Conflict of Laws Case Digest: HASEGAWA vs KITAMURA 538 SCRA 26

(2007)
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO.,
LTD.,
vs MINORU KITAMURA G.R. No. 149177 November 23, 2007
FACTS: Nippon Engineering Consultants (Nippon), a Japanese consultancy
firm providing technical and management support in the infrastructure
projects national permanently residing in the Philippines. The agreement
provides that Kitamaru was to extend professional services to Nippon for a
year. Nippon assigned Kitamaru to work as the project manager of the
Southern Tagalog Access Road (STAR) project. When the STAR project was
near completion, DPWH engaged the consultancy services of Nippon, this
time for the detailed engineering & construction supervision of the
Bongabon-Baler Road Improvement (BBRI) Project. Kitamaru was named as
the project manger in the contract.
Hasegawa, Nippons general manager for its International Division,
informed Kitamaru that the company had no more intention of automatically
renewing his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project.
Kitamaru demanded that he be assigned to the BBRI project. Nippon
insisted that Kitamarus contract was for a fixed term that had expired.
Kitamaru then filed for specific performance & damages w/ the RTC of Lipa
City. Nippon filed a MTD.
Nippons contention: The ICA had been perfected in Japan & executed by &
between Japanese nationals. Thus, the RTC of Lipa City has no jurisdiction.
The claim for improper pre-termination of Kitamarus ICA could only be
heard & ventilated in the proper courts of Japan following the principles of
lex loci celebrationis & lex contractus.
The RTC denied the motion to dismiss. The CA ruled hat the principle of lex
loci celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. It held that
the RTC was correct in applying the principle of lex loci solutionis.
ISSUE: Whether or not the subject matter jurisdiction of Philippine courts
in civil cases for specific performance & damages involving contracts
executed outside the country by foreign nationals may be assailed on the
principles of lex loci celebrationis, lex contractus, the state of the most
significant relationship rule, or forum non conveniens.
HELD: NO. In the judicial resolution of conflicts problems, 3 consecutive
phases are involved: jurisdiction, choice of law, and recognition and
enforcement of judgments. Jurisdiction & choice of law are 2 distinct
concepts. Jurisdiction considers whether it is fair to cause a defendant to
travel to this state; choice of law asks the further question whether the
application of a substantive law w/c will determine the merits of the case is
fair to both parties. The power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum law. While
jurisdiction and the choice of the lex fori will often coincide, the minimum
contacts for one do not always provide the necessary significant contacts
for the other. The question of whether the law of a state can be applied to a
transaction is different from the question of whether the courts of that state
have jurisdiction to enter a judgment.
In this case, only the 1st phase is at issuejurisdiction. Jurisdiction,
however, has various aspects. For a court to validly exercise its power to

adjudicate a controversy, it must have jurisdiction over the

plaintiff/petitioner, over the defendant/respondent, over the subject matter,
over the issues of the case and, in cases involving property, over the res or
the thing w/c is the subject of the litigation.In assailing the trial court's
jurisdiction herein, Nippon is actually referring to subject matter
jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by
the sovereign authority w/c establishes and organizes the court. It is given
only by law and in the manner prescribed by law. It is further determined by
the allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein. To succeed in its
motion for the dismissal of an action for lack of jurisdiction over the subject
matter of the claim, the movant must show that the court or tribunal cannot
act on the matter submitted to it because no law grants it the power to
adjudicate the claims.
In the instant case, Nippon, in its MTD, does not claim that the RTC is not
properly vested by law w/ jurisdiction to hear the subject controversy for a
civil case for specific performance & damages is one not capable of
pecuniary estimation & is properly cognizable by the RTC of Lipa City.What
they rather raise as grounds to question subject matter jurisdiction are the
principles of lex loci celebrationis and lex contractus, and the state of the
most significant relationship rule. The Court finds the invocation of these
grounds unsound.
Lex loci celebrationis relates to the law of the place of the ceremony or
the law of the place where a contract is made. The doctrine of lex
contractus or lex loci contractusmeans the law of the place where a
contract is executed or to be performed. It controls the nature,
construction, and validity of the contract and it may pertain to the law
voluntarily agreed upon by the parties or the law intended by them either
expressly or implicitly. Under the state of the most significant relationship
rule, to ascertain what state law to apply to a dispute, the court should
determine which state has the most substantial connection to the
occurrence and the parties. In a case involving a contract, the court should
consider where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of incorporation of
the parties.This rule takes into account several contacts and evaluates them
according to their relative importance with respect to the particular issue to
be resolved.
Since these 3 principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the 2 nd phase, the choice of
law. They determine which state's law is to be applied in resolving the
substantive issues of a conflicts problem. Necessarily, as the only issue in
this case is that of jurisdiction, choice-of-law rules are not only inapplicable
but also not yet called for.
Further, Nippons premature invocation of choice-of-law rules is exposed by
the fact that they have not yet pointed out any conflict between the laws of
Japan and ours. Before determining which law should apply, 1 st there should
exist a conflict of laws situation requiring the application of the conflict of
laws rules. Also, when the law of a foreign country is invoked to provide the
proper rules for the solution of a case, the existence of such law must be
pleaded and proved.
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are 3
alternatives open to the latter in disposing of it: (1) dismiss the case, either
because of lack of jurisdiction or refusal to assume jurisdiction over the

case; (2) assume jurisdiction over the case and apply the internal law of the
forum; or (3) assume jurisdiction over the case and take into account or
apply the law of some other State or States. The courts power to hear cases
and controversies is derived from the Constitution and the laws. While it
may choose to recognize laws of foreign nations, the court is not limited by
foreign sovereign law short of treaties or other formal agreements, even in
matters regarding rights provided by foreign sovereigns.
Neither can the other ground raised, forum non conveniens, be used to
deprive the RTC of its jurisdiction. 1st, it is not a proper basis for a motion
to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include it
as a ground. 2nd, whether a suit should be entertained or dismissed on the
basis of the said doctrine depends largely upon the facts of the particular
case and is addressed to the sound discretion of the RTC. In this case, the
RTC decided to assume jurisdiction. 3rd, the propriety of dismissing a case
based on this principle requires a factual determination; hence, this
conflicts principle is more properly considered a matter of defense.

3.
COMMUNICATION MATERIALS AND DESIGN, INC et al
vs.CA et al.G. R . N o. 1 0 2 2 2 3 August 22, 1996
FACTS petitioners COMMUNICATION MATERIALS AND DESIGN,
INC., (CMDI) and ASPAC MULTI-TRADE INC., (ASPAC) a r e b o t h
domestic
corporations..
Private
R e s p o n d e n t s I T E C,
I N C.
a n d / o r I T E C, I N T E R N AT I O N A L , I N C. ( I T E C ) a r e c o r p o r a t i o n s
duly organized and existing under the laws of the State
of Alabama, USA. There is no dispute that ITEC is a
foreign corporation not licensed to do business in the
P h i l i p p i n e s . I T E C e n t e r e d i n t o a c o n t r a c t w i t h A S PA C
referred to as Representative Agreement. Pursuant to
t h e c o n t r a c t , I T E C e n g a g e d A S PA C a s i t s e x c l u s i v e
representative in the Philippines for the sale of ITECs
p r o d u c t s , i n c o n s i d e r a t i o n o f w h i c h , A S PA C w a s p a i d
a stipulated commission.
Through
a License Agreement entered into by the same parties
l a t e r o n , A S PA C w a s a b l e t o i n c o r p o r a t e a n d u s e t h e n a m e
I T E C i n i t s o w n n a m e . T h u s , A S PA C M u l t i -T r a d e , I n c .
became
legally
and
publicly known
as
A S PA C - I T E C
(Philippines).O n e
year
into
the
second term
of
the
parties Representative Agreement, ITEC decided to
t e r m i n a t e t h e s a m e , b e c a u s e p e t i t i o n e r A S PA C a l l e g e d l y
violated its contractual commitment as stipulated in their
agreements.
ITEC
charges the
petitioners and another
P h i l i p p i n e C o r p o r a t i o n , D I G I TA L B A S E C O M M U N I C AT I O N S,
I N C. ( D I G I TA L ) , t h e P r e s i d e n t o f w h i c h i s l i k e w i s e p e t i t i o n e r
Aguirre, of using knowledge and information of ITECs
products
s p e c i fi c a t i o n s
to
develop
their
own
line
of
e q u i p m e n t a n d p r o d u c t s u p p o r t , w h i c h a r e s i m i l a r, i f n o t
i d e n t i c a l t o I T E C s o w n , a n d o ff e r i n g t h e m t o I T E C s f o r m e r
c u s t o m e r. T h e c o m p l a i n t w a s fi l e d w i t h t h e RT C - M a k a t i b y
I T E C, I N C. D e f e n d a n t s fi l e d a M T D t h e c o m p l a i n t o n t h e
f o l l o w i n g g r o u n d s : ( 1 ) T h a t p l a i n t i ff h a s n o l e g a l c a p a c i t y t o
sue as it is a foreign corporation doing business in the
Philippines without the required BOI authority and SEC
l i c e n s e , a n d ( 2 ) t h a t p l a i n t i ff i s s i m p l y e n g a g e d i n f o r u m
s h o p p i n g w h i c h justifies the application against it of the principle of
forum non conveniens. The MTD was denied. P e t i t i o n e r s e l e v a t e d
the
case to
the
respondent CA
on
a Pet i t i on
for
C e r t i o r a r i a n d P r o h i b i t i o n u n d e r R u l e 6 5 o f t h e Revised

R O C. I t w a s d i s m i s s e d a s w e l l . M R d e n i e d , h e n c e t h i s Pe t i t i o n
for Review on Certiorari under Rule 45.
I S S U E :1. Di d t h e P h i l i p p i n e c o u r t a c q u i r e j u r i s d i c t i o n o v e r
the person of the petitioner corp, despite allegations of
l a c k o f capacity to s u e b e c a u s e o f n o n - r e g i s t r a t i o n ?
2. Can the Philippine court give due course to the suit or
dismiss it, on the principle of forum non convenience?
HELD pe t i t i o n
dismissed.1 .
YES;
We
are
persuaded
to conclude that ITEC had been engaged in or doing
b u s i n e s s i n t h e P h i l i p p i n e s f o r s o m e t i m e n o w. T h i s i s t h e
i n e v i t a b l e r e s u l t a f t e r a s c r u t i n y o f t h e d i ff e r e n t c o n t r a c t s
and agreements entered in toby ITEC with its various
b u s i n e s s c o n t a c t s i n t h e c o u n t r y. I t s a r r a n g e m e n t s , w i t h
these entities indicate convincingly that ITEC is actively
e n g a g i n g i n b u s i n e s s i n t h e c o u n t r y. A f o r e i g n c o r p o r a t i o n
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
c o n t r a c t e d w i t h a n d b e n e fi t e d b y s a i d c o r p o r a t i o n . T o
put
it
in
another
w a y,
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. One who has dealt with a corporation of
foreign origin as a corporate entity is estopped to deny
its
corporate
existence
and
c a p a c i t y.
In
Antam
Consolidated Inc. vs. CA et al. we expressed our chagrin over
this commonly used scheme of defaulting l o c a l c o m p a n i e s
which are being sued by unlicensed foreign companies
n o t e n g a g e d i n b u s i n e s s i n t h e P h i l i p p i n e s t o invoke the
l a c k o f c a p a c i t y t o s u e o f s u c h f o r e i g n c o m p a n i e s . O b v i o u s l y,
t h e s a m e p l o y i s r e s o r t e d t o b y A S PA C t o p r e v e n t t h e
i n j u n c t i v e a c t i o n fi l e d b y I T E C t o e n j o i n p e t i t i o n e r f r o m u s i n g
knowledge
possibly
acquired
in
violation
o f fi d u c i a r y
a r r a n g e m e n t s b e t w e e n t h e p a r t i e s . 2 . Y E S ; Pe t i t i o n e r s
insistence on the dismissal of this
action due to the
application, or non application, of the private international
l a w r u l e o f f o r u m n o n c o n v e n i e n s d e fi e s w e l l - s e t t l e d r u l e s o f
f a i r p l a y. A c c o r d i n g t o p e t i t i o n e r, t h e P h i l i p p i n e C o u r t
has no venue to apply its discretion whether to give
c o g n i z a n c e o r n o t t o t h e p r e s e n t a c t i o n , because it has
n o t a c q u i r e d j u r i s d i c t i o n o v e r t h e p e r s o n o f t h e p l a i n t i ff i n
the case, the latter allegedly having no p e r s o n a l i t y t o
sue before
Philippine
Courts.
This
argument
is
misplaced
because the
court
has already
a c q u i r e d jurisdiction over the plaintiff in the suit, by virtue of his
filing the original
complaint.
And as we
have already
observed,
petitioner
is
not at
liberty
to
question
p l a i n t i ff s
standing to sue, having already acceded to the same by
virtue of its entry into the Representative Agreement
r e f e r r e d t o e a r l i e r. T h u s , h a v i n g a c q u i r e d j u r i s d i c t i o n , i t i s
now for the Philippine Court, based on the facts of the case,
whether to give due course to the suit or dismiss it, on the
principle of forum non convenience. Hence, the Philippine
Court mayrefuse to assume jurisdiction in spite of its having
a c q u i r e d j u r i s d i c t i o n . C o n v e r s e l y, t h e c o u r t m a y a s s u m e
jurisdiction over the case if it choses to do so provided that
the following requisites are met: (a) that the Philippine

courts would be the court to which the parties would

c o n v e n i e n t l y r e s o r t t o. ( b ) t h a t t h e P h i l i p p i n e c o u r t s i s i n a
position to make an intelligent decision as to the law and the
facts. (c)that the Philippine court has or is likely to have
power to enforce its decisions.
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 forum not being the most convenient
as
ground
for
the
suits
dismissal
deserves
scant
consideration.

4 . Hongkong and Shanghai Banking Corporation vs. Jack Robert

Sherman
G.R. No. 72494 11 August 1989 Medialdea, J:
Facts: Eastern Book Supply Service PTE, Ltd., a company incorporated in Singapore
applied with, and was granted by, the Hongkong and Shanghai Banking
Corporation Singapore branch an overdraft facility in the maximum amount
of Singapore dollars 200,000.00 (which amount was subsequently increased
to Singapore dollar 375,000.00). As a security for the repayment bythe
COMPANY of the sum advanced, Jack Robert Sherman and Deodato Reloj,
herein private respondents, and a certain Robin de Clive Lowe, all of whom
were directors of said COMPANY at such time, executed a Joint and Several
Guarantee in favor of petitioner BANK whereby they agreed to pay, jointly
and severally, on demand all sums owed by the COMPANY to petitioner
BANK under the aforestated overdraft facility. The Joint and Several
Guarantee provides that: "This guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and determined under and
may be enforced in accordance with the laws of the Republic of Singapore.
We hereby agree that the Courts of Singapore shall have jurisdiction overall
disputes arising under this guarantee . . ." The COMPANY failed to pay its
obligation. Thus, petitioner BANK demanded payment from the private
respondents, conformably with the provisions of the Joint and Several
Guarantee. Inasmuch as the private respondents still failed to pay,
petitioner BANK filed a civil case for a collection of a sum of money against
Sherman and Reloj before the Regional Trial Court of Quezon City. In turn,
the private respondents filed a motion to dismiss on the ground of lack of
jurisdiction over the subject matter of the complaint and over the persons of
the defendants, but, it was denied. Subsequently, the court granted the
petition for prohibition with preliminary injunction. Hence, this petition for
review on certiorari.
Issue: Whether or not Philippine courts have jurisdiction over the suit.
Held: Yes. The parties did not stipulate that only the courts of Singapore, to
the exclusion of all the rest, has jurisdiction. Neither did the clause in
question operate to divest Philippine courts of jurisdiction. In International
Law, jurisdiction is often defined as the right of a State to exercise authority
over persons and things within its boundaries subject to certain
exceptions. This authority, which finds its source in the concept of
sovereignty, is exclusive within and throughout the domain of the State. A
State is competent to take hold of any judicial matter it sees fit by making
its courts and agencies assume jurisdiction over all kinds of cases brought
before them. While it is true that the transaction took place in Singaporean
setting and that law not offend traditional notions of fair play and
substantial justice.

One basic principle underlies all rules of jurisdiction in International Law: a

State does not have jurisdiction in the absence of some reasonable basis for
exercising it, whether the proceedings are in rem quasi in rem or in
personam. To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions of fair play and
substantial justice. The defense of private respondents that the complaint
should have been filed in Singapore is based merely on technicality. They
did not even claim, much less prove, that the filing of the action here will
cause them any unnecessary trouble, damage, or expense. On the other
hand, there is no showing that petitioner BANK filed the action here just to
harass private respondents.
5. Sweet Lines Inc. vs. Teves, et. Al.
G.R. No. L-37750 May 19, 1978
Lessons Applicable: Contract of Adhesion (Transportation)
Laws Applicable:
FACTS:
Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for
Tagbilaran City via the port of Cebu Since many passengers were bound for
Surigao, M/S "Sweet Hope would not be proceeding to Bohol. They went to
the proper brancg office and was relocated to M/S "Sweet Town" where
they were forced to agree "to hide at the cargo section to avoid inspection
of the officers of the Philippine Coastguard." and they were exposed to the
scorching heat of the sun and the dust coming from the ship's cargo of corn
grits and their tickets were not honored so they had to purchase a new one.
They sued Sweet Lines for damages and for breach of contract of carriage
before the Court of First Instance of Misamis Oriental who dismissed the
complaint for improper venue. A motion was premised on the condition
printed at the back of the tickets dismissed instant petition for prohibition
for preliminary injunction
ISSUE: W/N a common carrier engaged in inter-island shipping stipulate
thru condition printed at the back of passage tickets to its vessels that any
and all actions arising out of the contract of carriage should be filed only in
a particular province or city
HELD: NO. petition for prohibition is DISMISSED. Restraining order
LIFTED and SET ASIDE
contract of adhesion not that kind of a contract where the parties sit down
to deliberate, discuss and agree specifically on all its terms, but rather, one
which respondents took no part at all in preparing just imposed upon them
when they paid for the fare for the freight they wanted to ship. We find and
hold that Condition No. 14 printed at the back of the passage tickets should
be held as void and unenforceable for the following reasons circumstances
obligation in the inter-island ship will prejudice rights and interests of
innumerable passengers in different s of the country who, under Condition
No. 14, will have to file suits against petitioner only in the City of Cebu
subversive of public policy on transfers of venue of actions philosophy
underlying the provisions on transfer of venue of actions is the convenience
of the plaintiffs as well as his witnesses and to promote 21 the ends of
justice.
6. PHILSEC INVESTMENT et al vs.CA et al
G.R. No. 103493 June 19, 1997

FACTS: Private respondent Ducat obtained separate loans from petitioners

Ayala International Finance Limited (AYALA) and Philsec Investment Corp
(PHILSEC), secured by shares of stock owned by Ducat.
In order to facilitate the payment of the loans, private respondent 1488,
Inc., through its president, private respondent Daic, assumed Ducats
obligation under an Agreement, whereby 1488, Inc. executed a Warranty
Deed with Vendors Lien by which it sold to petitioner Athona Holdings, N.V.
(ATHONA) a parcel of land in Texas, U.S.A., while PHILSEC and AYALA
extended a loan to ATHONA as initial payment of the purchase price. The
balance was to be paid by means of a promissory note executed by ATHONA
in favor of 1488, Inc. Subsequently, upon their receipt of the money from
1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging
to Ducat.
As ATHONA failed to pay the interest on the balance, the entire amount
covered by the note became due and demandable. Accordingly, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in
the United States for payment of the balance and for damages for breach of
contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock delivered to 1488,
Inc. under the Agreement.
While the Civil Case was pending in the United States, petitioners filed a
complaint For Sum of Money with Damages and Writ of Preliminary
Attachment against private respondents in the RTC Makati. The complaint
reiterated the allegation of petitioners in their respective counterclaims in
the Civil Action in the United States District Court of Southern Texas that
private respondents committed fraud by selling the property at a price 400
percent more than its true value.
Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of
(1) litis pendentia, vis-a-vis the Civil Action in the U.S., (2) forum non
conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a
cause of action.
The trial court granted Ducats MTD, stating that the evidentiary
requirements of the controversy may be more suitably tried before the
forum of the litis pendentia in the U.S., under the principle in private
international law of forum non conveniens, even as it noted that Ducat was
not a party in the U.S. case.
Petitioners appealed to the CA, arguing that the trial court erred in applying
the principle of litis pendentia and forum non conveniens.
The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and
Daic on the ground of litis pendentia.
ISSUE: is the Civil Case in the RTC-Makati barred by the judgment of the
U.S. court?
HELD: CA reversed. Case remanded to RTC-Makati. NO
While this Court has given the effect of res judicata to foreign judgments in
several cases, it was after the parties opposed to the judgment had been
given ample opportunity to repel them on grounds allowed under the law.
This is because in this jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely constitutes
prima facie evidence of the justness of the claim of a party and, as such, is
subject to proof to the contrary. Rule 39, 50 provides:

Sec. 50. Effect of foreign judgments. The effect of a judgment of a

tribunal of a foreign country, having jurisdiction to pronounce the judgment
is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive
upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive
evidence of a right as between the parties and their successors in interest
by a subsequent title; but the judgment may be repelled by evidence of a
want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private respondents.
The proceedings in the trial court were summary. Neither the trial court nor
the appellate court was even furnished copies of the pleadings in the U.S.
court or apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the U.S. court
were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata.
Second. Nor is the trial courts refusal to take cognizance of the case
justifiable under the principle of forum non conveniens:
First, a MTD is limited to the grounds under Rule 16, sec.1, which does not
include forum non conveniens. The propriety of dismissing a case based on
this principle requires a factual determination, hence, it is more properly
considered a matter of defense.
Second, while it is within the discretion of the trial court to abstain from
assuming jurisdiction on this ground, it should do so only after vital facts
are established, to determine whether special circumstances require the
courts desistance.
7. THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. vs.
NLRC
G.R. No. 120077 October 13, 2000
FACTS: During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Marcelo Santos received a letter dated May
2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel,
Beijing, China informing Santos that he was recommended by one Nestor
Buenio, a friend of his. Mr. Shmidt offered Santos the same position as
printer, but with a higher monthly salary and increased benefits. Santos was
deemed resigned from the Mazoon Printing Press, on June 30,1988 and
started to work at the Palace Hotel on November 5, 1988.
Subsequently, Santos signed an amended "employment agreement" with the
Palace Hotel, effective November 5, 1988. The Vice President (Operations
and Development) of petitioner MHICL Miguel D. Cergueda signed the
employment agreement under the word "noted". However, due to business
reverses brought about by the political upheaval in China, the Palace Hotel
terminated the employment of respondent. On February 20, 1990,
respondent Santos filed a complaint for illegal dismissal with theArbitration
Branch,
National
Capital
Region,
National
Labor
Relations
Commission(NLRC).
ISSUE: Whether or not the NLRC is a convenient forum to hear the case.

RULING: Under the rule of forum non conveniens, a Philippine court or

agency may assume jurisdiction over the case if it chooses to do so
provided
: (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. The conditions are unavailing in the
case at bar. The NLRC was a seriously inconvenient forum given that all the
incidents of the case from the time of recruitment, to employment to
dismissal occurred outside the Philippines. The inconvenience is
compounded by the fact that the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines. Neither are they "doing
business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and
Mr. Henkare non-residents of the Philippines.

9. ACT OF STATE DOCTRINE AND THE MARCOSES WEALTH

By: MANUEL J. LASERNA JR.
In the very recent case of PHILIPPINE NATIONAL BANK v. U.S. DISTRICT
COURT OF HAWAII, docketed as No. 04-71843 (D.C. No. MDL-00840-MLR)
decided on February 4, 2005, the U.S. 9th Circuit Court of Appeals, issued a
writ of mandamus, upon a petition commenced by the Bank, to prevent the
U.S. District Court of Hawaii from pursuing contempt and discovery
proceedings against the Bank.
The District Court had previously cited the Bank for contempt of court for
transferring funds to the Republic of the Philippines pursuant to a prior
judgment of the Philippine Supreme Court.
The U.S. 9th Circuit Court of Appeals held that the orders of the U.S.
District Court of Hawaii had violated the act of state doctrine.
This mandamus petition represented one more chapter in a long-running
dispute over the right to the assets of the estate of former Philippine
President Ferdinand E. Marcos.
On one side was a class of plaintiffs who obtained a large judgment in the
federal district court in Hawaii against the Marcos estate for human rights
violations by the Marcos regime. The judgment included an injunction
restraining the estate and its agents or aiders and abettors from
transferring any of the estates assets.
On the other side was the Republic of the Philippines, which independently
has sought forfeiture of the Marcos estates assets on the ground that they
were stolen by Marcos from the Philippine government and its people.
An earlier related case is worth noting, i.e., Credit Suisse v. U.S. Dist. Ct. for
the Cent. Dist. Of Cal., 130 F.3d 1342, 1347-48 (9th Cir. 1997). The Swiss
assets of the Marcos estate had been frozen by the Swiss government at the
request of the Republic of the Philippines, which was seeking to recover
them. The class plaintiffs obtained an injunction from the U.S. District Court
of Hawaii requiring the Swiss banks to hold the assets for the benefit of the
class plaintiffs. In that case, the same U.S. 9th Circuit Court of Appeals
issued a writ of mandamus and held that the injunction violated the act of
state doctrine, which precludes American courts from declaring invalid a
foreign sovereigns official act, that is, the freeze order of the Swiss
government.

Thereafter, the Swiss government released the funds frozen in Switzerland

for transfer to the Philippine National Bank in escrow pending a
determination of proper disposal by a competent court in the Philippines.
The Philippine National Bank deposited the funds in Singapore. The
Philippine Supreme Court subsequently held that the assets were forfeited
to the Republic of the Philippines.
The U.S. District Court of Hawaii then issued the orders that precipitated
the present petition for mandamus. The District Court ruled that the
Philippine Supreme Court had violated due process by any standard and
that its judgment was entitled to no deference. It ordered reinstatement of
an earlier settlement agreement in the District Court litigation that had
been rejected when the Philippine courts refused to approve it and the
Republic of the Philippines failed to give its consent to the agreement.
The District Court further ordered that any such transfer, without first
appearing and showing cause in this court as to how such transfer might
occur without violating the Courts injunction shall be considered contempt
of the Courts earlier order. Any and all persons and banking institutions
participating in such transfers are hereby notified that such transfer would
be considered in contempt of this Courts injunction.
The District Court then issued an Order to Show Cause against the
Philippine National Bank, which was not a party to the litigation in the
district court, requiring the Bank to show why it should not be held in
contempt for violating the courts injunction against transfer of assets by
the estate.
The Philippine National Bank then filed the present petition for mandamus
in the U.S. 9th Circuit Court of Appeals, seeking to restrain the District
Court from enforcing its Order to Show Cause and from pursuing
discovery against the Bank officer.
The Bank asserted that it had transferred nearly all of the funds in issue to
the Republic of the Philippines pursuant to the judgment of the Philippine
Supreme Court. It contended that the entire proceeding against it for its
transfer of funds to the Republic of the Philippines violated the act of
state doctrine.
DECISION
A. ACT OF STATE DOCTRINE
Every sovereign state is bound to respect the independence of every other
sovereign state, and the courts of one country will not sit in judgment on
the acts of the government of another, done within its own territory. Redress
of grievances by reason of such acts must be obtained through the means
open to be availed of by sovereign powers as between themselves.
(Underhill v. Hernandez, 168 U.S. 250, 252 [1897]).
The act of state doctrine originally was deemed to arise from international
law, but more recently has been viewed as a function of our constitutional
separation of powers. (W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Intl,
493 U.S. 400, 404 [1990]).
So viewed, the doctrine reflects the strong sense of the Judicial Branch
that its engagement in the task of passing on the validity of foreign acts of
state may hinder the conduct of foreign affairs. (Id., quoting Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423 [1964]).

The District Courts orders in issue violated this principal. In order to obtain
assets from the Philippine National Bank, or to hold the Bank in contempt
for the transfer of those assets to the Republic of the Philippines, the
District court necessarily (and expressly) held invalid the forfeiture
judgment of the Philippine Supreme Court.
The U.S. 9th Circuit Court of Appeals concluded that this action of the
District Court violated the act of state doctrine.
The class plaintiffs in the district court argued that the act of state doctrine
is directed at the executive and legislative branches of foreign governments
and did not apply to judicial decisions.
Although the act of state doctrine is normally inapplicable to court
judgments arising from private litigation, there is no inflexible rule
preventing a judgment sought by a foreign government from qualifying as
an act of state. (Liu v. Republic of China, 892 F.2d 1419, 1433-34 & n.2 (9th
Cir. 1989), citing RESTATEMENT [SECOND] OF FOREIGN RELATIONS OF
THE UNITED STATES 41 cmt. d [1965])
A judgment of a court may be an act of state. (Id.).
There was no question that the judgment of the Philippine Supreme Court
gave effect to the public interest of the Philippine Government. The
forfeiture action was not a mere dispute between private parties; it was an
action initiated by the Philippine Government pursuant to its statutory
mandate to recover property allegedly stolen from the treasury. (In re
Estate of Ferdinand Marcos Human Rights Litig., 94 F.3d at 546).
The U.S. 9th Circuit Court of Appeals had earlier characterized the
collection efforts of the Republic of the Philippines to be governmental.
(Id.).
The subject matter of the forfeiture action thus qualified for treatment as an
act of state.
The class plaintiffs next argued that the act of state doctrine was
inapplicable because the judgment of the Philippine Supreme Court did not
concern matters within its own territory.
The U.S. 9th Circuit Court of Appeals held that, generally, the act of state
doctrine applies to official acts of foreign sovereigns performed within
their own territory. (Credit Suisse, 130 F.3d at 1346). The act of the
Philippine Supreme Court was not wholly external, however. Its judgment,
which the district court declared invalid, was issued in the Philippines and
much of its force upon the Philippine National Bank arose from the fact that
the Bank is a Philippine corporation. (Callejo v. Bancomer, S.A, 764 F.2d
1101, 1121-25 (5th Cir. 1985, discussing differing theories of situs of
intangibles).

The Appeals Court further held that even if we assume for purposes of
decision that the assets were located in Singapore, we conclude that this
fact does not preclude treatment of the Philippine judgment as an act of
state in the extraordinary circumstances of this case.
(NOTE: [1] Certain portions of the funds held in another bank in Singapore
were not transferred because the bank refused to release the funds and
instead filed an interpleader action in Singapore. [2] The class plaintiffs
cited Hilao v. Estate of Marcos, 95 F.3d 848, 851 (9th Cir. 1996), for the

proposition that the locus of a bank deposit is the branch where the deposit
is made. Hilao, however, was applying a California statute that specified the
place and manner of levying execution; it did not purport to state a general
rule for determining the locus of bank accounts).
The act of state doctrine is to be applied pragmatically and flexibly, with
reference to its underlying considerations. (Tchacosh Co. v. Rockwell Intl
Corp., 766 F.2d 1333, 1337 (9th Cir. 1985).
Thus, even when an act of a foreign state affects property outside of its
territory, the considerations underlying the act of state doctrine may still
be present. (Callejo, 764 F.2d at 1121 n.29).
Because the Republic of the Philippines interest in the enforcement of its
laws does not end at its borders, the fact that the escrow funds were
deposited in Singapore does not preclude the application of the act of state
doctrine. (Id.).
The underlying governmental interest of the Republic supports treatment of
the judgment as an act of state.
It is important to keep in mind that the Republic of the Philippines did not
simply intrude into Singapore in exercising its forfeiture jurisdiction. The
presence of the assets in Singapore was a direct result of events that were
the subject of the decision in Credit Suisse, supra, where the U.S. 9th
Circuit Court of Appeals upheld as an act of state a freeze order by the
Swiss government, enacted in anticipation of the request of the Philippine
government, to preserve the Philippine governments claims against the
very assets in issue today. (Credit Suisse, 130 F.3d at 1346-47).
Indeed, the Philippine National Bank argued that the District Courts orders
violated the mandate of the U.S. 9th Circuit Court of Appeals in Credit
Suisse, supra, directing the District Court to refrain from taking any
further action with regard to assets of the Marcos estate held or claimed
to be held by the [Swiss] Banks. (Id. at 1348).
The District Court held that the mandate of the U.S. 9th Circuit Court of
Appeals did not apply to the assets once they left the hands of the Swiss
banks. The Appeals Court side tracked the issue by holding that there was
no necessity to decide the correctness of that ruling because we conclude
that, in these circumstances, the Philippine forfeiture judgment is an act of
state. It noted that the Swiss government did not repudiate its freeze
order, and the Swiss banks did not transfer the funds in the ordinary course
of business.

The Swiss banks delivered the funds into escrow with the approval of the
Swiss courts in order to permit the very adjudication of the Philippine
courts that the district court considered invalid. To permit the District Court
to frustrate the procedure chosen by the Swiss and Philippine Governments
to adjudicate the entitlement of the Republic of the Philippines to these
assets would largely nullify the effect of the decision of the Appeals Court in
Credit Suisse, supra.
In these unusual circumstances, the Appeals Court held that the choice of
a Singapore locus for the escrow of funds (was not) fatal to the treatment of
the Philippine Supreme Courts judgment as an act of state.
B. MANDAMUS

On the issue of the propriety of a writ of mandamus, the U.s. 9th Circuit
Court of Appeals concluded that the District Courts error qualified for
correction by a writ of mandamus. In so ruling, the Appeals Court
considered the factors set forth in Bauman v. U.S. Dist. Ct., 557 F.2d 650
(9th Cir. 1977):
(1) The party seeking the writ has no other adequate means, such as a
direct appeal, to attain the relief he or she desires.
(2) The petitioner will be damaged or prejudiced in a way not correctable on
appeal.
(3) The district courts order is clearly erroneous as a matter of law.
(4) The district courts order is an oft-repeated error, or manifests a
persistent disregard of the federal rules.
(5) The district courts order raises new and important problems, or issues
of law of first impression.
None of these guidelines is determinative and all five guidelines need not be
satisfied at once for a writ to issue. (citing Credit Suisse, 130 F.3d at 1345).
Rarely will all the five guidelines point in the same direction or even be
relevant to the particular inquiry.
With regard to the first two factors, the Appeals Court concluded that the
District Courts error was not sufficiently correctable on appeal. No appeal
would lie unless a contempt order is issued and sanctions have been
imposed. (citing Estate of Domingo v. Republic of the Philippines, 808 F.2d
1349, 1350 (9th Cir. 1987). The Bank had made a sufficient showing that
subjecting its US-based officers to cross-examination and discovery
procedures would place them and the Bank in danger of violating
Philippine bank secrecy laws.
Requiring the Bank to choose between being in contempt of court and
violating Philippine laws clearly constitutes severe prejudice that could not
be remedied on direct appeal. (citing Credit Suisse, 130 F.3d at 1346).
As for the third Bauman factor, the Appeals Court held that its discussion of
the act of state doctrine had made clear that the District Courts orders
were erroneous as a matter of law. In addition, the District Court was
attempting to apply its injunction against transfer of assets to the Philippine
National Bank as an aider and abettor or agent of the estate of Marcos. But
the Bank could hardly have been acting as an aider and abettor or agent of
the estate when it transferred assets to the Republic of the Philippines
pursuant to the forfeiture judgment of the Philippine Supreme Court,
entered over the opposition of the Marcos estate.
In fine, the U.S. 9th Circuit Court of Appeals granted the Philippine National
Banks petition and vacated the orders of the U.S. District Court of Hawaii,
dated February 25, 2004 (to the Philippine National Bank to show cause),
and April 8, 2004 (to the Bank to produce its employee, Rogel L. Zenarosa,
for a deposition). It further directed the District Court to refrain from any
further action against the Philippine National Bank in this action or any
other action involving any of the funds that were the subject of the decision
of the Philippine Supreme Court dated July 15, 2003. The Appeals Court
retained jurisdiction over the District Court litigation to the extent that it
involved any action against the Philippine National Bank.