Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where
he has a place of business through which the contract has been made, or before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation
with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San Francisco to
Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to
San Francisco. 1
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila.
Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He
therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved to
dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint could be
instituted only in the territory of one of the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the contract had been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the
petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of Appeals, which
affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same was
denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the
constitutional guarantees of due process and equal protection.
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation
by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate,
through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal
adherence thereto. "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of
law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that there is no
substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The
classification of the places in which actions for damages may be brought is arbitrary and irrational and thus violates the due process and
equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a
judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper party; and the resolution
of the question is unavoidably necessary to the decision of the case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of powers, which
enjoins upon the departments of the government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first carefully
studied and determined to be constitutional before it was adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the four
places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline and its
passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case can be decided on other
grounds without the necessity of resolving the constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is
inapplicable because of a fundamental change in the circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies under "the
conditions prevailing then and which have long ceased to exist." He argues that in view of the significant developments in the airline
industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for approval, it has become
unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a
legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the parties contracted
have changed so materially and so unexpectedly as to create a situation in which the exaction of performance would be
unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could not have
foreseen at the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The
Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee. They
wished to design a system of air law that would be both durable and flexible enough to keep pace with these changes . . .
The ever-changing needs of the system of civil aviation can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone
is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely
unforeseen although they were expected in a general sense only. In fact, the Convention itself, anticipating such developments, contains
the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this
convention to call for the assembling of a new international conference in order to consider any improvements which
may be made in this convention. To this end, it will communicate with the Government of the French Republic which
will take the necessary measures to make preparations for such conference.
But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic
stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, usually made by
the head of State, with a statement of the reasons why compliance with the treaty is no longer required.
In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under
its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting
Parties.
(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the
party which shall have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but
of the other branches of government. This is a political act. The conclusion and renunciation of treaties is the prerogative of the political
departments and may not be usurped by the judiciary. The courts are concerned only with the interpretation and application of laws and

treaties in force and not with their wisdom or efficacy.

C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this
would deny him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive
denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as
embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not
mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred
from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw
Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule
merely of venue and was waived by defendant when it did not move to dismiss on the ground of improper venue.
By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in
which, according to the contract made by the parties, the place of departure and the place of destination, whether or not
there be a break in the transportation or a transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket.
When the contract of carriage provides for the transportation of the passenger between certain designated terminals "within the territories
of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of
the airline and its passenger.
Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United
States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action
for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided . While the petitioner
cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private respondent
supporting the conclusion that the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which otherwise
would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the
consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant
to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent
or agreement of the parties, whether or not a prohibition exists against their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of
Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1).
Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction
other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact,
the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot
be left to the will of the parties regardless of the time when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of
Article 32. Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the
case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for domestic decision questions regarding
the suitability and location of a particular Warsaw Convention case.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the
international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a
particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is
determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is
submitted.
The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from amending the rules of
Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw Convention was not intended to preclude

them from doing so "after the damages occurred."

Article 32 provides:
Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by
which the parties purport to infringe the rules laid down by this convention, whether by deciding the law to be applied,
or by altering the rules as to jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration
clauses shall be allowed, subject to this convention, if the arbitration is to take place within one of the jurisdictions
referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article should be
regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack
of jurisdiction, the private respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that even
granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order. The respondent
court was correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in
its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to entertain the
Complaint" which SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the
gist of NOA's argument in its motion is that the Philippines is not the proper place where SANTOS could file the action
meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is
erroneous, the fact is the proper ground of the motion improper venue has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances justifying
this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their
original motion to dismiss. Even so, the motivation of the private respondent should have been taken into account by
both the trial judge and the respondent court in arriving at their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article 28(1)
is a venue provision. However, the private respondent avers that this was in effect reversed by the case of Aranas v. United
Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is binding on this Court, of
course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later case of Aranas insofar as its
pronouncements on jurisdiction conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this
case was properly filed in the Philippines, because Manila was the destination of the plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg
purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not
of the return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed an
action for damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction but
the motion was denied thus:
. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket
booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a
certain flight, a certain time and a certain class, but that the time for her to return remained completely in her power.
Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to return to Montreal between certain dates.
...
The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw Convention is
considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least two "places of
destination," viz., the "place of destination" of a particular flight either an "outward destination" from the "point of
origin" or from the "outward point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg
was killed, was Los Angeles according to the ticket, which was the contract between the parties and the suit is properly
filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to San
Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San Francisco should be considered the petitioner's
destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern District
of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators
are almost unanimous in concluding that the "place of destination" referred to in the Warsaw Convention "in a trip

consisting of several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return
portion of the ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger
back to the place of origin within the prescribed time and. the passenger for her part agreed to pay the fare and, in fact,
did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage, The fact that the passenger
could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not
contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued
a round trip ticket.
We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the
contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket
shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between
the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered
merely an agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different
jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have preferred the Butz
case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and correct, interpretation of
Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed
stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the
singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage has one place of
departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw Convention, this
case was properly filed in the Philippines because the defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts
have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier means every
place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a
corporation includes any country where the airline carries on its business on "a regular and substantial basis," and that
the United States qualifies under such definition. The meaning of domicile cannot, however, be so extended. The
domicile of a corporation is customarily regarded as the place where it is incorporated, and the courts have given the
meaning to the term as it is used in article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir.
1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian
World Airlines (E.D. pa. 1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F.
Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs'
claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out two places where an
action for damages may be brought; the country where the carrier's principal place of business is located, and the country
in which it has a place of business through which the particular contract in question was made, that is, where the ticket
was bought, Adopting the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a
third intermediate category. It would obviously introduce uncertainty into litigation under the article because of the
necessity of having to determine, and without standards or criteria, whether the amount of business done by a carrier in a
particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a
request to create a new jurisdictional standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French
law? . . . We think this question and the underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the
choice of law sense, to determine the meaning and scope of the Convention's terms. Of course, French legal usage must
be considered in arriving at an accurate English translation of the French. But when an accurate English translation is
made and agreed upon, as here, the inquiry into meaning does not then revert to a quest for a past or present French law
to be "applied" for revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in
French that in interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in
its present state of development. There is no suggestion in the treaty that French law was intended to govern the meaning
of Warsaw's terms, nor have we found any indication to this effect in its legislative history or from our study of its
application and interpretation by other courts. Indeed, analysis of the cases indicates that the courts, in interpreting and
applying the Warsaw Convention, have, not considered themselves bound to apply French law simply because the
Convention is written in French. . . .

We agree with these rulings.

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By specifying
the three other places, to wit, the principal place of business of the carrier, its place of business where the contract was made, and the place
of destination, the article clearly meant that these three other places were not comprehended in the term "domicile."
D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not
apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith, discriminated against
the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and gave his reserved seat to someone
who had no better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least two
American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not
provided for in the Convention as modified by the Montreal Agreement. It does not, however, limit the kind of cause of
action on which the relief may be founded; rather it provides that any action based on the injuries specified in Article 17
"however founded," i.e., regardless of the type of action on which relief is founded, can only be brought subject to the
conditions and limitations established by the Warsaw System. Presumably, the reason for the use of the phrase "however
founded," in two-fold: to accommodate all of the multifarious bases on which a claim might be founded in different
countries, whether under code law or common law, whether under contract or tort, etc.; and to include all bases on which
a claim seeking relief for an injury might be founded in any one country. In other words, if the injury occurs as described
in Article 17, any relief available is subject to the conditions and limitations established by the Warsaw System,
regardless of the particular cause of action which forms the basis on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case
from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(l) of the
Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit
his liability. if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the
law of the court to which the case is submitted, is considered to be equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be vested
with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction. Article 22 23 merely
fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful
misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first been commenced
properly under the rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his
protection.
Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in
favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the
restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an amendment that
would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. The reason for this proposal is
explained thus:
In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air
carrier which is generally subject to the jurisdiction of the US, Article 28 would prevent that person from suing the
carrier in the US in a "Warsaw Case" even though such a suit could be brought in the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala City on
March
8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties. Pending
such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw

Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own courts simply
because the defendant airline has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at
least inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw
Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will have to litigate in the
American courts does not necessarily mean he will litigate in vain. The judicial system of that country in known for its sense of fairness
and, generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and
Bellosillo, JJ., concur.
SECOND DIVISION

[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.
DECISION
TORRES, JR., J.:
Business Corporations, according to Lord Coke, have no souls. They do business peddling goods, wares
or even services across national boundaries in soulless forms in quest for profits albeit at times,
unwelcomed in these strange lands venturing into uncertain markets and, the risk of dealing with wily
competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the Court of Appeals on June 7, 1991,
sustaining the RTC Order dated February 22, 1991, denying the petitioners Motion to Dismiss, and directing
the issuance of a writ of preliminary injunction, and its companion Resolution of October 9, 1991, denying the
petitioners Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC MULTI-TRADE
INC., (ASPAC, for brevity) are both domestic corporations, while petitioner Francisco S. Aguirre is their
President and majority stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC,
for brevity) are corporations duly organized and existing under the laws of the State of Alabama, United
States of America. There is no dispute that ITEC is a foreign corporation not licensed to do business in the
Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as Representative
Agreement.[1] Pursuant to the contract, ITEC engaged ASPAC as its exclusive representative in the
Philippines for the sale of ITECs 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 twentyfour months. After the lapse of the agreed period, the agreement was renewed for another twenty-four
months.
Through a License Agreement[3] entered into by the same parties on November 10, 1988, ASPAC was

able to incorporate and use the name ITEC in its own name. Thus, ASPAC Multi-Trade, Inc. became legally
and publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their sole customer, the
Philippine Long Distance Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT executed a document
entitled PLDT-ASPAC/ITEC PROTOCOL[4] which defined the project details for the supply of ITECs 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 ITECs products specifications to develop their own line of equipment and product support, which are
similar, if not identical to ITECs own, and offering them to ITECs 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, plaintiffs trademark, internationally known as ITEC; and the
recovery from defendants in solidum, damages of at least P500,000.00, attorneys fees and litigation
expenses.
In due time, defendants filed a motion to dismiss[7] the complaint on the following grounds: (1) That
plaintiff has no legal capacity to sue as it is a foreign corporation doing business in the Philippines without the
required BOI authority and SEC license, and (2) that plaintiff is simply engaged in forum shopping which
justifies the application against it of the principle of forum non conveniens.
On February 8, 1991, the complaint was amended by virtue of which ITEC INTERNATIONAL, INC. was
substituted as plaintiff instead of ITEC, INC.[8]
In their Supplemental Motion to Dismiss,[9] defendants took note of the amendment of the complaint and
asked the court to consider in toto their motion to dismiss and their supplemental motion as their answer to
the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court a quo on February 22, 1991,
issued its Order:[10] (1) denying the motion to dismiss for being devoid of legal merit with a rejection of both
grounds relied upon by the defendants in their motion to dismiss, and (2) directing the issuance of a writ of
preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent Court of Appeals on a Petition
for Certiorari and 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 courts) ruling. We
therefore are unable to find in respondent Judges issuance of said writ the grave abuse of discretion ascribed
thereto by the petitioners.
In fine, We find that the petition prima facie does not show that Certiorari lies in the present case and
therefore, the petition does not deserve to be given due course.
WHEREFORE, the present petition should be, as it is hereby, denied due course and accordingly, is hereby

dismissed. Costs against the petitioners.

SO ORDERED."[12]
Petitioners filed a motion for 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 businesslike 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
ITECs 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 witness to the respondents' activities within the Philippines in pursuit of their business dealings:
a. While petitioner ASPAC was the authorized exclusive representative for three (3) years, it solicited from
and closed several sales for and on behalf of private respondents as to their products only and no other, to
PLDT, worth no less than US $15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by private respondents
sole witness, Mr. Clarence Long, is not in the name of petitioner ASPAC as such representative, but in the
name of private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as PLDT-ASPAC/ITEC PROTOCOL (Annex C of the original and amended
complaints) which defined the responsibilities of the parties thereto as to the supply, installation and
maintenance of the ITEC equipment sold under said Contract No. 1 is, as its very title indicates, in the names
jointly of the petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of US $15 Million, private respondent ITEC, Inc. issued in its letter
head, a Confirmation of payment dated November 13, 1989 and its Invoice dated November 22, 1989
(Annexes 1 and 2 of the Motion to Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which
were identified by private respondents 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 courts 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 petitioners 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 or 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 percentum of the FOB value of all ITEC
equipment sold to customers within the territory as a direct result of REPRESENTATIVEs sales efforts.[21]
More importantly, private respondents charge 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 respondents echoes the respondent courts 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 a 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 license 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 totaling 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
corporations 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 corporations 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 courts 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
ITECs 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 respondents 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 ITECs 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 ITECs 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 courts 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).
Petitioners 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 are not at liberty to question plaintiffs 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 conveniens.[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 courts 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
suits 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.
Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.
THIRD DIVISION

[G.R. No. 115849. January 24, 1996]

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution
of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.

DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of
letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101
hectares of land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may
the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate
such apparent authority after said contract has been deemed perfected? During the pendency of a suit for
specific performance, does the filing of a derivative suit by the majority shareholders and directors of the
distressed bank to prevent the enforcement or implementation of the sale violate the ban against forumshopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review
on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of
the respondent Court of Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14,
1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under
paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to
P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and
hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial courts[2] decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at
Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer
Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the
plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million
(P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T.
Nos. T-106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6)
titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the
sums of P 200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary
damages;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by
way of attorneys fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the
amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition
was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective
memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution
dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the
case to the undersigned ponente for the writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank,
for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines.
Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this
case, Head Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside
through this petition.

The Facts

The facts of this case are summarized in the respondent Courts Decision,[3] as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six
parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment
and Development Corporation which had them mortgaged with the bank as collateral fora loan. The original
plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated
negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel,
Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the
defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990,
pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30, 1987 (Exh. B), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn.

Mr. Mercurio Q. Rivera

Manager, Property Management Dept.

Gentlemen:
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder
located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
TCT NO.

AREA

T-106932
113,580 sq.m.
T-106933
70,899 sq.m.
T-106934
52,246 sq.m.
T-106935
96,768 sq.m.
T-106936
187,114 sq.m.
T-106937
481,481 sq.m.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is
hereunder quoted (Exh. C):
September 1, 1987
J-P M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doa Andres II

Rosario, Pasig, Metro Manila

Attention:
JOSE O. JANOLO Dear Sir:
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned
by Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for
more than 101 hectares on lot basis.
We shall be very glad to hear your position on the matter.
Best regards.
(4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh.
September 17, 1987
Producers Bank
Paseo de Roxas
Makati, Metro Manila
Attention: Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I
would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting
on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank.
Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987,
plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. E):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention:
Mr. Mercurio Rivera
Re:

101 Hectares of Land in Sta. Rosa, Laguna

Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your
offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total
price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the
Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T.
Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F):
Attention:

Atty. Demetrio Demetria

Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa,
Laguna is under study yet as of this time by the newly created committee for submission to the newly
designated Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with
what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused
by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to
defendant Rivera (Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected
sale agreement. Defendants refused to receive both the payment and the letter. Instead, the parcels of land
involved in the transaction were advertised by the bank for sale to any interested buyer (Exhs. H and H1). Plaintiffs demanded the execution by the bank of the documents on what was considered as a perfected
agreement. Thus:
Mr. Mercurio Rivera
Manager, Producers Bank

Paseo de Roxas, Makati

Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in
Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in
the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was
received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also
informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your
commitment. Instead, you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute
the necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit
the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary
court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in
its communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our
Conservator for proper disposition. However, no response came from the Acting Conservator. On December
14, 1987, the plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting
Conservator, defendant Encarnacion. Plaintiffs letter reads:

Attn.:

PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Atty. NIDA ENCARNACION Central Bank Conservator
Gentlemen:

We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the
amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932,
106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase
price of the said lots. Please inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through
counsel, made a final demand for compliance by the bank with its obligations under the considered perfected
contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter
dated May 12, 1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting
Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the
plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the
defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under
what the plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its
Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with
the bank resulted in a perfected contract of sale. The defendants took the position that there was no such
perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no
meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and
Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks
outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial
court issued an order denying the motion to intervene on the ground that it was filed after trial had already
been concluded. It also denied a motion for reconsideration filed thereafter. From the trial courts decision, the
Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently
affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for
intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several
other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action
(hereafter, the Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati,
Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo to declare any
perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the
sale.[4] In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case
then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a
Motion for Leave of Court to Dismiss the Case Without Prejudice. Private respondent opposed this motion on
the ground, among others, that plaintiffs act of forum shopping justifies the dismissal of both cases, with
prejudice.[5] Private respondent, in his memorandum, averred that this motion is still pending in the Makati
RTC.
In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution
of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke
acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and
may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo
(substituted by respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating
the agency and the contract, has no authority to revoke the contract of sale.

The Issues

From the foregoing positions of the parties, the issues in this case may be summed up as follows:

1) Was there forum-shopping on the part of petitioner Bank?

2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers
and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated
Revised Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not
(t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the
Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or
proceeding is pending in said courts or agencies. A violation of the said circular entails sanctions that include
the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating for the record(,) the pendency of Civil Case No. 92-1606
before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of
petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to
Dismiss Without Prejudice.[9]
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of
actual forum shopping because the instant petition pending before this Court involves identical parties or
interests represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial
Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a
judgment or resolution in either case will constitute res judicata in the other.[10]
On the other hand, petitioners explain[11] that there is no forum-shopping because:
1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant,
whereas in the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the
plaintiff;
2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the
Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal
question for the courts to decide;
4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law,[12] where non-resident
litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or
excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the
principle of forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not
precluded from seeking remedies elsewhere.
In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have
his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment
or verdict. Hence, according to Words and Phrases,[14] a litigant is open to the charge of forum shopping
whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and
litigants should be encouraged to attempt to settle their differences without imposing undue expense and

vexatious situations on the courts.

In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues,
as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of
venues), the Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant
or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice
of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a
public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa
criminal - each remedy being available independently of the others - although he cannot recover more than
once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of
his action. This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts
and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme
inconvenience to some of the parties to the action.
Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And
this necessitated or had given rise to the formulation of rules and canons discouraging or altogether
prohibiting the practice.[15]
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device
for solving problems has been abused and misused to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already
mentioned, promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules
and Guidelines issued on January 11, 1983 and had struck down in several cases[16] the inveterate use of this
insidious malpractice. Forum-shopping as the filing of repetitious suits in different courts has been
condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs
of Orval Hughes, et al., as a reprehensible manipulation of court processes and proceedings x x x. [17] When
does forum-shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed
in the courts but also in connection with litigations commenced in the courts while an administrative
proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of
an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where
the court in which the second suit was brought, has no jurisdiction [18]
The test for determining whether a party violated the rule against forum-shopping has been laid down in
the 1986 case of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that is, forum-shopping exists where
the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in
the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at
least such parties as represent the same interests in both actions, as well as identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars
is such that any judgment rendered in the other action, will, regardless of which party is successful, amount
to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.
xxx

xxx

xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards
parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree
sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same
identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction will
prevent any further delay in the settlement of the controversy which might ensue from attempts to seek
reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive.

Consequently, where a litigant (or one representing the same interest or person) sues the same party
against whom another action or actions for the alleged violation of the same right and the enforcement of the
same relief is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final
judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case,
forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two[20] (or
more) complaints or petitions, and for the imposition of the other sanctions, which are direct contempt of
court, criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is
obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of
reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint[21] in the
Second Case seeks to declare such purported sale involving the same real property as unenforceable as
against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority
stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the
original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is
the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to
respondent. In Danville Maritime, Inc. vs. Commission on Audit,[22] this Court ruled that the filing by a party of
two apparently different actions, but with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents
therein - PNOC in the case before the lower court and the COA in the case before this Court and sought what
seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA
dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by
and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin
the PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and
for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and
damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the
ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner,
and to overturn the letter-directive of the COA ofOctober 10, 1988 disapproving the sale. (italics supplied)
In an earlier case,[23] but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in
this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forumshopping. Both actions unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners claim of absence of identity simply because the PCGG had not been
impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement,
is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and
sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of
implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the
pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such
implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took
place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not
become functus oflcio. It remained an effective vehicle for obtention of relief; and petitioners remedy in the
premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to
include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done.
The remedy was certainly not the institution of another action in another forum based on essentially the same
facts. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both
their actions, in this Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented.
Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they
represent the same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter
in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the
assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
derivative suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the

Producers Bank of the Philippines.[24] Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he
holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to
sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90
SCRA 40, 47 [1979]; italics supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by
the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That
being so, then they really represent the Bank. So, whether they sued derivatively or directly, there is
undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate
and distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a
means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of
knavery or crime, the veil with which the law covers and isolates the corporation from the members or
stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of
individuals.[25]
In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the
instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant
violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct
actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly
where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending
corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage
corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum
shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that
there is identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in
the (first) case while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers,
Inc. vs. Regional Trial Court, Branch 63, Makati, etc. et al.,[27] where the Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new
action against the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as
causes of action, specific denials, special and affirmative defenses or even counterclaims. Thus, Velhagens
and Kings motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as
such did not exist in the first place. (italics supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen
the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and
the present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file
any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or
counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the
petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they
repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in
the process creating the possibility of conflicting decisions being rendered by the different fora upon the same
issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring

the parties from enforcing or implementing the said sale. Indeed, a final decision in one would constitute res
judicata in the other.[28]
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because
petitioners present counsel entered their appearance only during the proceedings in this Court, and the
Petitions VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second
Case to show good faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us;
thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them
in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and
processes. They are warned that a repetition of the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forumshopping but also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there was, on the basis of the facts
established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been
established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as
acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title
Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified
to by the Banks Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is
definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met
with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early
August 1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of
Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon
by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A:
The procedure runs this way: Acquired assets was turned over to me and then I published it in the
form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was
instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer,
formal offer and upon having been offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the borrower, bid price during the
foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to buy which the Committee considers
and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that
submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is
the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property,
dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and
plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to present the
offer to the Committee before which the said official is authorized to discuss information relative to price
determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official
information regarding the price, as determined by the Committee and approved by the Conservator, can be
had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of
plaintiff Demetria is clear on this point (TSN of May 31, 1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him pointblank his authority to sell any property?
A:

No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take
because he was saying that the matter of pricing will be passed upon by the committee. And
when I asked him how long it will take for the committee to decide and he said the committee
meets every week. If I am not mistaken Wednesday and in about two weeks (sic) time, in effect
what he was saying he was not the one who was to decide. But he would refer it to the

committee and he would relay the decision of the committee to me.

Q: Please answer the question.
A:

He did not say that he had the authority(.) But he said he would refer the matter to the
committee and he would relay the decision to me and he did just like that.

Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with
Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of
Rivera and the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the
plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of
P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept
such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the
plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator and
ultimately the bank itself with the set price on the other, and considering further the discussion of price at the
meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion
than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at
P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by the
Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for
discussion by the Committee of such matters as original loan of borrower, bid price during foreclosure, total
claim of the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as
clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the
property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not
discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As
correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on
this point are at best equivocal and considering the gratuitous and self-serving character of these
declarations, the banks submission on this point does not inspire belief. Both Co and Entereso, as members of
the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the
Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of
the Committee. It is important to note that negotiations on the price had started in early August and the
plaintiffs had already offered an amount as purchase price, having been made to understand by Rivera, the
official in charge of the negotiation, that the price will be submitted for approval by the bank and that the
banks decision will be relayed to plaintiffs. From the facts, the amount of P5.5 Million has a definite
significance. It is the official bank price. At any rate, the bank placed its official, Rivera, in a position of
authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank.
The bank cannot turn around and later say, as it now does, that what Rivera states as the banks action on
the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation
knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority,
and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any
one who has in good faith dealt with the corporation through such agent, he estopped from denying his
authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential
Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).[29]
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the
contract; (3)
Cause of the obligation which is established.
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels
of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third
requisites.
Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which
Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was
nothing for Ejercito (in substitution of Demetria and Janolo) to accept.[30] They disputed the factual basis of
the respondent Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank
counter-offered P5.5 million. We have perused the evidence but cannot find fault with the said Courts findings
of fact. Verily, in a petition under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not
reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence

presented by respondent more than that presented by petitioners is not by itself a reversible error. in fact,
such findings merit serious consideration by this Court, particularly where, as in this case, said courts
carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was
extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into the contractual elements of
consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine
of apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals,
[31] where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by
the agent. The agents apparent representation yields to the principals true representation and the contract
is considered as entered into between the principal and the third person (citing National Food Authority vs.
Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings
of the officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p.
417). A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the
frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom
(10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota
Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the
public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith
will be eroded where banks do not exercise strict care in the selection and supervision of its employees,
resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied
authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of
the Property Management Department of the Bank. By his own admission, Rivera was already the person in
charge of the Banks acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial
meeting between the buyers and Rivera, the latter suggested that the buyers offer should be no less than
P3.3 million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July
30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property
for P4.25 million (TSN, July 30, 1990, p. 12);
(f)
Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank
(TSN, January 16, 1990, p. 18);
(g)
Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the
Banks offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a
major shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h)
In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting
for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was
the officer mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and
S-I).

In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court, through
Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the
officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his
dealings with buyers.
To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and
testimony which seek to establish Riveras actual authority. These pieces of evidence, however, are inherently
weak as they consist of Riveras self-serving testimony and various inter-office memoranda that purport to
show his limited actual authority, of which private respondent cannot be charged with knowledge. In any
event, since the issue is apparent authority, the existence of which is borne out by the respondent Courts
findings, the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned.
[33]
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had
once acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras
limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the
buyers had no notice of Riveras actual authority prior to the sale. In fact, the Bank has not shown that they
acted as its counsel in respect to any acquired assets; on the other hand, respondent has proven that
Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership),
one of whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter
dated September 17, 1987 extinguished the Banks offer of P5.5 million.[34] They disputed the respondent
Courts finding that there was a meeting of minds when on 30 September 1987 Demetria and Janolo through
Annex L (letter dated September 30, 1987) accepted Riveras counter offer of P5.5 million under Annex J
(letter dated September 17, 1987), citing the late Justice Paras,[35] Art. 1319 of the Civil Code[36] and related
Supreme Court rulings starting with Beaumont vs. Prieto.[37]
However, the above-cited authorities and precedents cannot apply in the instant case because, as found
by the respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his
letter dated September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria
and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter
of September 30, 1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that
the September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5
million.[38] However, both the trial court and the Court of Appeals found petitioners testimonial evidence
not credible, and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that
private respondents evidence is more in keeping with truth and logic - that during the meeting on September
28, 1987, Luis Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee
and could no longer be lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming arguendo that the
counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5
million price during theSeptember 28, 1987 meeting revived the said offer. And by virtue of the September
30, 1987 letter accepting this revived offer, there was a meeting of the minds, as the acceptance in said letter
was absolute and unqualified.
We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action,
particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12,
1988 or more than seven (7) months after Janolos acceptance. Such delay, and the absence of any
circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the
repudiation as nothing more than a last-minute attempt on the Banks part to get out of a binding contractual
obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of
the petitioners that the written offer made on September 1, 1987 was carried through during the meeting
of September 28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the
first time on appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of
fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will
not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC,
No. 74243, November 14, 1986, 145 SCRA 592).[40]
xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the
trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules
of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434
[1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988];Ramos vs. IAC, 175 SCRA 70
[1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).[41]
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not
given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a
matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely
procedural grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated
by the lower courts, the inevitable conclusion is simply that there was a perfected contract of sale.

The Third Issue:

Is the Contract Enforceable?

The petition alleged:[42]

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30
September 1987, the contract produced thereby would be unenforceable by action - there being no note,
memorandum or writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil
Code.)
Upon the other hand, the respondent Court in its Decision (p. 14) stated:
x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of
the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear
embodiments of the fact that a contract of sale was perfected between the parties, such contract being
binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks
letter of September 1, 1987, taken together with plaintiffs letter dated September 30, 1987, constitute in law
a sufficient memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only
from September 1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters
constitute sufficient memoranda - since they include the names of the parties, the terms and conditions of the
contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did
constitute a new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will
not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Banks counteroffer of P5.5 million. Hence, petitioners - by such utter failure to object - are deemed to have waived any
defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits
under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counteroffer of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the
evidence binding on them thus:
A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told
me to accompany him and we were able to meet Luis Co at the Bank.
xxx

xxx

xxx

Q - Now, what transpired during this meeting with Luis Co of the Producers Bank?
A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q - What price?
A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the
final price and that is the price they intends (sic) to have, sir.
Q - What do you mean?
A - That is the amount they want, sir.
Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant
Riveras counter-offer of 5.5 million was the defendants bank (sic) final offer?
A - He said in a day or two, he will make final acceptance, sir.
Q - What is the response of Mr. Luis Co?
A - He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
----0---Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A - We went straight to the point because he being a busy person, I told him if the amount of P5.5
million could still be reduced and he said that was already passed upon by the committee. What
the bank expects which was contrary to what Mr. Rivera stated. And he told me that is the final
offer of the bank P5.5 million and we should indicate our position as soon as possible.
Q - What was your response to the answer of Mr. Luis Co?
A - I said that we are going to give him our answer in a few days and he said that was it. Atty.
Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q - By Mr. Co you are referring to?
A - Mr. Luis Co.
Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by
the bank?
A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we
accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
---- 0 ---Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee

and it is not within his power to reduce this amount. What can you say to that statement that the
amount of P5.5 million was reached by the Committee?
A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of
Atty. Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of
the Philippines during the time that the negotiation and perfection of the contract of sale took place.
Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the
management or the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise
known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is
in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect
the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the
assets, liabilities, and the management of that institution, collect all monies and debts due said institution and
exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof,
and restore its viability. He shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or non-bank financial intermediary performing quasi-banking
functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board
shall deem necessary.
In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected
contract of sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court
of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the
Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to the basic rules of
fair play, justice and due process.[43]
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The Banks acting conservator at the time,
Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are really
referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected
on September 30, 1987 (Annex V, petition) which unilaterally repudiated - not the contract - but the authority
of Rivera to make a binding offer - and which unarguably came months after the perfection of the contract.
Said letter dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6)
parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a
contract to sell and buy with any of them for the following reasons.
In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting
Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of
Property Management Department (PMD) staff and officers (Annex A), you will immediately read that
Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged
counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and
Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator

may authorize the sale of any property of the corporation/bank.

Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were
just preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind
the Banks Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently
violative of corporate and banking laws. We believe that this is more than sufficient legal justification for
refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in
accordance with law. We also have no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. ENCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the (preservation of) the
assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability. Such
powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the Constitution.[44] If the
legislature itself cannot revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes the place of a banks board of directors. What the said board cannot do - such as
repudiating a contract validly entered into under the doctrine of implied authority - the conservator cannot do
either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank.
His authority would be only to bring court actions to assail such contracts - as he has already done so in the
instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither
by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of
third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way
or another come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights
nor vested interests of the third parties who had dealt with the Bank.

The Fifth Issue:

Were There Reversible Errors of Fact?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust
Corporation,[45] we held:
x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule
45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988,
158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule
45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court
of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact being
conclusive [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line
of decisions]. This Court has emphatically declared that it is not the function of the Supreme Court to
analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that
might have been committed by the lower court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58
SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of
Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596). Barring, therefore, a showing that the
findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required

to examine or contrast the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs.
Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals,[46] we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency
of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the
Supreme Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited
to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a trier
of facts. x x x
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp.:[47]
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are
final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is
premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same
are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we
find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts
below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company,
Inc. vs. Hon. Court of Appeals, et al.[48] is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function
of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by
the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the
matter coincide. (italics supplied)
Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions
which were not only contrary to the evidence on record but have no bases at all, specifically the findings that
(1) the Banks counter-offer price of P5.5 million had been determined by the past due committee and
approved by conservator Romey, after Rivera presented the same for discussion and (2) the meeting with
Co was not to scale down the price and start negotiations anew, but a meeting on the already determined
price of P5.5 million. Hence, citing Philippine National Bank vs. Court of Appeals,[49] petitioners are asking us
to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals,[50] thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by
letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counteroffer price had been determined by the Past Due Committee and approved by the Conservator after Rivera
had duly presented plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established
fact, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price
at which the bank was selling the property. (p. 11, CA Decision)
xxx

xxx

xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of
September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where
the topic was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million
price had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 3435) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as
not credible and at best equivocal, and considering the gratuitous and self-serving character of these
declarations, the banks submissions on this point do not inspire belief.
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey
to testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules
on evidence,[51] such suppression gives rise to the presumption that his testimony would have been adverse,

if produced.
The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed
insufficient by both the trial court and the respondent Court, and instead, it was respondents submissions
that were believed and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts
are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the
conclusion they are espousing. This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the
Court of Appeals.[52] We have studied both the records and the CA Decision and we find no such exceptions in
this case. On the contrary, the findings of the said Court are supported by a preponderance of competent and
credible evidence. The inferences and conclusions are reasonably based on evidence duly identified in the
Decision. Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending
credibility and dependability to its findings. The best that can be said in favor of petitioners on this point is
that the factual findings of respondent Court did not correspond to petitioners claims, but were closer to the
evidence as presented in the trial court by private respondent. But this alone is no reason to reverse or ignore
such factual findings, particularly where, as in this case, the trial court and the appellate court were in
common agreement thereon. Indeed, conclusions of fact of a trial judge - as affirmed by the Court of Appeals are conclusive upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any
kind, because the trial court is in a better position to observe the demeanor of the witnesses and their
courtroom manner as well as to examine the real evidence presented.

Epilogue

In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the
first time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers
to repudiate contracts entered into by the Banks officers] - which per se could justify the dismissal of the
present case. We did not limit ourselves thereto, but delved as well into the substantive issues - the
perfection of the contract of sale and its enforceability, which required the determination of questions of fact.
While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases
of respondent Courts decisions and resolutions, we did so just the same, if only to find out whether there is
reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by
which the parties, through their respective eloquent counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on its
feet x x x as many people depend on (it) for investments, deposits and well as employment. As of June 1987,
the Banks overdraft with the Central Bank had already reached P1.023 billion x x x and there were (other)
offers to buy the subject properties for a substantial amount of money.[53]
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot
emotionally close its eyes to overriding considerations of substantive and procedural law, like respect for
perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which must be
upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondents submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price
agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a
foreclosure sale for no more than P 3.5 million.[54] That the Bank procrastinated and refused to honor its
commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its binding
obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank simply because
the property in question has algebraically accelerated in price during the long period of litigation is to reward
lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its
imprimatur on such outrageous proposition.

WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby
DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for
engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more
severely. Costs against petitioners.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.