its offer of a "standard
importer contract" and terminated the exclusive dealer
relationship effective June 30, 1993. 4 At a conference of
BMW Regional Importers held on April 26, 1993 in Singapore,
Hahn was surprised to find Alvarez among those invited from
the Asian region. On April 29, 1993, BMW proposed that Hahn
and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he
filed a complaint for specific performance and damages
against BMW to compel it to continue the exclusive
dealership. Later he filed an amended complaint to include
an application for temporary restraining order and for writs of
preliminary, mandatory and prohibitory injunction to enjoin
BMW from terminating his exclusive dealership. Hahn's
amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing
business in the Philippines with principal offices at
Munich, Germany. It may be served with summons and
other court processes through the Secretary of the
Department of Trade and Industry of the Philippines. . .
.

xxx xxx xxx

5. On March 7, 1967, Plaintiff executed in favor of
defendant BMW a Deed of Assignment with Special
Power of Attorney covering the trademark and in
consideration thereof, under its first whereas clause,
Plaintiff was duly acknowledged as the "exclusive
Dealer of the Assignee in the Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was
first used by the Plaintiff in the Philippines up to the
present, Plaintiff, through its firm name "HAHN
MANILA" and without any monetary contribution from
defendant BMW, established BMW's goodwill and
market presence in the Philippines. Pursuant thereto,
Plaintiff has invested a lot of money and resources in
order to single-handedly compete against other
motorcycle and car companies. . . . Moreover, Plaintiff
has built buildings and other infrastructures such as
service centers and showrooms to maintain and
promote the car and products of defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant
BMW advised Plaintiff that it was willing to maintain
with Plaintiff a relationship but only "on the basis of a
standard BMW importer contract as adjusted to reflect
the particular situation in the Philippines" subject to
certain conditions, otherwise, defendant BMW would
terminate Plaintiffs exclusive dealership and any
relationship for cause effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of
the assignment agreement between itself and plaintiff
since the consideration for the assignment of the BMW
trademark is the continuance of the exclusive

dealership agreement. It thus, follows that the

exclusive dealership should continue for so long as
defendant BMW enjoys the use and ownership of the
trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and
raffled to Branch 104 of the Quezon City Regional Trial Court,
which on June 14, 1993 issued a temporary restraining order.
Summons and copies of the complaint and amended
complaint were thereafter served on the private respondent
through the Department of Trade and Industry, pursuant to
Rule 14, 14 of the Rules of Court. The order, summons and
copies of the complaint and amended complaint were later
sent by the DTI to BMW via registered mail on June 15,
1993 5 and received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the
hearing on the application for the writ of preliminary
injunction proceeded ex parte, with petitioner Hahn
testifying. On June 30, 1993, the trial court issued an order
granting the writ of preliminary injunction upon the filing of a
bond of P100,000.00. On July 13, 1993, following the posting
of the required bond, a writ of preliminary injunction was
issued.
On July 1, 1993, BMW moved to dismiss the case, contending
that the trial court did not acquire jurisdiction over it through
the service of summons on the Department of Trade and
Industry, because it (BMW) was a foreign corporation and it
was not doing business in the Philippines. It contended that
the execution of the Deed of Assignment was an isolated
transaction; that Hahn was not its agent because the latter
undertook to assemble and sell BMW cars and products
without the participation of BMW and sold other products;
and that Hahn was an indentor or middleman transacting
business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that
BMW was doing business in the Philippines through him as its
agent, as shown by the fact that BMW invoices and order
forms were used to document his transactions; that he gave

warranties as exclusive BMW dealer; that BMW officials

periodically inspected standards of service rendered by him;
and that he was described in service booklets and
international publications of BMW as a "BMW Importer" or
"BMW Trading Company" in the Philippines.
The trial court 6 deferred resolution of the motion to dismiss
until after trial on the merits for the reason that the grounds
advanced by BMW in its motion did not seem to be
indubitable.
Without seeking reconsideration of the aforementioned order,
BMW filed a petition for certiorari with the Court of Appeals
alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE
HASTE
OR
OTHERWISE
INJUDICIOUSLY
IN
PROCEEDINGS LEADING TOWARD THE ISSUANCE OF
THE WRIT OF PRELIMINARY INJUNCTION, AND IN
PRESCRIBING THE TERMS FOR THE ISSUANCE
THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN
DEFERRING RESOLUTION OF THE MOTION TO DISMISS
ON THE GROUND OF LACK OF JURISDICTION, AND
THEREBY FAILING TO IMMEDIATELY DISMISS THE
CASE A QUO.
BMW asked for the immediate issuance of a temporary
restraining order and, after hearing, for a writ of preliminary
injunction, to enjoin the trial court from proceeding further in
Civil Case No. Q-93-15933. Private respondent pointed out
that, unless the trial court's order was set aside, it would be
forced to submit to the jurisdiction of the court by filing its
answer or to accept judgment in default, when the very
question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing
petitioner's complaint. On December 20, 1993, it rendered
judgment finding the trial court guilty of grave abuse of

discretion in deferring resolution of the motion to dismiss. It

stated:
Going by the pleadings already filed with the
respondent court before it came out with its
questioned order of July 26, 1993, we rule and so hold
that petitioner's (BMW) motion to dismiss could be
resolved then and there, and that the respondent
judge's deferment of his action thereon until after trial
on the merit constitutes, to our mind, grave abuse of
discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as
regards the factual matters relating to the motion to
dismiss. What truly divide (sic) the parties and to
which they greatly differ is the legal conclusions they
respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing
business in the Philippines while the latter asserts that
it is not.
Then, after stating that any ruling which the trial court might
make on the motion to dismiss would anyway be elevated to
it on appeal, the Court of Appeals itself resolved the motion.
It ruled that BMW was not doing business in the country and,
therefore, jurisdiction over it could not be acquired through
service of summons on the DTI pursuant to Rule 14, 14. 'The
court upheld private respondent's contention that Hahn
acted in his own name and for his own account and
independently of BMW, based on Alfred Hahn's allegations
that he had invested his own money and resources in
establishing BMW's goodwill in the Philippines and on BMW's
claim that Hahn sold products other than those of BMW. It
held that petitioner was a mere indentor or broker and not an
agent through whom private respondent BMW transacted
business in the Philippines. Consequently, the Court of
Appeals dismissed petitioner's complaint against BMW.

Hence, this appeal. Petitioner contends that the Court of

Appeals erred (1) in finding that the trial court gravely
abused its discretion in deferring action on the motion to
dismiss and (2) in finding that private respondent BMW is not
doing business in the Philippines and, for this reason,
dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon private foreign corporations. If the
defendant is a foreign corporation, or a nonresident
joint stock company or association, doing business in
the Philippines, service may be made on its resident
agent designated in accordance with law for that
purpose, or, if there be no such agent, on the
government official designated by law to that effect, or
on any of its officers or agents within the Philippines.
(Emphasis added).
What acts are considered "doing business in the Philippines"
are enumerated in 3(d) of the Foreign Investments Act of
1991 (R.A. No. 7042) as follows: 7
d) the phrase "doing business" shall include soliciting
orders, service contracts, opening offices, whether
called "liaison" offices or branches; appointing
representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the
country for a period or periods totalling one hundred
eighty (180) days or more; participating in the
management, supervision or control of any domestic
business, firm, entity or corporation in the
Philippines;and any other act or acts that imply a
continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions
normally incident to, and in progressive prosecution
of, commercial gain or of the purpose and object of
the business organization: Provided, however, That the
phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign

entity in domestic corporations duly registered to do

business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to
represent its interests in such corporation; nor
appointing a representative or distributor domiciled in
the Philippines which transacts business in its own
name and for its own account. (Emphasis supplied)

distributor in the Philippines of BMW on the ground that "he

alone had contacts with individuals or entities interested in
acquiring BMW vehicles. Independence characterizes Hahn's
undertakings, for which reason he is to be considered, under
governing statutes, as doing business." (p. 13) In support of
this conclusion, the appellate court cited the following
allegations in Hahn's amended complaint:

Thus, the phrase includes "appointing representatives or

distributors in the Philippines" but not when the
representative or distributor "transacts business in its name
and for its own account." In addition, 1(f)(1) of the Rules and
Regulations implementing (IRR) the Omnibus Investment
Code of 1987 (E.O. No. 226) provided:

8. From the time the trademark "BMW & DEVICE" was

first used by the Plaintiff in the Philippines up to the
present, Plaintiff, through its firm name "HAHN
MANILA" and without any monetary contributions from
defendant BMW, established BMW's goodwill and
market presence in the Philippines. Pursuant thereto,
Plaintiff invested a lot of money and resources in order
to single-handedly compete against other motorcycle
and car companies. . . . Moreover, Plaintiff has built
buildings and other infrastructures such as service
centers and showrooms to maintain and promote the
car and products of defendant BMW.

(f) "Doing business" shall be any act or combination of

acts, enumerated in Article 44 of the Code. In
particular, "doing business" includes:
(1) . . . A foreign firm which does business through
middlemen acting in their own names, such as
indentors,
commercial
brokers
or
commission
merchants, shall not be deemed doing business in the
Philippines. But such indentors, commercial brokers or
commission merchants shall be the ones deemed to be
doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or
distributor in the Philippines of private respondent BMW. If he
is, BMW may be considered doing business in the Philippines
and the trial court acquired jurisdiction over it (BMW) by
virtue of the service of summons on the Department of Trade
and Industry. Otherwise, if Hahn is not the agent of BMW but
an independent dealer, albeit of BMW cars and products,
BMW, a foreign corporation, is not considered doing business
in the Philippines within the meaning of the Foreign
Investments Act of 1991 and the IRR, and the trial court did
not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted
in his own name and for his own account and not as agent or

As the above quoted allegations of the amended complaint

show, however, there is nothing to support the appellate
court's finding that Hahn solicited orders alone and for his
own account and without "interference from, let alone
direction of, BMW." (p. 13) To the contrary, Hahn claimed he
took orders for BMW cars and transmitted them to BMW.
Upon receipt of the orders, BMW fixed the downpayment and
pricing charges, notified Hahn of the scheduled production
month for the orders, and reconfirmed the orders by signing
and returning to Hahn the acceptance sheets. Payment was
made by the buyer directly to BMW. Title to cars purchased
passed directly to the buyer and Hahn never paid for the
purchase price of BMW cars sold in the Philippines. Hahn was
credited with a commission equal to 14% of the purchase
price upon the invoicing of a vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered
in the Philippines and serviced by him, Hahn received an
additional 3% of the full purchase price. Hahn performed
after-sale services, including warranty services, for which he
received reimbursement from BMW. All orders were on
invoices and forms of BMW. 8

These allegations were substantially admitted by BMW which,

in its petition for certiorari before the Court of Appeals,
stated: 9
9.4. As soon as the vehicles are fully manufactured
and full payment of the purchase prices are made, the
vehicles are shipped to the Philippines. (The payments
may be made by the purchasers or third-persons or
even by Hahn.) The bills of lading are made up in the
name of the purchasers, but Hahn-Manila is therein
indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the
Philippine ports, for purposes of conducting predelivery inspections. Thereafter, he delivers the
vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered,
Hahn is credited with a commission of fourteen
percent (14%) of the full purchase price thereof, and
as soon as he confirms in writing that the vehicles
have been registered in the Philippines and have been
serviced by him, he will receive an additional three
percent (3%) of the full purchase prices as
commission.
Contrary to the appellate court's conclusion, this
arrangement shows an agency. An agent receives a
commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the
buyer and the seller together, even if no sale is eventually
made.
As to the service centers and showrooms which he said he
had put up at his own expense, Hahn said that he had to
follow BMW specifications as exclusive dealer of BMW in the
Philippines. According to Hahn, BMW periodically inspected
the service centers to see to it that BMW standards were
maintained. Indeed, it would seem from BMW's letter to Hahn
that it was for Hahn's alleged failure to maintain BMW
standards that BMW was terminating Hahn's dealership.

The fact that Hahn invested his own money to put up these
service centers and showrooms does not necessarily prove
that he is not an agent of BMW. For as already noted, there
are facts in the record which suggest that BMW exercised
control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with
BMW standards and specifications. 10 For example, in its letter
to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several
discussions and letters that we have to tackle the
Philippine market more professionally and that we are
through your present activities not adequately
prepared to cope with the forthcoming challenges. 11
In effect, BMW was holding Hahn accountable to it under the
1967 Agreement.
This case fits into the mould of Communications Materials,
Inc. v. Court of Appeals, 12 in which the foreign corporation
entered into a "Representative Agreement" and a "Licensing
Agreement" with a domestic corporation, by virtue of which
the latter was appointed "exclusive representative" in the
Philippines for a stipulated commission. Pursuant to these
contracts, the domestic corporation sold products exported
by the foreign corporation and put up a service center for the
products sold locally. This Court held that these acts
constituted doing business in the Philippines. The
arrangement showed that the foreign corporation's purpose
was to penetrate the Philippine market and establish its
presence in the Philippines.
In addition, BMW held out private respondent Hahn as its
exclusive distributor in the Philippines, even as it announced
in the Asian region that Hahn was the "official BMW agent" in
the Philippines. 13
The Court of Appeals also found that petitioner Alfred Hahn
dealt in other products, and not exclusively in BMW products,
and, on this basis, ruled that Hahn was not an agent of BMW.
(p. 14) This finding is based entirely on allegations of BMW in

its motion to dismiss filed in the trial court and in its petition
for certiorari before the Court of Appeals. 14 But this
allegation was denied by Hahn 15 and therefore the Court of
Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should
have indicated to the Court of Appeals the necessity of
affirming the trial court's order deferring resolution of BMW's
motion to dismiss. Petitioner alleged that whether or not he is
considered an agent of BMW, the fact is that BMW did
business in the Philippines because it sold cars directly to
Philippine buyers. 16 This was denied by BMW, which claimed
that Hahn was not its agent and that, while it was true that it
had sold cars to Philippine buyers, this was done without
solicitation on its part. 17
It is not true then that the question whether BMW is doing
business could have been resolved simply by considering the
parties' pleadings. There are genuine issues of facts which
can only be determined on the basis of evidence duly
presented. BMW cannot short circuit the process on the plea
that to compel it to go to trial would be to deny its right not
to submit to the jurisdiction of the trial court which precisely
it denies. Rule 16, 3 authorizes courts to defer the resolution
of a motion to dismiss until after the trial if the ground on
which the motion is based does not appear to be indubitable.
Here the record of the case bristles with factual issues and it
is not at all clear whether some allegations correspond to the
proof.
Anyway, private respondent need not apprehend that by
responding to the summons it would be waiving its objection
to the trial court's jurisdiction. It is now settled that, for
purposes of having summons served on a foreign corporation
in accordance with Rule 14, 14, it is sufficient that it be
alleged in the complaint that the foreign corporation is doing
business in the Philippines. The court need not go beyond the
allegations of the complaint in order to determine whether it
has Jurisdiction. 18 A determination that the foreign
corporation is doing business is only tentative and is made
only for the purpose of enabling the local court to acquire

jurisdiction over the foreign corporation through service of

summons pursuant to Rule 14, 14. Such determination does
not foreclose a contrary finding should evidence later show
that it is not transacting business in the country. As this Court
has explained:
This is not to say, however, that the petitioner's right
to question the jurisdiction of the court over its person
is now to be deemed a foreclosed matter. If it is true,
as Signetics claims, that its only involvement in the
Philippines was through a passive investment in Sigfil,
which it even later disposed of, and that TEAM Pacific
is not its agent, then it cannot really be said to be
doing business in the Philippines. It is a defense,
however, that requires the contravention of the
allegations of the complaint, as well as a full
ventilation, in effect, of the main merits of the case,
which should not thus be within the province of a mere
motion to dismiss. So, also, the issue posed by the
petitioner as to whether a foreign corporation which
has done business in the country, but which has
ceased to do business at the time of the filing of a
complaint, can still be made to answer for a cause of
action which accrued while it was doing business, is
another matter that would yet have to await the
reception and admission of evidence. Since these
points have seasonably been raised by the petitioner,
there should be no real cause for what may
understandably be its apprehension,i.e., that by its
participation during the trial on the merits, it may,
absent an invocation of separate or independent
reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction. 19
Far from committing an abuse of discretion, the trial court
properly deferred resolution of the motion to dismiss and
thus avoided prematurely deciding a question which requires
a factual basis, with the same result if it had denied the
motion and conditionally assumed jurisdiction. It is the Court
of Appeals which, by ruling that BMW is not doing business
on the basis merely of uncertain allegations in the pleadings,
disposed of the whole case with finality and thereby deprived

petitioner of his right to be heard on his cause of action. Nor

was there justification for nullifying the writ of preliminary
injunction issued by the trial court. Although the injunction
was issued ex parte, the fact is that BMW was subsequently
heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is
REVERSED and the case is REMANDED to the trial court for
further proceedings.
SO ORDERED.

G.R. No. 143723

June 28, 2001
LITONJUA GROUP OF COMPANIES, EDDIE LITONJUA and
DANILO LITONJUA, petitioners,
vs.
TERESITA VIGAN, respondent.
GONZAGA-REYES, J.:
In this petition for review on certiorari, petitioners seek to
annul and set aside the (1) decision 1 of the respondent Court
of Appeals dated March 20, 2000 which reversed and set
aside the decision of the National Labor Relations
Commission finding respondent guilty of abandonment and
(2) resolution2 dated June 19, 2000 denying petitioners
motion for reconsideration.
The factual backdrop as found by the respondent Court of
Appeals is as follows:3

"As to the factual milieu, the contending parties have

diametrically opposed versions. Vigan tells it this way;
She was hired by the Litonjua Group of Companies on
February 2, 1979 as telex operator. Later, she was
assigned as accounting and payroll clerk under the
supervision of Danilo Litonjua. She had been
performing well until 1995, when Danilo Litonjua who
was already naturally a (sic) very ill-tempered, illmouthed and violent employer, became more so due
to business problems. In fact, a complaint letter
(Annex "I", p. 85, rollo) was sent by the Litonjua
Employees to the father and his junior regarding the
boorishness of their kin Danilo Litonjua but apparently
the management just glossed over this.1wphi1.nt
Danilo Litonjua became particularly angry with Vigan
and threw a stapler at her when she refused to give
him money upon the instructions of Eddie Litonjua.
From then on, Danilo Litonjua had been rabid towards
her berated and bad-mouthed her, calling her a
"mental case" "psycho", "sira ulo", etc. and even
threatened to hit her for some petty matters. Danilo
Litonjua even went so far as to lock her up in the
comfort room and preventing others to help her out.
Not contented, Danilo Litonjua would order the
security guards to forcibly eject her or prevent her
entry in the office premises whenever he was angry.
This occurred twice in July of 1995, first on the 5th
then on the 7th. The incidents prompted Vigan to write
Danilo Litonjua letters asking why she was treated so
and what was her fault (Annexes "F", "G" & "K", pp. 82,
83 & 87, rollo). She suspected that Danilo Litonjua
wanted her out for he would not let her inside the
office such that even while abroad he would order the
guards by phone to bar her. She pleaded for
forgiveness or at least for explanation but it fell on
deaf ears.
Later, Danilo Litonjua changed tack and charged that
Vigan had been hysterical, emotional and created
scenes at the office. He even required her to secure
psychiatric assistance. (Annexes "L" to "N", pp. 88-90,

rollo) But despite proof that she was not suffering from
psychosis or organic brain syndrome as certified to by
a Psychiatrist of Danilo Litonjuas choice (Annex "H", p.
84, rollo), still she was denied by the guards entry to
her work upon instructions again of Danilo Litonjua.
Left with no alternative, Vigan filed this case for illegal
dismissal, alleging she was receiving a monthly salary
of P8,000.00 at the time she was unlawfully
terminated.
The Litonjuas have a different version. They negate
the existence of the Litonjua Group of Companies and
the connection of Eduardo Litonjua thereto. They
contend that Vigan was employed by ACT Theater,
Inc., where Danilo Litonjua is a Director. They dispute
the charge of illegal dismissal for it was Vigan who
ceased to report for work despite notices and likewise
contest the P8,000.00 monthly salary alleged by
Vigan, claiming it was merely P6,850.00.
They claim that Vigan was a habitual absentee
specially on Tuesdays that fell within three days before
and after the "15th" day and "30th" day of every
month. Her performance had been satisfactory, but
then starting March 15, 1996 she had become
emotional, hysterical, uncontrollable and created
disturbances at the office with her crying and shouting
for no reason at all. The incident was repeated on April
3, 1996, May 24, 1996 and on June 4, 1996. Thus
alarmed, on July 24, 1996 Vigan was required by
management to undergo medical and psychological
examination at the companys expense and naming
three doctors to attend to her. Dr. Baltazar Reyes and
Dr. Tony Perlas of the Philippine General Hospital and
Dr. Lourdes Ignacio of the Medical Center Manila. But
they claim that Vigan refused to comply.
On August 2, 1996, Vigan again had another
breakdown, hysterical, shouting and crying as usual for
about an hour, and then she just left the premises
without a word. The next day, August 3, 1996,

Saturday, she came to the office and explained she

was not feeling well the day before. After that Vigan
went AWOL and did not heed telegram notices from
her employer made on August 26, 1996 and on
September 9, 1996 (Annexes "1" & "2", pp. 108 to 109,
rollo). She instead filed the instant suit for illegal
dismissal."
On June 10, 1997, Labor Arbiter Ernesto S. Dinopol rendered
his decision4 finding Vigan diseased and unfit for work under
Article 284 of the Labor Code5 and awarded the
corresponding separation pay as follows: 6
"WHEREFORE, judgment is hereby rendered ordering
respondents LITONJUA GROUP OF COMPANIES, EDDIE
K. LITONJUA and DANILO LITONJUA to jointly and
severally pay complainant TERESITA Y. VIGAN, the
following amounts:
Separation pay (P4,000 x 18) years.=
Proportionate
13th"
month
(P8,000 x 8 months over 12) =
TOTAL AWARD.

P72,000.0
0

pay 4,666.66
P76,666.6
6

All other causes of action are DISMISSED for lack of

merit."
Vigan appealed the decision to the National Labor Relations
Commission which modified7 the arbiters decision by ruling
that Art. 284 of the Labor Code is inapplicable in the instant
case but affirmed the legality of the termination of the
complainant based on her having effectively abandoned her
job; the rest of the decision was affirmed. Vigan moved for a
partial reconsideration which was denied in a resolution
dated August 7, 1998.

Dissatisfied, Vigan filed a petition for certiorari with the

respondent Court of Appeals which rendered its assailed
decision dated March 20, 2000 reversing the NLRC
Resolution. The dispositive portion of the decision reads: 8

Petitioners Litonjuas filed the instant petition for review on

certiorari alleging the following grounds:

"WHEREFORE, premises considered, the assailed NLRC

Decision
and
Resolution
are
hereby REVERSEDand SET ASIDE. In its stead
judgment is rendered ordering the respondents
LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA
and DANILO LITONJUA jointly and severally to:

WHETHER OR NOT "LITONJUA GROUP OF COMPANIES",

WHICH HAS NO JURIDICAL PERSONALITY, BUT ONLY A
GENERIC
NAME
TO
DESCRIBE
THE
VARIOUS
COMPANIES WHICH THE LITONJUA FAMILY HAS
INTERESTS, CAN BE LEGALLY CONSTRUED AS
RESPONDENTS EMPLOYER.

(a) Reinstate complainant TERESITA Y. VIGAN if

she so desires;

II
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY
ERRED AS A MATTER OF LAW IN HOLDING THAT
RESPONDENT WAS ILLEGALLY DISMISSED FROM HER
EMPLOYMENT, INSTEAD OF AFFIRMING THE DECISION
OF THE NATIONAL LABOR RELATIONS COMMISSION
THAT SHE HAD ABANDONED HER JOB OR THAT OF
LABOR ARBITER ERNESTO DINOPOL HOLDING THAT
SHE SHOULD BE SEPARATED ON THE GROUND OF
DISEASE UNDER ARTICLE 284 OF THE LABOR CODE,
CONSIDERING THAT SHE HAS EXHIBITED A PATTERN OF
PSYCHOLOGICAL AND MENTAL DISTURBANCE WHICH
ADMITTEDLY NO LONGER MADE HER PHYSICALLY FIT
TO WORK.

or
(b) pay her separation compensation in the sum
of P8,000.00 multiplied by her years of service
counted from February 2, 1979 up to the time
this Decision becomes final; and in either case
to pay Vigan;
(c) full back wages from the time she was
illegally dismissed up to the date of the finality
of this Decision;
(d) moral
P40,000.00;

damages

in

the

amount

of

III
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY
ERRED AS A MATTER OF LAW IN DIRECTING
RESPONDENTS REINSTATEMENT AT HER OWN CHOICE
OR PAYMENT OF SEPARATION PAY OF ONE MONTH
SALARY FOR EVERY YEAR OF SERVICE AND
BACKWAGES.

(e) exemplary damages in the amount of

P15,000.00; and
(f) attorneys fees of P10,000.00.
SO ORDERED."
Litonjuas filed their motion for reconsideration which was
denied in a resolution dated June 19, 2000.

IV
THE COURT OF APPEALS SERIOUSLY ERRED AS A
MATTER OF LAW IN HOLDING PETITIONERS LIABLE FOR

MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS

FEES.
Anent the first assigned error, petitioners allege that the
Litonjua group of companies cannot be a party to this suit for
it is not a legal entity with juridical personality but is merely a
generic name used to describe collectively the various
companies in which the Litonjua family has business interest;
that the real employer of respondent Vigan was the ACT
theater Incorporated where Danilo Litonjua is a member of
the Board of Directors while Eddie Litonjua was not
connected in any capacity.
Petitioners argument is meritorious. Only natural or juridical
persons or entities authorized by law may be parties to a civil
action and every action must be prosecuted and defended in
the name of the real parties in interest. 9Petitioners claim
that Litonjua Group of Companies is not a legal entity with
juridical personality hence cannot be a party to this suit
deserves consideration since respondent failed to prove
otherwise. In fact, respondent Vigans own allegation in her
Memorandum supported petitioners claim that Litonjua
group of companies does not exist when she stated therein
that instead of naming each and every corporation of the
Litonjua family where she had rendered accounting and
payroll works, she simply referred to these corporations as
the Litonjua group of companies, thus, respondent merely
used such generic name to describe collectively the various
corporations in which the Litonjua family has business
interest. Considering the non-existence of the Litonjua group
of companies as a juridical entity and petitioner Eddie
Litonjuas denial of his connection in any capacity with the
ACT Theater, the supposed company where Vigan was
employed, petitioner Eddie Litonjuas should also be excluded
as a party in this case since respondent Vigan failed to prove
Eddie Litonjuas participation in the instant case. It is
respondent Vigan, being the party asserting a fact, who has
the burden of proof as to such fact 10 which however, she
failed to discharge.

Next, petitioners claim that the complaint for illegal dismissal

was prematurely filed since Vigan was not dismissed, actual
or constructive, from her employment as the records show
that despite being absent without official leave since August
5, 1996 and her receipt of two telegram notices sent to her
by petitioners on August 26, and September 9, 1996 for her
to report for work, she failed to do so and yet petitioners had
not done any act to dismiss her. Petitioners deny Vigans
claim that she had been physically barred from entering the
work premises.
Petitioners thus contend that since respondent Vigan was not
illegally dismissed from employment, the respondent courts
order reinstating the latter, awarding her separation pay
equivalent to one month salary per year of service as well as
backwages, damages and attorneys fees have no factual
and legal basis.
We are not persuaded.
The above arguments relate mainly to the correctness of the
factual findings of the Court of Appeals and the award of
damages. This Court has consistently affirmed that the
findings of fact of the Court of Appeals are as a rule binding
upon it, subject to certain exceptions, one of which is when
the factual findings of the Court of Appeals are contrary to
those of the trial court (or administrative body, as the case
may be).11 However, it bears emphasizing that mere
disagreement between the Court of Appeals and the trial
court as to the facts of a case does not of itself warrant this
Court's review of the same. It has been held that the doctrine
that the findings of fact made by the Court of Appeals, being
conclusive in nature, are binding on this Court, applies even
if the Court of Appeals was in disagreement with the lower
court as to the weight of evidence with a consequent reversal
of its findings of fact, so long as the findings of the Court of
Appeals are borne out by the record or based on substantial
evidence.12
We have gone over the records of this case and found no
cogent reason to disagree with the respondent courts

findings that respondent Vigan did not abandon her job but
was illegally dismissed. Petitioners claim that despite two (2)
telegram notices dated August 26 and September 9, 1996
respectively sent to respondent Vigan to report for work, the
latter did not heed the demands and absented herself since
August 5, 1996 was belied by the respondents evidence, as
it was upon instructions of petitioner Danilo Litonjua to the
guards on duty that she could not enter the premises of her
workplace. In fact, in her letter dated August 30, 1996
addressed to petitioner Danilo Litonjua, respondent Vigan
had complained of petitioner Danilos inhumane treatment in
barring her from entering her workplace, to wit:
"Sukdulan na po ang pang-aaping dinaranas ko sa
inyo, sir. Since August 5 etc. I was always approached
by your guard Batutay and harassed by your men to
vacate my cubicle as per your strict order. Only this
August 7 that you succeeded as you order the door
locked for me only. As per our agreement Aug. 27 at
Jollibee (sic) gave me assurance that I willingly
undergo psychiatric test I could freely report for work
without intimidating me, you wont anymore charge
me of insubordination. You wont disturb my family
anymore, so why do you advice to try to go back Aug.
30 but as always to be barred by guard Batutay? Sir,
with my 18 years of loyal service, all I need is a little
respect. Tao ako sir, hindi hayop. Malaki ang nawawala
sa akin."
Notwithstanding the fact the she was refused entrance to her
workplace, respondent Vigan, to show her earnest desire to
report for work, would sneak her way into the premises and
punched her time card but she could not resume work as the
guards in the company gate would prevent her per petitioner
Danilo Litonjuas instructions. It appears also that respondent
Vigan wrote petitioner Danilo a letter dated September 9,
1996 notifying him that per his instructions, she had made an
appointment for a psychiatric test on September 11, 1996
and requested him to make a check payable to Dr. Lourdes
Ladrido-Ignacio in the amount of P800.00 consultation fee as
they agreed upon. She underwent a psychiatric examination

as a result of which Dr. Ignacio issued a medical certificate as

follows:13
"This is to certify that MISS TERESITA VIGAN has come
for psychiatric evaluation on September 11 and 17,
1996. The psychiatric interview and mental status
examination did not reveal any symptoms of psychosis
or organic brain syndrome. She showed anxiety but
this was deemed a realistic reaction to her present job
difficulties."
Respondents actuations militate against petitioners claim
that she did not heed the notices to return to work and
abandoned her job. She had been going to her workplace to
report for work but was prevented from resuming her work
upon the instructions of petitioner Danilo Litonjua. It would
be the height of injustice to allow an employee to claim as a
ground for abandonment a situation which he himself had
brought about.14
We fully agree with the respondent courts ratiocination on
the illegality of Vigans dismissal, to wit:15
"The basic issue is whether Vigans employment was
terminated by illegal dismissal or by abandonment of
work, and We hold that this was a case of illegal
dismissal.
Shopworn is the rule on abandonment that the
immediate filing of a case for illegal dismissal negates
the same. Mark that Vigan promptly filed this suit for
illegal dismissal when her attempts to enter the
premises of her workplace became futile and the
efforts to bar and eject her became unmistakable. In
the more recent case of Rizada vs. NLRC (G.R. No.
96982, September 21, 1999), the Supreme Court
reiterated anew the hoary rule that:
"To constitute abandonment two elements must
concur (1) the failure to report for work or
absence without valid or justifiable reason, and

(2) a clear intention to sever the employeremployee relationship, with the second element
as the more determinative factor and being
manifested by some overt acts. Abandoning
ones job means the deliberate, unjustified
refusal of the employee to resume his
employment and the burden of proof is on the
employer to show a clear and deliberate intent
on the part of the employee to discontinue
employment.
Abandonment is a matter of intention and
cannot be lightly inferred, much less legally
presumed from certain equivocal acts. (Shin
Industrial
v.
National
Labor
Relations
Commission, 164 SCRA 8).
An employee who forthwith took steps to protest
his dismissal cannot be said to have abandoned
his work." (Toogue v. National Labor Relations
Commission, 238 SCRA 241), as where the
employee immediately filed a complaint for
illegal dismissal to seek reinstatement (Tolong
Aqua Culture Corp., et al. V. National Labor
Relations Commission, G.R. 122268, November
12, 1996) (emphasis supplied).
Note that in the instant case Vigan was even pleading
to be allowed to work but she was prevented by the
guards thereat upon the orders of Danilo Litonjua.
These are disclosed by her letters (Annexes "F", "G",
"K", "Q", "R" and "U", pp. 82, 83, 87, 93, 94 & 97,
rollo), the entries in her time cards (Annexes "P", "S",
"W" and "X", pp. 92, 95, 99 & 100, rollo) and her
compliance when required to see a psychiatrist (Annex
"H", p. 84, rollo). On the other hand there is complete
silence from the Litonjuas on these matters, including
on the collective manifesto of several employees
against Danilo Litonjua and his highhanded ways
(Annex "I", p. 85). They chose to ignore material and
telling points. They even alleged that Vigan refused to

comply with their request for her to have medical

examination (Comment, pp. 164-171, rollo and
Memorandum for the Respondents, pp. 215-222, rollo),
an unmitigated falsity in the face of clear proofs that
she complied with their directive and was given a
clean bill of mental health by a reputable psychiatrist
of their choice.
For emphasis, We shall quote with seeming triteness
the dictum laid down in Mendoza vs. NLRC (supra)
regarding the unflinching rule in illegal dismissal
cases:
"that the employer bears the burden of proof. To
establish a case of abandonment, the employer
must prove the employees deliberate and
unjustified refusal to resume employment
without any intention of returning. . .
mere absence from work, especially where the
employee has been verbally told not to report,
cannot by itself constitute abandonment. To
repeat, the employer has the burden of proving
overt acts on the employees part which
demonstrate a desire or intention to abandon
her work"
The NLRC had erred in shifting the onus probandi to
Vigan in the charge of abandonment against her, while
the Litonjuas failed to discharge their burden. Though
they may not have verbally told Vigan not to report for
work but the act of ordering the guards not to let her
in was just as clear a notice. Vigans plight was akin to
that of the truck helper in the case of Masagana
Concrete Products, et al. vs. NLRC (G.R. No. 106916,
September 3, 1999) who was likewise prevented from
coming to work.
While there was no formal termination of his
services, Marias, was constructively dismissed
when he was accused of tampering the "vale

sheet" and prevented from returning to work.

Constructive dismissal does not always involve
forthright dismissal or diminution in rank,
compensation, benefit and privileges. For an act
of clear discrimination insensibility or disdain by
an employer may become so unbearable on the
part of the employee that it could foreclose any
choice by him except to forego his continued
employment. In this case, Marias had to resign
from his job because he was prevented from
returning back to work unless he admitted his
mistake in writing and he was not given any
opportunity to contest the charge against him. It
is a rule often repeated that unsubstantiated
accusation without anything more are not
synonymous with guilt and unless a clear, valid,
just or authorized ground for dismissing an
employee is established by the employer the
dismissal shall be considered unfounded.
Similarly, Vigan was accused of having mental,
emotional and physical disorders (Annex "M", p. 89,
rollo), but per medical examination it was proven that
hers was pure anxiety as a realistic reaction to her
present job difficulties. She was charged of habitual
absenteeism on Tuesdays that fell within three days
before and after the "15th" day and "30th" day of
every month (Litonjuas Position Paper, pp. 101-107,
rollo). This is preposterous for how many Tuesdays in a
year would fall within three days before and after the
"15th" day and "30th" day of every month? By no
extrapolation can this be habitual absenteeism."
Since respondent Vigan was illegally dismissed from her
employment, she is entitled to: (1) either reinstatement, if
viable, or separation pay if reinstatement is no longer viable,
and (2) backwages.16 As correctly disposed by the respondent
Court:17
"Thus finding that Vigan was illegally dismissed, she is
entitled to the following:

1) Either reinstatement, if viable, or separation pay if

reinstatement is no longer viable; and 2) Backwages,
Backwages and separation pay are distinct relief given
to alleviate the economic damage by an illegally
dismissed employee. Hence, an award of separation
pay in lieu of reinstatement does not bar an award of
backwages, computed from the time of illegal
dismissal up to the date of the finality of the
Decision...
without
qualification
or
deduction.
Separation pay, equivalent to one months salary for
every year of service, is awarded as an alternative to
reinstatement when the latter is no longer an option.
Separation pay is computed from the commencement
of employment up to the time of termination, including
the imputed service for which the employee is entitled
to backwages, with the salary rate prevailing at the
end of the period of putative service being the basis
for computation (Masagana Concrete Products, et al.
vs. NLRC, supra). In case of a fraction of at least six (6)
months in the length of service, the same shall be
considered as one year in computing the separation
pay. With regard to backwages, it meant literal "full
backwages" that is inclusive of allowances and other
benefits or their monetary equivalent computed from
the time her compensation was withheld from her up
to the time of her actual reinstatement, if it is still
viable or up to the time the Decision in her favor
becomes final without deducting from back wages
the earning derived elsewhere, if there is any, by Vigan
during the period of her illegal dismissal. (Lopez vs.
NLRC, 297 SCRA 508).
In other words, Vigan is entitled to reinstatement,
which perhaps is no longer viable due to the strained
relations between the parties, or separation pay of
P8,000.00 for every year of service and backwages of
another P8,000 per month reckoned from the time she
last received salary from the Litonjuas up to the date
of the finality of this Decision. Mark again that We
allowed the P8,000.00 claim of Vigan as her last salary
received for again the Litonjuas failed to validly refute
the same."

We likewise affirm respondent courts award of moral and

exemplary damages to the respondent. As a rule, moral
damages are recoverable only where the dismissal of the
employee was attended by bad faith or fraud or constituted
an act oppressive to labor, or was done in a manner contrary
to morals, good customs or public policy. We find that bad
faith attended respondents dismissal from her employment.
Bad faith involves a state of mind dominated by ill will or
motive. It implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or some moral
obliquity.18 Petitioner Danilo Litonjua showed ill will in treating
respondent Vigan in a very unfair and cruel manner which
made her suffer anxieties by reason of such job difficulties.
The report to work notices sent by petitioners to respondent
Vigan was just part of the ploy to make it appear that the
latter abandoned her work but in reality, Vigan was barred
from entering her work premises. We fully subscribe to
respondents position that petitioners action was for the
purpose of removing her from her employment. Respondent
Vigan is also entitled to exemplary damages as her dismissal
was effected in an oppressive and malevolent manner. 19
We also find that there is a basis for the award of attorneys
fees. It is settled that in actions for recovery of wages or
where an employee was forced to litigate and incur expenses
to protect his rights and interest, he is entitled to an award of
attorneys fees.20
WHEREFORE, premises considered, the decision of the
respondent Court of Appeals dated March 20, 2000 is hereby
AFFIRMED with the MODIFICATION that Litonjua Group of
Companies and Eddie Litonjua are dropped as parties in the
instant case.1wphi1.nt
SO ORDERED.

G.R. No. L-17828

August 31, 1963

LIGAYA MINA, JAIME MINA, SILVINA MINA, FAUSTA

MINA,
PABLO MINA and MIGUEL MINA, the minors
represented by PILAR LAZO as guardian-adlitem, plaintiffs-appellants,
vs.
ANTONIA PACSON, CRISPINO MEDINA and CRESENCIA
MINA, defendants-appellees.
F. A. Pelmoka for plaintiffs-appellants.
Castelo Law Office for defendants-appellees.
LABRADOR, J.:

This is an appeal from an order of the Court of First Instance

of Nueva Ecija, Hon. Felix Makasiar, presiding, in its Civil Case
No. 3296, entitled "Ligaya Mina, et al., plaintiffs vs. Crispino
Medina, et al., defendants," dismissing the complaint filed in
this case. The appellant also appeals against the order
denying the motion for reconsideration of the order of
dismissal.
The facts necessary to understand the nature of the issues
presented in this appeal, as gleaned from the pleadings, may
be briefly stated as follows: Plaintiffs Ligaya, Jaime, Silvina,
Fausta, Pablo and Miguel, all surnamed Mina, are alleged to
be the illegitimate children of the deceased Joaquin Mina with
plaintiff Pilar Lazo from 1933-1958, while married to Antonia
Pacson. Joaquin Mina died in August, 1958, leaving no
descendants norascendants except his widow, the defendant
herein Antonia Pacson. On April 9, 1958, Joaquin Mina, then
still living, executed a deed of absolute sale (Annex "B" to
Complaint) of three parcels of land situated in the
municipality of Muoz, Nueva Ecija, in favor of the
defendants Crispino Medina and Cresencia Mina for the sum
of P12,000. On April 15, 1958 again he executed another
deed of sale (Annex "C" to Complaint) of 13 parcels of land
covered by 12 transfer certificates of title to the same
spouses Crispino Medina and Cresencia Mina. Both deeds of
sale bear the conformity of his wife Antonia Pacson.
In the complaint filed in the Court of First Instance of Nueva
Ecija in the case which originated this appeal, it is alleged
that plaintiffs are illegitimate children of the deceased
Joaquin Mina begotten by him with Pilar Lazo during the
period from 1933 to 1958 while Joaquin Mina was lawfully
married to Antonia Pacson; that the plaintiff Pablo Mina is a
recognized illegitimate child of the deceased Joaquin Mina;
that Joaquin Mina died intestate leaving no ascendants or
descendants, except his widow Antonia Pacson; that he left
various parcels of land enumerated in the complaint but that
on April 9, 1950 the defendants connived and secured from
Joaquin Mina, who was ill and did not know what he was
doing, the execution of the two deeds of sale without
consideration, fictitiously and fraudulently, transferring his
propertiesto the spouses Crispino Medina and Cresencia

Mina; and that by reason of said acts, defendants have

caused moral anguish, anxiety and embarrassment to
plaintiffs, causing them damages amounting to P10,000; that
plaintiffs pray that they be declared recognized illegitimate
children of the deceased Joaquin Mina, entitled to share in
the properties left by him as such illegitimate children; that
the deeds of sale, Annexes "B" and "C" be declared fictitious,
fraudulent and therefore, null and void; and that defendants
be required to deliver to plaintiffs' possession one-fourth of
said properties together with P10,000 for moral damages.
Upon the filing of the complaint the defendants presented a
motion to dismiss the complaint on the ground of res
judicata, alleging that a similar action had previously been
presented as Civil Case No. 3015 in the same court, and by
the same parties against Crispino Medina and Cresencia
Mina, in which the same allegations of plaintiffs' status and
fraudulent conveyance of the properties to defendants are
alleged, together with a prayer for moral damages in the sum
of P20,000. It appears, however, that in the complaint filed in
said Civil Case No. 3015, no prayer is made for the
declaration of the filiation of the plaintiffs in relation or with
respect to the deceased Joaquin Mina.
The motion to dismiss also copied an order of the court
issued in said Civil Case No. 3015 which reads as follows:
Acting on the Motion filed by the defendants on
December 22, 1958 for the reconsideration of the
order dated December 8, 1958, and considering that
the present action is not only for annulment of deeds
of sale but also for partition (paragraphs 8 and 11 of
the complaint and paragraph 4 of the prayer thereof);
that to avoid multiplicity of suits, the complex action to
establish filiation andfor partition or for recovery of
inheritance may be brought in the same case (Lopez v.
Lopez, 68 Phil. 227; Escoval vs. Escoval, 48 O.G. 615;
Edades vs. Edades, L-8964, July 31, 1956); and that
Antonia Pacson, the surviving widow and the other
intestate heirs of the deceased Joaquin Mina, or
necessary parties are not made a party in this case

(Briz v. Briz, 43 Phil. 763), the plaintiffs are hereby

directed to amend their complaint within fifteen (15)
days from receipt hereof by including as party
defendant the surviving widow of the deceased
Joaquin Mina and other necessary parties.
Should the plaintiffs fail to comply with this order, this
case will be dismissed.
Lastly, another order of the same court dated February 9,
1959 was quoted, the dispositive part of which reads:
The fifteen-day period granted to the plaintiffs having
elapsed without said order having been complied with,
the Court hereby dismisses this case, without
pronouncement aa to costs.
Opposition to the motion to dismiss was presented on behalf
of the plaintiffs by their attorney to which a reply was filed on
behalf of the defendants. A rejoinder was also filed after
which Judge Genaro Tan Torres, then presiding over the court,
sustained the motion to dismiss in an order which reads as
follows:
After a careful consideration of the joint motion to
dismiss of defendants Antonia Pacson and the spouses
Crispino Medina and Cresencia Mina, dated November
11, 1959, the opposition thereto dated November 24,
1959, and the reply of the defendants to the
opposition, dated December 7, 1959, the Court is of
the opinion that said motion to dismiss is well taken;
hence this case is hereby dismissed without costs.
Plaintiffs' motion for time to submit rejoinder, dated
December 10, 1959, is hereby denied because it will
only unnecessarily delay the termination of this case.
So ordered.
Cabanatuan City, December 18, 1959.

A motion for the reconsideration of the order of the court

dismissing the action having been denied, the plaintiffs in the
present case prosecuted this appeal directly to this
Court.1wph1.t
As shown above the question to be resolved is whether or not
the order dismissing the previous Civil Case No. 3015 bars
the present civil action No. 3296 of the Court of First Instance
of Nueva Ecija.
In the first error assigned by the appellants in their brief it is
argued that the dismissal of the complaint in the previous
action was in fact "at the indirect instance of the plaintiffs
through inaction or omission." We do not find this claim
justified by the facts of the case. The order of the court
dismissing the complaint in the first case contains the
following warning: "Should the plaintiffs fail to comply with
this order, this case will be dismissed." In the face of this
express warning given in the court's order the dismissal can
not be said to have been "at the indirect instance of the
plaintiffs; it was in fact caused by plaintiffs' refusal to comply
with the express mandate contained in the order of dismissal.
The dismissal, therefore, was justified under Rule 30, Section
3 of the Rules of Court, which reads:
SEC. 3. Failure to prosecute. When 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 of 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 court.
The above provision of the Rules was invoked in the case,
of Garchitorena, et al. vs. De los Santos, et al., G.R. No. L17045, June 30, 1962, wherein this Court held:
To order an amendment to a complaint within a certain
period in order to implead as party plaintiff or
defendant one who is not a party to the case lies

within the discretion of the Court. And where it

appears that the person to be impleaded is an
indispensable party, the party to whom such order is
directed has no other choice but to comply with it. His
refusal or failure to comply with the order is a ground
for the dismissal of his complaint pursuant to Section
3, Rule, 30, of the Rules of Court. . . .
Under the second assignment of error it is argued that the
dismissal of the previous case was brought about by the
negligence, gross or criminal, of plaintiffs' lawyer for which
the plaintiffs-appellants should not be made to suffer. The
argument is not true to fact. The failure to amend was a
result not of the neglect of the lawyer alone but also of the
plaintiffs-appellants themselves. Had the plaintiffs taken
even an ordinary interest in the result of the action that they
had filed, they would have been able to secure information
from their lawyer that the case had been dismissed for failure
to amend. Upon receipt of such information, plaintiffs could
have applied to the court for relief under Rule 38 of the Rules
of Court and could have had the complaint amended as
directed in the order of dismissal. It is not alone negligence of
their counsel, therefore, but of themselves also that the
required amendment was not made. But assuming for the
sake of argument that the failure was due to the lawyer
alone, such failure would not relieve them of the
responsibility resulting from the neglect of their lawyer, for
the client is bound by the action of his counsel. (Isaac v.
Mendoza, G. R. No. L-2830, June 21, 1951; Vivero v. Santos,
et al., G. R. No. L-8105, Feb. 28, 1956; Fernandez v. Tan Tiong
Tick, G.R. No. L-15877, April 28, 1961; Gordulan v. Gordulan,
G.R. No. L-17722, Oct. 9, 1962; Valerio v. Sec. of Agriculture,
G.R. No. L-18587, April 23, 1963.)
In the third assigiament of error it is claimed that there is no
complete identity between the parties in the first case and
those in the case at bar. The statement is true because in the
previous case Antonia Pacson was not included as partydefendlant. As a matter of fact the order decided that Pacson
was to be included as party-defendant. As to the latter,
therefore, the previous order of dismissal does not bar the
present complaint, not only because she was not made a

party but also because the issue of filiation of the partiesplaintiffs was not raised in the previous case, although such
issue was necessary for the plaintiffs to be able to maintain
their right of action. In view of this fact, the present action
should be considered barred in respect to the action for the
annulment of the deeds of sale and as regards the
defendants spouses Crispino Medina and Cresencia Mina; but
as to the case for the declaration of the plaintiffs as
illegitimate children and heirs of the deceased Joaquin Mina
this latter case is not barred by the previous action as above
explained and may still be prosecuted.
WHEREFORE, the order of dismissal is hereby modified in the
sense that the action for the recognition of the filiation of the
plaintiffs should be allowed to continue against the defendant
Antonia Pacson; but the dismissal of the action for the
annulment of the deeds of sale is affirmed. Without costs.

As found by account Court of Appeals, petitioner Aida Robles

is account granddaughter of account deceased Eligio A.
Robles (being account child of Eligio's deceased son Jose). In
his lifetime, Eulogio registered his title to Lot No. 1304 with
an area of 4.2038 hectares of account Escalante Cadastre
and account certificate of title thereto was issued in his name
and that of his wife Melania Cuaycong. Eligio had also started
registration proceedings for another lot, No. 1305-A with an
area of 5.8685 hectares and after his death, title thereto was
issued in account name of his surviving spouse and in
account name of "the heirs of Eulogio Robles". These two
properties pertaining to account conjugal estate of Eligio and
Melamia constitute account disputed properties at bar.
G.R. No. L-47494 May 15, 1978
AIDA ROBLES, Accompanied by her husband Rafael
Penolio, petitioners,
vs.
COURT OF APPEALS,* ANICETO B. PARREO, and THE
REGISTER OF DEEDS OF NEGROS
OCCIDENTAL,respondents.
Ramon C. Ditching & Rolando C. Medalla for petitioners.
Arsenio Acua & Associates for respondents.
TEEHANKEE, J.:
The Court sets aside respondent court's decision which would
require petitioner to implead certain parties and remands
account appeal for determination on its merits. The vendorsco-heirs of petitioner are not indispensable parties in account
action brought by her for cancellation of account vendee's
titles insofar as they were issued for account whole of
account properties sold to account exclusion of petitioner's
share notwithstanding that she was not a party to account
sale and for redemption as a co-heir of account properties
thus sold to respondent vendee under Article 1088 of
account Civil Code.

On June 20, 1957, Melania as surviving spouse and nine other

children besides Eva Robles, another granddaughter of
account deceased Eulogio (sister of petitioner Aida), who
were account deceased heirs to account extent of 43/44
executed a general Power of attorney in favor of Francisco (a
son) to alienate and encumber account disputed properties,
reciting therein that account signatories are account owners
of account properties, although they were not joined by
petitioner Aida who is also an heir of account deceased's
estate to account extent of 1/44.
In October, 1960, Francisco by virtue of account power of
attorney executed a private deed of sale of account
properties in favor of respondent Aniceto B. Parreno and later
executed on January 20, 1965 a notarized deed of sale of
account properties in favor of said respondent for account
price of p4.300.00.
The power of attorney was registered in account office of
account respondent Register of Deeds of Negros Occidental
and was apparently treated as a Declaration of Heirship and
thereafter new transfer titles to account whole of d properties
were issued in favor of account vendee Parreo.
On September 18, 1967, petitioner Aida Robles as plaintiff
filed a complaint in account Negros Occidental court Of first
instance against respondents Parreo and Register of Deeds

praying for cancellation of account titles issued in respondent

Parreo's name and that she be allowed as a 1/44 co-heir and
co-owner of account properties to redeem account same
from said respon. dent vendee.
The lower court dismissed account complaint and on appeal
respondent c held that account sellers (the other co-heirs)
were indispensable parties and should have been impleaded
and rendered its decision that "the judgment of account
LOWER COURT is hereby set aside and let this case be, as it
is, hereby ordered remanded to account LOWER COURT so
that plaintiff can be required to implead account
indispensable and necessary parties in account case and for
subsequent hearing for account issuance of a new
judgment."
Respondent appellate court held that "(T)here is a procedural
error in account CASE BELOW. Since plaintiff was suing
defendant for cancellation of his ownership of account
DISPUTED PROPERTY sold to him by account SELLERS.
account latter were indispensable parties and should have
been impleaded. They had a right to justify account legality
of their sale of account DISPUTED PROPERTY to defendant in
order to free themselves from damages in favor of defendant
if account sale should be adjudged invalid. Moreover, they
should be given account chance to justify account sale if only
to avoid possible criminal responsibility for estafa on false
allegation of ownership (Art. 315, 2[a], Revised Penal Code),"
and added that "The general rule is that if an indispensable
party is not impleaded, account case should be dismissed ...
Rather than affirm account decision dismissing plaintiff's
complaint, which will not definitely settle account con
controversy between account plaintiff and account other
parties, this case should be remanded to the LOWER
COURT ...
Petitioner's motion for reconsideration stressing that her act
is one for legal redemption against respondent as vendee
against whom precisely account right of redemption is
exercised) was denied by respondent court which ruled that
the SELLERS would not be indispensable parties if what they

had sold to defendant was only their respective participations

in account DISPUTED PROPERTY. But what was sold was
account entirety of account DISPUTED PROPERTY, with
account SELLERS claiming full ownership over account same.
The SELLERS took account position that plaintiff was not a
co-owner of account DISPUTED PROPERTY. As a matter of
fact, in account 'NOTICE OF DECLARATION OF HEIRSHIP',
account SELLERS excluded plaintiff as an heir of ELIGIO and
therefore not a co-owner of account DISPUTED PROPERTY. If
plaintiff is held entitled to redeem and account redemption is
held binding on account SELLERS, defendant will have causes
of action, civil and criminal against account SELLERS for
having sold to him. as all account owners thereof, account
entirety of account DISPUTED PROPERTY. Without account
SELLERS being made parties in account CASE BELOW,
account redemption should not be allowed."
Hence, this petition which asserts that petitioner's co-heirs
who sold account properties to respondent Parreno are not
indispensable parties but that her suit could be completely
adjudicated without them, much more so with regard to her
action as co-heir for legal redemption of account properties
from said respondent-vendee under Article 1088 of account
Civil Code.
We find merit in the petition.
Petitioner's action for cancellation of titles was in reality not
one "for cancellation of (respondent's) ownership of account
disputed property sold to him by account sellers" as
perceived by respondent court but rather one questioning
account validity of respondent Register of Deeds' issuing
account titles to account whole of account properties in
disregard of petitioner's 1/44 share therein and against
existing laws and regulations. As stated in account
petition, 1 respondent Register of Deeds was impleaded
"because, by his obvious negligence or act of indiscretion, he
unduly accommodated respondent Parreno to cure a legal
defect or legal deficiency of account documents covering
account sale, via a short-cut method, by allowing account
General Power of Attorney to be registered as a 'Declaration

of Heirship' (which, in effect. left out account petitioner and

transferred ownership of account disputed property in
'totality' to respondent Parreno instead of requiring account
presentation of a separate and true 'Declaration of Heirship'
executed by all account heirs. This requirement is all account
more necessary, if it is noted that account General Power of
Attorney presented was no longer account original copy, but
only a certified true copy from account Notary Public, and
was executed by account vendor co- heirs on June 20, 1957,
or nearly eight (8) years prior to account date of its
registration on February 23, 1965. Furthermore, account
Register of Deeds did not require account presentation of a
'written notice to all possible redemptioners'. All these faults,
which fag squarely on account shoulders of respondents
Parreno and account Register of Deeds resulted in account
irregular issuance of titles which are now sought to be
cancelled"
The vendors-co-heirs of petitioner are not indispensable
parties insofar as this phase of account action against
account Register of Deeds is concerned. The fact cited by
respondent court that they have a right to justify account
legality of their sale to respondent to avoid being held liable
for damages or possible criminal responsibility if account sale
should be adjudged invalid does not make them
indispensable parties without whom petitioner's action
cannot be completely adjudicated. Respondent Parreno could
have called them as witnesses on his behalf or impleaded
them as third-parties defendants in a third-party complaint to
justify account sale of account properties or else answer to
him by was of damages (but it is too late now for such a
third-party complaint); at any rate, said respondent still has
account right of finding a separate action against account
vendors-co-heirs by way of enforcing account warranty made
by them as vendors of account properties.
The imprecision of petitioner's complaint has caused some
confusion. But it appears evident that account action for
cancellation of titles impleading account Register of Deeds is
one assailing this acts as wrongful and without authority in
law, but that petitioner "action for cancellation file issued in
favor of respondent Parreno pertains only to her own rights

and in one's and interest and does not affect the true rights
and interests of the vendors-co-heirs. Against respondent
Parreno the action instituted is based on account premise
that he did not acquire all the rights and interests on account
property, subject of sale. His acquisition is limited only to
account rights and interests of account vendors-co-heirs who
signed account General Power of Attorney and does not
include account rights and interests of a co-heir, herein
petitioner, Aida Robles, who did not sign," as is clearly in
account petition. 2
Such action for cancellation is really secondary and is but a
means of enforcing petitioner's claim as a co-heir and
undivided co-owner of 1/44 of account properties as a
granddaughter of account decreased Eulogio Robles, which
has been found as a fact by respondent court a well as by
account trial court which held that 'The court accepts as a
sufficiently established fact that plaintiff being account
daughter of Jose Robles and therefore one of account
granddaughters of Eulogio Robles, is one among account
latter's heirs, in account same manner as plaintiff's sister,
Eva Robles. The court also takes note that plaintiff was not a
signatory to account general power of attorney, Exh. 'A'
pursuant to which conveyance to account defendant of said
lots were made by Francisco Robles. 3
Petitioner's principal action is really therefore one for legal
redemption under Article 1088 of account Civil Code. 4Insofar
as account exercise of such right of redemption is concerned,
petitioner as a co-heir and respondent Parreno as account
buyer are account only indispensable parties to account
exclusion of account seners-coheirs This was expressly so
ruled by account Court in Castillo vs. Samonte, 5 where we
held that "the trial court had no obligation to order account
inclusion of account vendor either as a party plaintiff or party
defendant in account case, because while he may be a
necessary party, still he is not indispensable in account
sense that account matter before it could not be completely
adjudicated without him. The deed of sale in favor of
appellant clearly states that what is being sold is an
undivided 1/5 portion of account land jointly owned by
account vendor and his brothers and nephew, The vendee-

appellant is, therefore, conclusively presumed to know

account law that under such circumstances, account co- heirs
are entitled to redeem account portion being sold within 30
days from notice in writing of account sale, under Article
1088 of account New civil Code. In effect, he is a vendee with
notice of account right of redemption by account vendor's coheirs," and that "moreover, if vendee-appellant believed he
had a claim against account vendor by reason of account
warranty, it was his duty to have filed a third-party complaint
against account latter ...
Respondent court should therefore have adjudged account
appeal on its merits, and if account facts be as they are
indicated in its decision, to wit, account petitioner is indeed a
co-heir and co-owner of 1/44 of account properties and that
her co-owners-coheirs had sold account same or their
hereditary rights thereto without notice to her, petitioner's
action for redemption of account properties must be
sustained.
ACCORDINGLY, account judgment of respondent court is
hereby set aside and account case- is remanded to it for
determination of account merits of account appeal in
consonance with account Court's observations in this
decision. No costs.

G.R. No. L-22238

February 18, 1967

CLAVECILLIA RADIO SYSTEM, petitioner-appellant,

vs.
HON. AGUSTIN ANTILLON, as City Judge of the
Municipal Court of Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.
B. C. Padua for petitioner and appellant.
Pablo S. Reyes for respondents and appellees.
REGALA, J.:
This is an appeal from an order of the Court of First Instance
of Misamis Oriental dismissing the petition of the Clavecilla
Radio System to prohibit the City Judge of Cagayan de Oro
from taking cognizance of Civil Case No. 1048 for damages.
It appears that on June 22, 1963, the New Cagayan Grocery
filed a complaint against the Clavecilla Radio System
alleging, in effect, that on March 12, 1963, the following
message, addressed to the former, was filed at the latter's
Bacolod Branch Office for transmittal thru its branch office at
Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY
FIFTY IF AGREEABLE SHALL SHIP LATER REPLY POHANG

The Cagayan de Oro branch office having received the

said message omitted, in delivering the same to the
New Cagayan Grocery, the word "NOT" between the
words "WASHED" and "AVAILABLE," thus changing
entirely the contents and purport of the same and
causing the said addressee to suffer damages. After
service of summons, the Clavecilla Radio System filed
a motion to dismiss the complaint on the grounds that
it states no cause of action and that the venue is
improperly laid. The New Cagayan Grocery interposed
an opposition to which the Clavecilla Radio System
filed its rejoinder. Thereafter, the City Judge, on
September 18, 1963, denied the motion to dismiss for
lack of merit and set the case for hearing.1wph1.t
Hence, the Clavecilla Radio System filed a petition for
prohibition with preliminary injunction with the Court of First
Instance praying that the City Judge, Honorable Agustin
Antillon, be enjoined from further proceeding with the case
on the ground of improper venue. The respondents filed a
motion to dismiss the petition but this was opposed by the
petitioner. Later, the motion was submitted for resolution on
the pleadings.
In dismissing the case, the lower court held that the
Clavecilla Radio System may be sued either in Manila where
it has its principal office or in Cagayan de Oro City where it
may be served, as in fact it was served, with summons
through the Manager of its branch office in said city. In other
words, the court upheld the authority of the city court to take
cognizance of the case.1wph1.t
In appealing, the Clavecilla Radio System contends that the
suit against it should be filed in Manila where it holds its
principal office.
It is clear that the case for damages filed with the city court
is based upon tort and not upon a written contract. Section 1
of Rule 4 of the New Rules of Court, governing venue of
actions in inferior courts, provides in its paragraph (b) (3)
that when "the action is not upon a written contract, then in

the municipality where the defendant or any of the

defendants resides or may be served with summons."
(Emphasis supplied)
Settled is the principle in corporation law that the residence
of a corporation is the place where its principal office is
established. Since it is not disputed that the Clavecilla Radio
System has its principal office in Manila, it follows that the
suit against it may properly be filed in the City of Manila.
The appellee maintain, however, that with the filing of the
action in Cagayan de Oro City, venue was properly laid on
the principle that the appellant may also be served with
summons in that city where it maintains a branch office. This
Court has already held in the case of Cohen vs. Benguet
Commercial Co., Ltd., 34 Phil. 526; that the term "may be
served with summons" does not apply when the defendant
resides in the Philippines for, in such case, he may be sued
only in the municipality of his residence, regardless of the
place where he may be found and served with summons. As
any other corporation, the Clavecilla Radio System maintains
a residence which is Manila in this case, and a person can
have only one residence at a time (See Alcantara vs.
Secretary of the Interior, 61 Phil. 459; Evangelists vs. Santos,
86 Phil. 387). The fact that it maintains branch offices in
some parts of the country does not mean that it can be sued
in any of these places. To allow an action to be instituted in
any place where a corporate entity has its branch offices
would create confusion and work untold inconvenience to the
corporation.
It is important to remember, as was stated by this Court
in Evangelista vs. Santos, et al., supra, that the laying of the
venue of an action is not left to plaintiff's caprice because the
matter is regulated by the Rules of Court. Applying the
provision of the Rules of Court, the venue in this case was
improperly laid.
The order appealed from is therefore reversed, but without
prejudice to the filing of the action in Which the venue shall

be laid properly.
appellees.

With costs against the respondents-

respondent George C. Roxas of the complaint for collection

filed by petitioners.
It appears that sometime on October 28, 1987, Young Auto
Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its
president, Nelson Garcia and Vicente Sy, sold all of their
shares of stock in Consolidated Marketing & Development
Corporation (CMDC) to Roxas. The purchase price was
P8,000,000.00 payable as follows: a downpayment of
P4,000,000.00 and the balance of P4,000,000.00 in four post
dated checks of P1,000,000.00 each.
Immediately after the execution of the agreement, Roxas
took full control of the four markets of CMDC. However, the
vendors held on to the stock certificates of CMDC as security
pending full payment of the balance of the purchase price.

G.R. No. 104175 June 25, 1993

YOUNG AUTO SUPPLY CO. AND NEMESIO
GARCIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (THIRTEENTH
DIVISION) AND GEORGE CHIONG ROXAS,respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Antonio Nuyles for private respondent.
QUIASON, J.:
Petitioners seek to set aside the decision of respondent Court
of Appeals in CA-G.R. SP No. 25237, which reversed the Order
dated February 8, 1991 issued by the Regional Trial Court,
Branch 11, Cebu City in Civil Case No. CEB 6967. The order of
the trial court denied the motion to dismiss filed by

The first check of P4,000,000.00, representing the downpayment, was honored by the drawee bank but the four other
checks representing the balance of P4,000,000.00 were
dishonored. In the meantime, Roxas sold one of the markets
to a third party. Out of the proceeds of the sale, YASCO
received P600,000.00, leaving a balance of P3,400,000.00
(Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all
their rights and title to the proceeds of the sale of the CMDC
shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas
in the Regional Trial Court, Branch 11, Cebu City, praying that
Roxas be ordered to pay petitioners the sum of P3,400,00.00
or that full control of the three markets be turned over to
YASCO and Garcia. The complaint also prayed for the
forfeiture of the partial payment of P4,600,000.00 and the
payment of attorney's fees and costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his
answer. But despite said motion, he failed to do so causing
petitioners to file a motion to have him declared in default.

Roxas then filed, through a new counsel, a third motion for

extension of time to submit a responsive pleading.

A subsequent motion for reconsideration by petitioner was to

no avail.

On August 19, 1988, the trial court declared Roxas in default.

The order of default was, however, lifted upon motion of
Roxas.

Petitioners now come before us, alleging that the Court of

Appeals
erred in:

On August 22, 1988, Roxas filed a motion to dismiss on the

grounds that:

1. holding the venue should be in Pasay City,

and
not
in
Cebu
City
(where
both
petitioners/plaintiffs are residents;

1. The complaint did not state a cause of action

due to non-joinder of indispensable parties;
2. The claim or demand set forth in the
complaint had been waived, abandoned or
otherwise extinguished; and
3. The venue was improperly laid (Rollo, p. 299).
After a hearing, wherein testimonial and documentary
evidence were presented by both parties, the trial court in an
Order dated February 8, 1991 denied Roxas' motion to
dismiss. After receiving said order, Roxas filed another
motion for extension of time to submit his answer. He also
filed a motion for reconsideration, which the trial court
denied in its Order dated April 10, 1991 for being proforma (Rollo, p. 17). Roxas was again declared in default, on
the ground that his motion for reconsideration did not toll the
running of the period to file his answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the
Order of Default which was not accompanied with the
required affidavit or merit. But without waiting for the
resolution of the motion, he filed a petition for certiorari with
the Court of Appeals.
The Court of Appeals sustained the findings of the trial court
with regard to the first two grounds raised in the motion to
dismiss but ordered the dismissal of the complaint on the
ground of improper venue (Rollo, p. 49).

2. not finding that Roxas is estopped from

questioning the choice of venue (Rollo, p. 19).
The petition is meritorious.
In holding that the venue was improperly laid in Cebu City,
the Court of Appeals relied on the address of YASCO, as
appearing in the Deed of Sale dated October 28, 1987, which
is "No. 1708 Dominga Street, Pasay City." This was the same
address written in YASCO's letters and several commercial
documents in the possession of Roxas (Decision, p. 12; Rollo,
p. 48).
In the case of Garcia, the Court of Appeals said that he gave
Pasay City as his address in three letters which he sent to
Roxas' brothers and sisters (Decision, p. 12; Rollo, p. 47). The
appellate court held that Roxas was led by petitioners to
believe that their residence is in Pasay City and that he had
relied upon those representations (Decision, p. 12, Rollo, p.
47).
The Court of Appeals erred in holding that the venue was
improperly laid in Cebu City.
In the Regional Trial Courts, all personal actions are
commenced and tried in the province or city where the
defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of
Court].

There are two plaintiffs in the case at bench: a natural person

and a domestic corporation. Both plaintiffs aver in their
complaint that they are residents of Cebu City, thus:
1.1. Plaintiff Young Auto Supply Co., Inc.,
("YASCO") is a domestic corporation duly
organized and existing under Philippine laws
with principal place of business at M. J. Cuenco
Avenue, Cebu City. It also has a branch office at
1708 Dominga Street, Pasay City, Metro Manila.
Plaintiff Nemesio Garcia is of legal age, married,
Filipino citizen and with business address at
Young Auto Supply Co., Inc., M. J. Cuenco
Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p.
81).
The Article of Incorporation of YASCO (SEC Reg. No. 22083)
states:
THIRD That the place where the principal office
of the corporation is to be established or located
is at Cebu City, Philippines (as amended on
December 20, 1980 and further amended on
December 20, 1984) (Rollo, p. 273).
A corporation has no residence in the same sense in which
this term is applied to a natural person. But for practical
purposes, a corporation is in a metaphysical sense a resident
of the place where its principal office is located as stated in
the articles of incorporation (Cohen v. Benguet Commercial
Co., Ltd., 34 Phil. 256 [1916] Clavecilla Radio System v.
Antillon, 19 SCRA 379 [1967]). The Corporation Code
precisely requires each corporation to specify in its articles of
incorporation the "place where the principal office of the
corporation is to be located which must be within the
Philippines" (Sec. 14 [3]). The purpose of this requirement is
to fix the residence of a corporation in a definite place,
instead of allowing it to be ambulatory.

In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]),

this Court explained why actions cannot be filed against a
corporation in any place where the corporation maintains its
branch offices. The Court ruled that to allow an action to be
instituted in any place where the corporation has branch
offices,
would
create
confusion
and
work
untold
inconvenience to said entity. By the same token, a
corporation cannot be allowed to file personal actions in a
place other than its principal place of business unless such a
place is also the residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter
questioned the venue on the ground that its principal place
of business was in Cebu City, Roxas could argue that YASCO
was in estoppel because it misled Roxas to believe that Pasay
City was its principal place of business. But this is not the
case before us.
With the finding that the residence of YASCO for purposes of
venue is in Cebu City, where its principal place of business is
located, it becomes unnecessary to decide whether Garcia is
also a resident of Cebu City and whether Roxas was in
estoppel from questioning the choice of Cebu City as the
venue.
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals appealed from is SET ASIDE and the Order
dated February 8, 1991 of the Regional Trial Court is
REINSTATED.
SO ORDERED.

G.R. No. L-17699

March 30, 1962

DR. ANTONIO A. LIZARES, INC., petitioner,

vs.
HON. HERMOGENES CALUAG, as Judge of the Court of
First Instance of Quezon City,
and FLAVIANO CACNIO, respondents.
Ramon C. Aquino for petitioner.
Paulino Carreon for respondents.
CONCEPCION, J.:
Appeal by certiorari from a decision of the Court of Appeals
dismissing the petition of Dr. Antonio A. Lizares & Co., Inc.,
for a writ of prohibition, with costs against said petitioner.
On or about June 14, 1960, Flaviano Cacnio instituted Civil
Case No. Q-5197 of the Court of First Instance of Rizal,
Quezon City Branch, against said petitioner. In his complaint,
Cacnio alleged that on April 20, 1955, he bought from
petitioner, on installment, Lot 4, Block 1 of the Sinkang
Subdivision in Bacolod City, making therefor a downpayment
of P1,206, the balance of P10,858 to be paid in ten (10)
yearly installments of P1,085.80 each, with interest thereon
at the rate of 6% per annum; that on March 25, 1960, Cacnio
received from petitioner a letter demanding payment of
P7,324.69, representing arrears in the payment of
installments up to April 20, 1960, plus "regular and overdue"
interest, as well as "land taxes up to 70% of 1960"; that the
sum then due from Cacnio by way of arrears amounted only
to P5,824.69, he having paid P1,500 to petitioner "sometime
in 1958"; that in view of the aforementioned demand of
petitioner, Cacnio sent thereto a check for P5,824.69, dated
May 26, 1960, drawn by one Antonino Bernardo in favor of

said petitioner, in payment of the amount due from Cacnio by

way of arrears; that "without legal and equitable grounds"
therefor, petitioner returned said check and "refused the
tender of payment" aforementioned; that by reason of said
illegal act of petitioner, Cacnio is entitled to compensatory
damages in the sum of P5,000, plus P2,000 by way of
attorney's fees, Cacnio having been constrained to engage
the services of counsel and bring the action; and that
petitioner "is doing threatens, or is about to do, or is
procuring or suffering to be done some act in violation of"
Cacnio's rights respecting the subject of the action, viz. the
repossession of the lot bought by" the latter, who,
accordingly, prayed that petitioner be ordered "to accept the
payment being made" by him (Cacnio) and to pay him P5,000
as compensatory damages and P2,000 as attorney's fees,
and that, upon the filing of a bond to be fixed by the court, a
writ of preliminary injunction enjoining petitioner and its
agents or representatives from repossessing the lot adverted
to above be issued. Said writ of preliminary injunction was
issued on June 16, 1960.
On July 5, 1960, petitioner moved to dismiss the complaint
upon the ground that "venue is improperly laid," for the
action affects the title to or possession of real property
located in Bacolod City, which was the subject matter of a
contract, between petitioner and Cacnio, made in said City.
The motion having been denied by the Court of First Instance
of Rizal, Quezon City Branch, by an order of July 9, 1960,
upon the ground that the action was in personam, petitioner
filed with the Court of Appeals a petition, which was docketed
as Civil Case CA-G.R. No. 28013-R, praying that said order be
set aside and that a writ of prohibition be issued
commanding respondent Hon. Hermogenes Caluag, as Judge
of said Court, to desist from taking cognizance of said Civil
Case No. Q-5197. In due course, the Court of Appeals
rendered a decision on October 27, 1960, dismissing said
petition. Hence, this appeal by certiorari taken by petitioner
herein.
The issue is whether or not the main case falls under section
3 of Rule 5 of the Rules of Court, reading:

"Actions affecting title to, or for recovery of

possession, or for partition or condemnation of, or
foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the
property or any part thereof lies."
The Court of Appeals and the Court of First Instance of Rizal,
Quezon City Branch, held that Civil Case No. Q-5197 of the
latter court is an action in personam, and that, as such, it
does not fall within the purview of said section 3, and was
properly instituted in the court of first instance of the
province in which Cacnio, as plaintiff in said case, resided,
pursuant to section 1 of said rule 5.
We are unable to share such view. Although the immediate
remedy sought by Cacnio is to compel petitioner to accept
the tender of payment allegedly made by the former, it is
obvious that this relief is merely the first step to establish
Cacnio's title to the real property adverted to above.
Moreover, Cacnio's complaint is a means resorted to by him
in order that he could retain the possession of said property.
In short, venue in the main case was improperly laid and the
Court of First Instance of Rizal, Quezon City Branch, should
have granted the motion to dismiss. 1wph1.t
WHEREFORE, the decision appealed from is hereby reversed
and another one shall be entered directing respondent Judge
to desist from taking further cognizance of Civil Case No. Q5197 of said court, with costs against respondent Flaviano
Cacnio. It is so ordered.

G.R. No. L-53485 February 6, 1991

PATRIA ESUERTE and HERMINIA JAYME, petitioners,
vs.
HON. COURT OF APPEALS (Eleventh Division), HON.
RAFAEL T. MENDOZA, Judge, Branch VI, Court of First
Instance of Cebu and MA. BEVERLY TAN, respondents.
Romeo B. Esuerte for petitioners.
Eleno V. Andales & Sisinio M. Andales for private respondent.
MEDIALDEA, J.:p
This petition for certiorari with a prayer for preliminary
injunction seeks to set aside the decision of the Court of
Appeals in CA G.R. No. SP-08999-R, involving the same
parties.
An action for damages was filed by private respondent
Beverly Tan against herein petitioners Patria Esuerte and
Herminia Jayme with the Court of First Instance (now

Regional Trial Court) of Cebu and docketed as Civil Case No.

R-17584. The claim for damages arose from an incident
involving the parties and summarized by the Court of
Appeals, as follows:
. . . that on September 22, 23 and 27, 1978,
private respondent Ma. Beverly Tan, a Junior
Resident
Physician
of
Corazon
LocsinMontelibano Memorial Hospital, Bacolod City,
without any justifiable reason shouted at,
humiliated and insulted the petitioner, Patria
Esuerte, Head Nurse, Medicare Department of
the said hospital and as a result of the said
incident, said petitioner complained to the Chief
of the Hospital, Dr. Teodoro P. Motus, in writing.
The other petitioner, Herminia Jayme, who was
one of those who were present at the time of
the incident also sent a letter to the Chief of the
Hospital, Dr. Teodoro Motus, informing the latter
of what she had witnessed. As a result thereof,
private respondent was advised to explain in
writing by the Chief of the Hospital, but private
respondent instead of explaining only her side of
the incident also complained against the
petitioners. The Discipline and Grievance
Committee,
Corazon
Locsin-Montelibano
Memorial Hospital, conducted a fact-finding
investigation and later, the Chief of the Hospital,
Dr. Teodoro P. Motus, issued a resolution dated
November 8, 1978, transmitting the records of
the case to the Regional Health Office, No. 6,
Jaro, Iloilo City for appropriate action; . . . . (pp.
91-92, Rollo)
Esuerte and Jayme filed a motion to dismiss the complaint on
the ground of improper venue and for being premature for
failure of Tan to exhaust administrative remedies.
On January 2, 1979, the trial court denied the motion to
dismiss. The motion for reconsideration of the denial was
likewise denied by the court on February 16, 1979.

Esuerte and Jayme filed a petition for certiorari and

prohibition with a prayer for preliminary injunction with the
Court of Appeals. On September 18, 1979, the petition was
dismissed without pronouncement as to costs. The motion for
reconsideration of the decision was likewise denied for lack of
merit on February 18, 1980.
The following reasons were advanced by petitioners for the
allowance of this petition:
1) The Court of Appeals committed gross error
and grave abuse of discretion when it dismissed
the petition despite petitioners' overwhelming
evidence showing that the venue of private
respondent's action (Civil Case No. R-17584)
was improperly laid.
2) The Court of Appeals committed gross error
and grave abuse of discretion when it dismissed
the petition despite petitioners' overwhelming
evidence showing that the filing of Civil Case No.
R-17584 is premature due to non-exhaustion of
administrative remedies.
It is the contention of petitioners that the proper venue of the
action filed by Tan should be Bacolod City and not Cebu City.
At the time of the filing of her action in court, Tan was
actually residing and may be found in Bacolod City. In fact, in
her "Statement of Assets and Liabilities," submitted by Tan to
her employer, the Corazon Locsin Montelibano Memorial
Hospital, she declared that she is a resident of FRAYU
INTERIOR, 6th Street, Bacolod City.
Section 2(b), Rule 4 of the Rules of Court provides:
Sec. 2. Venue in Courts of First Instance.
xxx xxx xxx
(b) Personal Actions. All other actions may be
commenced and tried where the defendants or

any of the defendants resides or may be found,

or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff.
The choice of venue for personal actions cognizable by the
Regional Trial Court is given to the plaintiff but not to the
plaintiff's caprice because the matter is regulated by the
Rules of Court (see Clavecilla Radio System v. Antillon, 19
SCRA 379). The rule on venue, like other procedural rules, are
designed to insure a just and orderly administration of justice
or the impartial and evenhanded determination of every
action and proceeding (Sy v. Tyson Enterprises Inc., 19 SCRA
367). The option of the plaintiff in personal actions
cognizable by the Regional Trial Court is either the place
where the defendant resides or may be found or the place
where the plaintiff resides. If plaintiff opts for the latter, he is
limited to that place.
"Resides" in the rules on venue on personal actions means
the place of abode, whether permanent or temporary, of the
plaintiff or defendants as distinguished from "domicile" which
denotes a fixed permanent residence (Dangwa Transportation
Co., Inc. v. Sarmiento, G.R. No. L-22795, January 31, 1977, 75
SCRA 124). And, in Hernandez v. Rural Bank of Lucena, Inc.,
G.R. No. L-29791, January 10, 1978, 81 SCRA 75), venue of
personal actions should be at the place of abode or place
where plaintiffs actually reside, not in domicile or legal
residence.
In Koh v. CA, L-40428, December 17, 1975, 70 SCRA 298;
305, We ruled:
Applying the foregoing observation to the
present case, We are fully convinced that
private respondent Coloma's protestations of
domicile in San Nicolas, Ilocos Norte, based on
his manifested intention to return there after the
retirement of his wife from government service
to justify his bringing of an action for damages
against petitioner in the C.F.I. of Ilocos Norte, is
entirely of no moment since what is of

paramount importance is where he actually

resided or where he may be found at the time
he brought the action, to comply substantially
with the requirements of Sec. 2(b) of Rule 4,
Rules of Court, on venue of personal actions. . ..
As perspicaciously observed by Justice Moreland, the purpose
of procedure is not to restrict the court's jurisdiction over the
subject matter but to give it effective facility "in righteous
action," "to facilitate and promote the administration of
justice" or to insure "just judgments" by means of a fair
hearing. If the objective is not achieved, then "the
administration
of
justice
becomes
incomplete
and
unsatisfactory and lays itself open to criticism." (Manila
Railroad Co. v. Attorney General, 20 Phil. 523, 530).
There is no question that private respondent as plaintiff in
the Civil Case is a legal resident of Cebu City. Her parents live
there. However, it cannot also be denied that at the time of
her filing of the complaint against petitioners, she was a
temporary resident of Bacolod City. She was then employed
with the Corazon Locsin Montelibano Memorial Hospital,
Bacolod City, as resident physician. Moreover, the acts
complained of were committed in Bacolod City. The private
respondents were all residents of Bacolod City at the time of
the bringing of the action. Though Tan's employment was
only temporary there was no showing when this employment
will end. Justice would be better served if the complaint were
heard and tried in Bacolod City where all the parties resided.
The second ground raised by petitioners is devoid of merit.
The alleged need by private respondent Tan to exhaust
administrative remedies before filing the complaint for
damages does not apply to the instant case. Private
respondent as plaintiff in the civil Case for damages has no
administrative remedy available to her. It is true that the
same incident complained of in the administrative case filed
by petitioners against Tan is the subject of the action for
damages filed by Tan against the petitioners in the trial court.
However, the cause of action in the administrative case is
different from that of the civil case for damages. While the

complainant in the administrative case may be a private

person, it is the government who is the aggrieved party and
no award for damages may be granted in favor of private
persons. In the civil action for damages, the trial court's
concern is whether or not damages, personal to the plaintiff,
were caused by the acts of the defendants. The civil action
for damages can proceed notwithstanding the pendency of
the administrative action.
WHEREFORE, the position is GRANTED. The questioned
decision of the Court of Appeals is SET ASIDE. Civil Case No.
R-17584 is DISMISSED for improper venue.
SO ORDERED.

G.R. No. L-28742 April 30, 1982

VIRGILIO CAPATI, plaintiff-appellant,
vs.
DR. JESUS P. OCAMPO, defendant-appellee.
ESCOLIN, J.:
We set aside the order of the Court of First Instance of
Pampanga in Civil Case No. 3188 which dismissed the
plaintiff's complaint on ground of improper venue.
Plaintiff Virgilio Capati a resident of Bacolor, Pampanga, was
the contractor of the Feati Bank for the construction of its
building in Iriga, Camarines Sur. On May 23, 1967, plaintiff
entered into a sub-contract with the defendant Dr. Jesus
Ocampo, a resident of Naga City, whereby the latter, in
consideration of the amount of P2,200.00, undertook to
construct the vault walls, exterior walls and columns of the
said Feati building in accordance with the specifications
indicated therein. Defendant further bound himself to
complete said construction on or before June 5, 1967 and, to
emphasize this time frame for the completion of the
construction job, defendant affixed his signature below the
following stipulation written in bold letters in the subcontract: "TIME IS ESSENTIAL, TO BE FINISHED 5 JUNE' 67."
Claiming that defendant finished the construction in question
only on June 20, 1967, plaintiff filed in the Court of First
Instance of Pampanga an action for recovery of
consequential damages in the sum of P85,000.00 with
interest, plus attorney's fees and costs. The complaint
alleged inter alia that "due to the long unjustified delay
committed by defendant, in open violation of his express
written agreement with plaintiff, the latter has suffered great
irreparable loss and damage ... "
Defendant filed a motion to dismiss the complaint on the
ground that venue of action was improperly laid. The motion
was premised on the stipulation printed at the back of the
contract which reads:

14. That all actions arising out, or relating to this

contract may be instituted in the Court of First
Instance of the City of Naga.
Plaintiff filed an opposition to the motion, claiming that their
agreement to hold the venue in the Court of First Instance of
Naga City was merely optional to both contracting parties. In
support thereof, plaintiff cited the use of the word "may " in
relation with the institution of any action arising out of the
contract.
The lower court, in resolving the motion to dismiss, ruled that
"there was no sense in providing the aforequoted stipulation,
pursuant to Sec. 3 of Rule 4 of the Revised Rules of Court, if
after all, the parties are given the discretion or option of filing
the action in their respective residences," and thereby
ordered the dismissal of the complaint.
Hence, this appeal.
The rule on venue of personal actions cognizable by the
courts of first instance is found in Section 2 (b), Rule 4 of the
Rules of Court, which provides that such "actions may be
commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff."
The said section is qualified by the following provisions of
Section 3 of the same rule:
By written agreement of the parties the venue
of an action may be changed or transferred from
one province to another.
Defendant stands firm on his contention that
because of the aforequoted covenant contained
in par. 14 of the contract, he cannot be sued in
any court except the Court of First Instance of
Naga City. We are thus called upon to rule on
the issue as to whether the stipulation of the
parties on venue is restrictive in the sense that
any litigation arising from the contract can be

filed only in the court of Naga City, or merely

permissive in that the parties may submit their
disputes not only in Naga City but also in the
court where the defendant or the plaintiff
resides, at the election of the plaintiff, as
provided for by Section 2 (b) Rule 4 of the Rules
of Court.
It is well settled that the word "may" is merely
permissive and operates to confer discretion
upon a party. Under ordinary circumstances, the
term "may be" connotes possibility; it does not
connote certainty. "May" is an auxillary verb
indicating liberty, opportunity, permission or
possibility. 1
In Nicolas vs. Reparations Commission 2, a case involving the
interpretation of a stipulation as to venue along lines similar
to the present one, it was held that the agreement of the
parties which provided that "all legal actions arising out of
this contract ... may be brought in and submitted to the
jurisdiction of the proper courts in the City of Manila," is not
mandatory.
We hold that the stipulation as to venue in the contract in
question is simply permissive. By the said stipulation, the
parties did not agree to file their suits solely and exclusively
with the Court of First Instance of Naga. They merely agreed
to submit their disputes to the said court, without waiving
their right to seek recourse in the court specifically indicated
in Section 2 (b), Rule 4 of the Rules of Court.
Since the complaint has been filed in the Court of First
Instance of Pampanga, where the plaintiff resides, the venue
of action is properly laid in accordance with Section 2 (b),
Rule 4 of the Rules of Court.
WHEREFORE, the order appealed from is hereby set aside.
Let the records be returned to the court of origin for further
proceedings. Costs against defendant-appellee.

SO ORDERED.