[G.R. No. 103493. June 19, 1997.

]
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS,
N.V., Petitioners, v. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS and WILLIAM H. CRAIG, Respondents.

DECISION

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the
same cause of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of
Makati, Branch 56, which, in view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on
the ground of litis pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence
this petition for review on certiorari.
The facts are as follows:chanrob1es virtual 1aw library
On January 15, 1983, private respondent Ventura O Ducat obtained separate loans from petitioners Ayala
International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation (hereafter called
PHILSEC) in the sum of US$2,500,000.00 secured by shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president,
private respondent Drago Daic, assumed Ducats obligation under an Agreement, dated January 27, 1983, whereby
1488, Inc. executed a Warranty Deed with Vendors Lien by which it sold to petitioner Athona Holdings, N.V.
(hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A. for US$2,807,209.02, while PHILSEC and
AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The
balance of US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc.
Subsequently, upon their receipt of the US$2,500,000.00 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 of US$307,209.02, the entire amount covered by the note
became due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners
PHILSEC, AYALA and ATHONA in the United States for payment of the balance of US$307,209.02 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. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was later transferred to
the United States District Court for the Southern District of Texas, where 1488, Inc. filed an amended complaint,
reiterating its allegations in the original complaint. ATHONA filed an answer with counterclaim, impleading private
respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price over its market
value. Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant.
ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative,
the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of
lack of jurisdiction over their person, but, as their motion was denied, they later filed a joint answer with counterclaim
against private respondents and Edgardo V. Guevarra, PHILSECs own former president, for the rescission of the sale
on the ground that the property had been over-valued. On March 13, 1990, the United States District Court for the
Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the U.S. court
imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 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 Regional Trial
Court of Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the allegation of petitioners
in their respective counterclaims in Civil Action No. H-86-440 of 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 of
US$800,000.00. Petitioners claimed that, as a result of private respondents fraudulent misrepresentations, ATHONA,
PHILSEC and AYALA were induced to enter into the Agreement and to purchase the Houston property. Petitioners
prayed that private respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to pay
damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal
properties of private respondents. 2
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-a-vis Civil
Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners
PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of the property
prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and

whose only participation was to extend financial accommodation to ATHONA under a separate loan agreement. On the
other hand, private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified
Motion to Dismiss," contending that the action being in personam, extraterritorial service of summons by publication
was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign
corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to dismiss, 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.
A separate hearing was held with regard to 1488, Inc. and Daics motion to dismiss. On March 9, 1988, the trial court
3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that
the "main factual element" of the cause of action in this case which is the validity of the sale of real property in the
United States between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United
States District Court which, under the doctrine of forum non conveniens, is the better (if not exclusive) forum to
litigate matters needed to determine the assessment and/or fluctuations of the fair market value of real estate
situated in Houston, Texas, U.S.A. from the date of the transaction in 1983 up to the present and verily, . . .
(emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-residents and the
action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial
court subsequently lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and
Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis
pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous
attachment of shares of stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc.,
and Daic on the ground of litis pendentia, thus:chanrob1es virtual 1aw library
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec, the Ayala
International Finance Ltd. (BPI-IFLs former name) and the Athona Holdings, NV. The case at bar involves the same
parties. The transaction sued upon by the parties, in both cases is the Warranty Deed executed by and between
Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the promissory notes are sued upon by 1488
Inc., which likewise alleges fraud employed by herein appellants, on the marketability of Ducats securities given in
exchange for the Texas property. The recovery of a sum of money and damages, for fraud purportedly committed by
appellees, in overpricing the Texas land, constitute the action before the Philippine court, which likewise stems from
the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of
money for alleged tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction
over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non conveniens was
likewise affirmed by the Court of Appeals on the ground that the case can be better tried and decided by the U.S.
court:chanrob1es virtual 1aw library
The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the
property subject matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign
corporation; 3) although the buyer, Athona Holdings, a foreign corporation which does not claim to be doing business
in the Philippines, is wholly owned by Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also
a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:chanrob1es virtual 1aw library
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE (LITIS
PENDENTIA) RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURTS DISMISSAL OF THE CIVIL
ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE
DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS
RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE

PETITIONERS RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE
MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present case was pending in the Court of
Appeals, the United States District Court for the Southern District of Texas rendered judgment 5 in the case before it.
The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals. 6
Thus, the principal issue to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the
U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the
foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the
effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the Rules
of Court, to wit: "want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact."cralaw virtua1aw library
Petitioners contention is meritorious. While this court has given the effect of res judicata to foreign judgments in
several cases, 7 it was after the parties opposed to the judgment had been given ample opportunity to repel them on
grounds allowed under the law. 8 It is not necessary for this purpose to initiate a separate action or proceeding for
enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment,
in order for the court to properly determine its efficacy. 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. 9 Rule 39, 50 provides:chanrob1es
virtual 1aw library
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:chanrob1es virtual 1aw library
(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.
Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 10 which
private respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment
was considered res judicata because this Court found "from the evidence as well as from appellants own pleadings"
11 that the foreign court did not make a "clear mistake of law or fact" or that its judgment was void for want of
jurisdiction or because of fraud or collusion by the defendants. Trial had been previously held in the lower court and
only afterward was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same vein, in Philippine International
Shipping Corp. v. Court of Appeals, 12 this court held that the foreign judgment was valid and enforceable in the
Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake
of law or fact. The prima facie presumption under the Rule had not been rebutted.
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. As the trial court stated in its disputed order dated March 9, 1988.
On the plaintiffs claim in its Opposition that the causes of action of this case and the pending case in the United
States are not identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and
the case pending before the USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners action is barred by the principle of
res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was
brushed aside by both the trial court and the Court of Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment
in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134,
although the proceedings were suspended because of the pendency of this case. To sustain the appellate courts ruling
that the foreign judgment constitutes res judicata and is a bar to the claim of petitioners would effectively preclude

petitioners from repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment
is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim as in this case,
but it may be opposed by the defendant if the foreign judgment is sought to be enforced against him in a separate
proceeding. This is plainly untenable. It has been held therefore that:chanrob1es virtual 1aw library
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being
sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the
Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private
respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and
law, if applicable. 14
Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be
consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this
case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch
134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of impeaching the foreign
judgment and only in the event they succeed in doing so may they proceed with their action against private
respondents.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the principle of forum non
conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include forum non
conveniens. 16 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. 17
In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private
respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a
domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of
the latters debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case
even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and
Daic could not be obtained because this is an action in personam and summons were served by extraterritorial
service. Rule 14, 17 on extraterritorial service provides that service of summons on a non-resident defendant may be
effected out of the Philippines by leave of Court where, among others, "the property of the defendant has been
attached within the Philippines." 18 It is not disputed that the properties, real and personal, of the private
respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987.
19
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in
Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners
by the U.S. court, the Court finds that the judgment sought to be enforced is severable from the main judgment under
consideration in Civil Case No. 16563. The separability of Guevarras claim is not only admitted by petitioners, 20 it
appears from the pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563.
21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.chanroblesvirtuallawlibrary
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the
Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance
with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.

[G.R. No. L-24170. December 16, 1968.]

ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and MOHAMMAD BANTALA,
Petitioners, v. THE COMMISSIONER OF CUSTOMS, Respondent.
SYLLABUS

1. COURTS; COURT OF TAX APPEALS; APPEAL FROM DECISIONS THEREOF TO SUPREME COURT; FINDINGS OF FACT
BY SUBSTANTIAL EVIDENCE, BINDING There is no plausible reason not to accept in its entirety the conclusion
reached by the Court of Tax Appeals. Nor even if the persuasive element therein were not so overwhelming, could we
alter the decisive facts as found by it. For it is now beyond question that its finding, if supported by substantial
evidence, binds us, only questions of law being for us to resolve. Where the issue raised belongs to the former
category, we lack the power to review.
2. TAXATION; SEIZURE AND FORFEITURE OF VESSELS AND CARGO FOR SMUGGLING; JURISDICTION OF THE
COMMISSIONER OF CUSTOMS IN RELATION THERETO From the apprehension and seizure of the vessel in question
on the high seas beyond the territorial waters of the Philippines, the absence of jurisdiction of Commissioner of
Customs is predicated. Such contention of petitioners-appellants is without merit. It is unquestioned that all vessels
seized are of Philippine registry. The Revised Penal Code leaves no doubt as to its applicability and enforceability not
only within the Philippines, its interior waters and maritime zone, but also outside of its jurisdiction against those
committing offense while on a Philippine ship . . . . The principle of law that sustains the validity of such a provision
equally supplies a firm foundation for the seizure of the five sailing vessels found thereafter to have violated the
applicable provisions of the Revised Administrative Code.
3. ID.; ID.; ID.; EXPIRATION OF R.A. 650 DID NOT DIVEST THE COMMISSIONER OF CUSTOMS OF JURISDICTION
Despite the expiration of Republic Act 650 the Commissioner of Customs retained his jurisdiction over the case and
could continue to take cognizance thereof until its final determination, for the main question brought in by the appeal
from the decision of the Collector of Customs was the legality or illegality of the decision of the Collector of Customs
and that question could not have been abated by the mere expiration of R.A. No. 650. We firmly believe that the
expiration of R.A. 650 could not have produced the effect: (1) of declaring legal the importation of the cotton
counterpanes which were illegally imported, and (2) of declaring the seizure and forfeiture ordered by the Collector of
Customs illegal or null and void; in other words, it could not have the effect of annulling or setting aside the decision
of the Collector of Customs which was rendered while the law was in force and which should stand until it is revoked
by the appellate tribunal.
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; SEIZURE IN INSTANT CASE DOES NOT CONSTITUTE DENIAL OF DUE
PROCESS There could be no denial of due process. There was nothing arbitrary about the manner in which such
seizure and forfeiture were effected. The right to a hearing of petitioners-appellants was respected. They could not
have been unaware of what they were doing. It would be an affront to reason if under the circumstances they could
be allowed to raise in all seriousness a due process question. Such a conditional guaranty, basic and fundamental,
certainly should not be allowed to lend itself as an instrument for escaping a liability arising from ones own nefarious
acts.

DECISION
FERNANDO, J.:

The policy relentlessly adhered to and unhesitatingly pursued to minimize, if not to do away entirely, with the evil and
corruption that smuggling brings in its wake would be frustrated and set at naught if the action taken by respondent
Commissioner of Customs in this case, as affirmed by the Court of Tax Appeals, were to be set aside and this appeal
from the decision of the latter were to succeed. Fortunately, the controlling principles of law do not call for a contrary
conclusion. It cannot be otherwise if the legitimate authority vested in the government were not to be reduced to
futility and impotence in the face of an admittedly serious malady, that at times has assumed epidemic proportions.
The principal question raised by petitioners, owners of five sailing vessels and the cargo loaded therein declared
forfeited by respondent Commissioner of Customs for smuggling, is the validity of their interception and seizure by
customs officials on high seas, the contention being raised that importation had not yet begun and that the seizure
was affected outside our territorial waters.
Why such a plea could not be given the least credence without doing violence to common sense and placing the law in

disrepute would be apparent from a statement of the case and the findings of facts as set forth in the decision now
under review, of the Court of Tax Appeals, dated November 19, 1964, the opinion being penned by the late Associate
Judge Augusto M. Luciano.
His opinion starts thus: "This is an appeal from the decision of the Acting Commissioner of Customs in Customs Case
No. 113, dated September 26,1961, (Jolo Seizure Identification Cases Nos. 38, 39, 40, 41, & 42) decreeing the
forfeiture of five (5) sailing vessels (kumpits) named Iroc-Iroc, Lahat-lahat, Liberal Wing 111, Sulu Area
Command, and Business, with their respective cargoes of blue seal cigarettes and rattan chairs, for violation of
Section 1363(a) of the Revised Administrative Code and Section 20 of Republic Act No. 426 in relation with Section
1363(f) of The Revised Administrative Code." 1
The facts according to the above opinion "are not controverted." Thus: "It appears that on September 10, 1950, at
about noon time, a customs patrol team on board Patrol Boat ST-23 intercepted the five (5) sailing vessels in question
on the high seas, between British North Borneo and Sulu while they were heading towards Tawi-tawi, Sulu. After
ordering the vessels to stop, the customs officers boarded and found on board, 181 cases of Herald cigarettes, 9
cases of Camel cigarettes, and some pieces of rattan chairs. The sailing vessels are all of Philippine registry, owned
and manned by Filipino residents of Sulu, and of less than thirty (30) tons burden. They came from Sandakan, British
North Borneo, but did not possess any permit from the Commissioner of Customs to engage in the importation of
merchandise into any Port of the Sulu sea, as required by Section 1363(a) of the Revised Administrative Code. Their
cargoes were not covered by the required import license under Republic Act No. 426, otherwise known as the Import
Control Law. 2
Respondent Commissioner of Customs, as noted at the outset, affirmed the decision rendered by the Collector of
Customs of Jolo, who found cause for forfeiture under the law of the vessels and the cargo contained therein. He was,
as also already made known, sustained by the Court of Tax Appeals. Hence this petition for review.
The first two errors assigned by petitioners would impugn the jurisdiction of the Bureau of Customs to institute seizure
proceedings and thereafter to declare the forfeiture of the vessels in question and their cargo. They would justify their
stand thus:" In the light of the fact that the vessels involved with the articles laden therein were apprehended and
seized on the high seas, beyond the territorial waters of the Philippines, the said vessels could not have touched any
place or port in the Philippines, whether a port or place of entry or not, consequently, the said vessels could not have
been engaged in the importation of the articles laden therein into any Philippine port or place, whether a port or place
of entry or not, to have incurred the liability of forfeiture under Section 1363(a) of the Revised Administrative Code."
3
Such a contention was advanced by petitioners before the Court of Tax Appeals. It met the repudiation that it
deserved. Thus: "We perfectly see the point of the petitioners but considering the circumstances surrounding the
apprehension of the vessels in question, we believe that Section 1363(a) of the Revised Administrative Code should
be apprehended to the case at bar. It has been established that the five vessels came from Sandakan, British North
Borneo, a foreign port, and when intercepted, all of them were heading towards Tawi- tawi, a domestic port within the
Sulu sea. Laden with foreign manufactured cigarettes, they did not possess the import license required by the
Republic Act No. 426, nor did they carry a permit from the Commissioner of Customs to engage in importation into
any port in the Sulu sea. Their course announced loudly their intention not merely to skirt along the territorial
boundary of the Philippines but to come within our limits and land somewhere in Tawi-tawi towards which their prows
were pointed. As a matter of fact, they were about to cross our aquatic boundary but for the intervention of a customs
patrol which, from all appearances, was more than eager to accomplish its mission." 4 The sense of realism and the
vigorous language employed by the late Judge Luciano in rejecting such a plea deserve to be quoted. Thus: "To
entertain even for a moment the thought that these vessels were probably not bound for a Philippine port would be
too much a concession even for a simpleton or a perennial optimist. It is quite irrational for Filipino sailors manning
five Philippines vessels to sneak out of the Philippines and go to British North Borneo, and come a long way back
laden with highly taxable goods only to turn about upon reaching the brink of our territorial waters and head for
another foreign port." 5
1. We find no plausible reason not to accept in its entirety such a conclusion reached by the Court of Tax Appeals.
Nor, even if the persuasive element in the above view were not so overwhelming, could we alter the decisive facts as
found by it. For it is now beyond question that its finding, if supported by substantial evidence, binds us, only
questions of law being for us to resolve. Where the issue raised belongs to the former category, we lack the power of
review. 6
Moreover, for understandable reasons, we feel extreme reluctance to substitute our own discretion for that of the
Court of Tax Appeals in its appreciation of the relevant facts and its appraisal of their significance. As we had occasion
to state in a relatively recent decision: "Nor as a matter of principle is it advisable for this Court to set aside the
conclusion reached by an agency such as the Court of Tax Appeals which is, by the very nature of its function,
dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on
the subject .,. there has been an abuse or improvident exercise of its authority." 7

2. We thus could rest our decision affirming that of the Court of Tax Appeals on the above consideration. It might not
be amiss however to devote some degree of attention to the legal points raised in the above two assignment of
errors, discussed jointly by petitioners- appellants, alleging the absence of jurisdiction, the deprivation of property
without due process of law and the abatement of liability consequent upon the repeal of Republic Act No. 426. Not one
of the principles of law relied upon suffices to call for reversal of the action taken by the respondent Commissioner of
Customs, even if the facts presented a situation less conclusive against the pretension of Petitioners-Appellants.
From the apprehension and seizure of the vessels in question on the high seas beyond the territorial waters of the
Philippines, the absence of jurisdiction of Commissioner of Customs is predicated. Such contention of petitionersappellants is without merit.
It is unquestioned that all vessels seized are of Philippine registry. The Revised Penal Code leaves no doubt as to its
applicability and enforceability not only within the Philippines, its interior waters and maritime zone, but also outside
of its jurisdiction against those committing offense while on a Philippine ship . . . 8 The principle of law that sustains
the validity of such a provision equally supplies a firm foundation for the seizure of the five sailing vessels found
thereafter to have violated the applicable provisions of the Revised Administrative Code. 9
Moreover, it is a well settled doctrine of International Law that goes back to Chief Justice Marshalls opinion in Church
v. Hubbart, 10 an 1804 decision, that a state has the right to protect itself and its revenues, a right not limited to its
own territory but extending to the high seas. In the language of Chief Justice Marshall: "The authority of a nation
within its own territory is absolute and exclusive. The seizure of a vessel within the range of its cannon by a foreign
force is an invasion of that territory, and is a hostile act which it is its duty to repel. But its power to secure itself from
injury may certainly be exercised beyond the limits of its territory."cralaw virtua1aw library
The question asked in the brief of petitioners-appellants as to whether the seizure of the vessels in question and the
cargoes on the high seas and thus beyond the territorial waters of the Philippines was legal must be answered in the
affirmative.
4. The next question raised is the alleged denial of due process arising from such forfeiture and seizure. The argument
on the alleged lack of validity of the action taken by the Commissioner of Customs is made to rest on the fact that the
alleged offense imputed to petitioners-appellants is a violation of Section 1363(a) and not Section 1363(f). The title of
Section 1363 is clear. "Property subject to forfeiture under customs laws." The first subsection thereof, (a), covers
any vessel including cargo unlawfully engaged in the importation of merchandise except a port of entry. Subsection (f)
speaks of any merchandise of any prohibited importation, the importation of which is effected or attempted contrary
to law and all other merchandise which in the opinion of the Collector of Customs have been used are or were
intended to be used as instrument in the importation or exportation of the former.
From the above recital of the legal provisions relied upon, it would appear most clearly that the due process question
raised is insubstantial. Certainly, the facts on which the seizure was based were not unknown to petitionersappellants. On those facts the liability of the vessels and merchandise under the above terms of the statute would
appear to be undeniable. The action taken then by the Commissioner of Customs was in accordance with law.
How could there be a denial of due process? There was nothing arbitrary about the manner in which such seizure and
forfeiture were effected. The right to a hearing of petitioners-appellants was respected. They could not have been
unaware of what they were doing. It would be an affront to reason if under the above circumstances they could be
allowed to raise in all seriousness a due process question. Such a constitutional guaranty, basic and fundamental,
certainly should not be allowed to lend itself as an instrument for escaping a liability arising from ones own nefarious
acts.
5. Petitioners-appellants would further assail the validity of the action taken by the respondent Commissioner of
Customs by the plea that the repeal of Republic Act No. 426 abated whatever liability could have been incurred
thereunder. This argument raised before the Court of Tax Appeals was correctly held devoid of any persuasive force.
The decision under review cited our opinion in Golay-Buchel & Cie v. Commissioner of Customs 11 to the effect that
the expiration of the Import Control Law "did not produce the effect of declaring legal the importation of goods which
were illegally imported and the seizure and forfeiture thereof as ordered by the Collector of Customs illegal or null and
void."cralaw virtua1aw library
Roxas v. Sayoc 12 announced that principle earlier. Thus: "Herein, we are concerned with the effect of the expiration
of a law, not with the abrogation of a law, and we hold the view that once the Commissioner of Customs has acquired
jurisdiction over the case, the mere expiration of Republic Act No. 650 will not divest him of his jurisdiction thereon
duly acquired while said law was still in force. In other words, we believe that despite the expiration of Republic Act
No. 650 the Commissioner of Customs retained his jurisdiction over the case and could continue to take cognizance
thereof until its final determination, for the main question brought in by the appeal from the decision of the Collector
of Customs was the legality or illegality of the decision of the Collector of Customs, and that question could not have

been abated by the mere expiration of Republic Act No. 650. We firmly believe that the expiration of Republic Act No.
650 could not have produced the effect (1) of declaring legal the importation of the cotton counterpanes which were
illegally imported, and (2) of declaring the seizure and forfeiture ordered by the Collector of Customs illegal or null
and void; in other words, it could not have the effect of annulling or setting aside the decision of the Collector of
Customs which was rendered while the law was in force and which should stand until it is revoked by the appellate
tribunal."cralaw virtua1aw library
As late as 1965, in Bombay Dept. Store v. Commissioner of Customs, 13 we had occasion to reaffirm the doctrine in
the above two decisions, the present Chief Justice, speaking for the Court, stating that such expiration of the period of
effectivity of Republic Act No. 650 "did not have the effect of depriving the Commissioner of Customs of the
jurisdiction, acquired by him prior thereto, to act on cases of forfeiture pending before him, which are in the nature of
proceedings in rem. . . ."cralaw virtua1aw library
It is thus most evident that the Court of Tax Appeals had not in any wise refused to adhere faithfully to controlling
legal principles when it sustained the action taken by respondent Commissioner of Customs. It would be a reproach
and a reflection on the law if on the facts as they had been shown to exist, the seizure and forfeiture of the vessels
and cargo in question were to be characterized as outside the legal competence of our government and violative of
the constitutional rights of petitioners-appellants. Fortunately, as had been made clear above, that would be an
undeserved reflection and an unwarranted reproach. The vigor of the war against smuggling must not be hampered
by a misreading of international law concepts and a misplaced reliance on a constitutional guaranty that has not in
any wise been infringed.
WHEREFORE, the decision of respondent Court of Tax Appeals of November 19, 1964, is affirmed. With costs against
Petitioners-Appellants.

December 16, 1910

G.R. No. 5887
THE UNITED STATES, plaintiff-appellee, vs. LOOK CHAW (alias LUK CHIU), defendant-appellant.
ARELLANO, C. J.:
The first complaint filed against the defendant, in the Court of First Instance of Cebu, stated that he "carried, kept,
possessed and had in his possession and control, 96 kilogrammes of opium," and that "he had been surprised in the
act of selling 1,000 pesos worth prepared opium."
The defense presented a demurrer based on two grounds, the second of which was the more than one crime was
charged in the complaint. The demurrer was sustained, as the court found that the complaint contained two charges,
one, for the unlawful possession of opium, and the other, for the unlawful sale of opium, and, consequence of that
ruling, it ordered that the fiscal should separated one charge from the other and file a complaint for each violation;
this, the fiscal did, and this cause concerns only the unlawful possession of opium. It is registered as No. 375, in the
Court of First Instance of Cebu, and as No. 5887 on the general docket of this court.
The facts of the case are contained in the following finding of the trial court:
The evidence, it says, shows that between 11 and 12 o'clock a. m. on the present month (stated as August 19, 1909),
several persons, among them Messrs. Jacks and Milliron, chief of the department of the port of Cebu and internalrevenue agent of Cebu, respectively, went abroad the steamship Erroll to inspect and search its cargo, and found, first
in a cabin near the saloon, one sack (Exhibit A) and afterwards in the hold, another sack (Exhibit B). The sack referred
to as Exhibit A contained 49 cans of opium, and the other, Exhibit B, the larger sack, also contained several cans of
the same substance. The hold, in which the sack mentioned in Exhibit B was found, was under the defendant's
control, who moreover, freely and of his own will and accord admitted that this sack, as well as the other referred to
in Exhibit B and found in the cabin, belonged to him. The said defendant also stated, freely and voluntarily, that he
had bought these sacks of opium, in Hongkong with the intention of selling them as contraband in Mexico or Vera
Cruz, and that, as his hold had already been searched several times for opium, he ordered two other Chinamen to
keep the sack. Exhibit A.
It is to be taken into account that the two sacks of opium, designated as Exhibits A and B, properly constitute
the corpus delicti. Moreover, another lot of four cans of opium, marked, as Exhibit C, was the subject matter of
investigation at the trial, and with respect to which the chief of the department of the port of Cebu testified that they
were found in the part of the ship where the firemen habitually sleep, and that they were delivered to the first officer
of the ship to be returned to the said firemen after the vessel should have left the Philippines, because the firemen
and crew of foreign vessels, pursuant to the instructions he had from the Manila custom-house, were permitted to
retain certain amounts of opium, always provided it should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," is also corpus delicti and important as evidence in this cause.
With regard to this the internal-revenue agent testified as follows:
FISCAL. What is it?
WITNESS. It is a can opium which was bought from the defendant by a secret-service agent and taken to the office of
the governor to prove that the accused had opium in his possession to sell.
On motion by the defense, the court ruled that this answer might be stricken out "because it refers to a sale." But,
with respect to this answer, the chief of the department of customs had already given this testimony, to wit:
FISCAL. Who asked you to search the vessel?
WITNESS. The internal-revenue agent came to my office and said that a party brought him a sample of opium and
that the same party knew that there was more opium on board the steamer, and the agent asked that the vessel be
searched.
The defense moved that this testimony be rejected, on the ground of its being hearsay evidence, and the court only
ordered that the part thereof "that there was more opium, on board the vessel" be stricken out.

The defense, to abbreviate proceedings, admitted that the receptacles mentioned as Exhibits A, B, and C, contained
opium and were found on board the steamship Erroll, a vessel of English nationality, and that it was true that the
defendant stated that these sacks of opium were his and that he had them in his possession.
According to the testimony of the internal-revenue agent, the defendant stated to him, in the presence of the
provincial fiscal, of a Chinese interpreter (who afterwards was not needed, because the defendant spoke English), the
warden of the jail, and four guards, that the opium seized in the vessel had been bought by him in Hongkong, at three
pesos for each round can and five pesos for each one of the others, for the purpose of selling it, as contraband, in
Mexico and Puerto de Vera Cruz; that on the 15th the vessel arrived at Cebu, and on the same day he sold opium;
that he had tried to sell opium for P16 a can; that he had a contract to sell an amount of the value of about P500;
that the opium found in the room of the other two Chinamen prosecuted in another cause, was his, and that he had
left it in their stateroom to avoid its being found in his room, which had already been searched many times; and that,
according to the defendant, the contents of the large sack was 80 cans of opium, and of the small one, 49, and the
total number, 129.
It was established that the steamship Erroll was of English nationality, that it came from Hongkong, and that it was
bound for Mexico, via the call ports of Manila and Cebu.
The defense moved for a dismissal of the case, on the grounds that the court had no jurisdiction to try the same and
the facts concerned therein did not constitute a crime. The fiscal, at the conclusion of his argument, asked that the
maximum penalty of the law be imposed upon the defendant, in view of the considerable amount of opium seized. The
court ruled that it did not lack jurisdiction, inasmuch as the crime had been committed within its district, on the wharf
of Cebu.
The court sentenced the defendant to five years' imprisonment, to pay a fine of P10,000, with additional subsidiary
imprisonment in case of insolvency, though not to exceed one third of the principal penalty, and to the payment of the
costs. It further ordered the confiscation, in favor of the Insular Government, of the exhibits presented in the case,
and that, in the event of an appeal being taken or a bond given, or when the sentenced should have been served, the
defendant be not released from custody, but turned over to the customs authorities for the purpose of the fulfillment
of the existing laws on immigration.
From this judgment, the defendant appealed to this court.
The appeal having been heard, together with the allegations made therein by the parties, it is found: That, although
the mere possession of a thing of prohibited use in these Islands, aboard a foreign vessel in transit, in any of their
ports, does not, as a general rule, constitute a crime triable by the courts of this country, on account of such vessel
being considered as an extension of its own nationality, the same rule does not apply when the article, whose use is
prohibited within the Philippine Islands, in the present case a can of opium, is landed from the vessel upon Philippine
soil, thus committing an open violation of the laws of the land, with respect to which, as it is a violation of the penal
law in force at the place of the commission of the crime, only the court established in that said place itself had
competent jurisdiction, in the absence of an agreement under an international treaty.
It is also found: That, even admitting that the quantity of the drug seized, the subject matter of the present case, was
considerable, it does not appear that, on such account, the two penalties fixed by the law on the subject, should be
imposed in the maximum degree.
Therefore, reducing the imprisonment and the fine imposed to six months and P1,000, respectively, we affirm in all
other respects the judgment appealed from, with the costs of this instance against the appellant. So ordered.

G.R. No. L-18924

October 19, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,

vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the Court of First Instance of Manila,
sustaining the demurrer presented by the defendant to the information that initiated this case and in which the
appellee is accused of having illegally smoked opium, aboard the merchant vessel Changsa of English nationality while
said vessel was anchored in Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and dismissed the case.
The question that presents itself for our consideration is whether such ruling is erroneous or not; and it will or will not
be erroneous according as said court has or has no jurisdiction over said offense.
The point at issue is whether the courts of the Philippines have jurisdiction over crime, like the one herein involved,
committed aboard merchant vessels anchored in our jurisdiction waters. 1awph!l.net
There are two fundamental rules on this particular matter in connection with International Law; to wit, the French
rule, according to which crimes committed aboard a foreign merchant vessels should not be prosecuted in the courts
of the country within whose territorial jurisdiction they were committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the territorial principle and followed in the United States,
according to which, crimes perpetrated under such circumstances are in general triable in the courts of the country
within territory they were committed. Of this two rules, it is the last one that obtains in this jurisdiction, because at
present the theories and jurisprudence prevailing in the United States on this matter are authority in the Philippines
which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116), Chief Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be obviously inconvenient and dangerous
to society, and would subject the laws to continual infraction, and the government to degradation, if such
individuals or merchants did not owe temporary and local allegiance, and were not amenable to the
jurisdiction of the country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
. . . No court of the Philippine Islands had jurisdiction over an offense or crime committed on the high seas or
within the territorial waters of any other country, but when she came within three miles of a line drawn from
the headlands, which embrace the entrance to Manila Bay, she was within territorial waters, and a new set of
principles became applicable. (Wheaton, International Law [Dana ed.], p. 255, note 105; Bonfils, Le Droit Int.,
secs. 490 et seq.; Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of
the territorial sovereign subject to such limitations as have been conceded by that sovereignty through the
proper political agency. . . .
It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus vs. Keeper of the Common
Jail (120 U.., 1), wherein it was said that:
. . . The principle which governs the whole matter is this: Disorder which disturb only the peace of the ship or
those on board are to be dealt with exclusively by the sovereignty of the home of the ship, but those which
disturb the public peace may be suppressed, and, if need be, the offenders punished by the proper authorities
of the local jurisdiction. It may not be easy at all times to determine which of the two jurisdictions a particular
act of disorder belongs. Much will undoubtedly depend on the attending circumstances of the particular case,
but all must concede that felonious homicide is a subject for the local jurisdiction, and that if the proper
authorities are proceeding with the case in the regular way the consul has no right to interfere to prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:

Although the mere possession of an article of prohibited use in the Philippine Islands, aboard a foreign vessel
in transit in any local port, does not, as a general rule, constitute a crime triable by the courts of the Islands,
such vessels being considered as an extension of its own nationality, the same rule does not apply when the
article, the use of which is prohibited in the Islands, is landed from the vessels upon Philippine soil; in such a
case an open violation of the laws of the land is committed with respect to which, as it is a violation of the
penal law in force at the place of the commission of the crime, no court other than that established in the said
place has jurisdiction of the offense, in the absence of an agreement under an international treaty.
As to whether the United States has ever consented by treaty or otherwise to renouncing such jurisdiction or a part
thereof, we find nothing to this effect so far as England is concerned, to which nation the ship where the crime in
question was committed belongs. Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says
the following:
There shall be between the territories of the United States of America, and all the territories of His Britanic
Majesty in Europe, a reciprocal liberty of commerce. The inhabitants of the two countries, respectively, shall
have liberty freely and securely to come with their ships and cargoes to all such places, ports and rivers, in
the territories aforesaid, to which other foreigners are permitted to come, to enter into the same, and to
remain and reside in any parts of the said territories, respectively; also to hire and occupy houses and
warehouses for the purposes of their commerce; and, generally, the merchants and traders of each nation
respectively shall enjoy the most complete protection and security for their commerce, but subject always to
the laws and statutes of the two countries, respectively. (Art. 1, Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a foreign vessel in transit was held by this court not triable
by or courts, because it being the primary object of our Opium Law to protect the inhabitants of the Philippines
against the disastrous effects entailed by the use of this drug, its mere possession in such a ship, without being used
in our territory, does not being about in the said territory those effects that our statute contemplates avoiding. Hence
such a mere possession is not considered a disturbance of the public order.
But to smoke opium within our territorial limits, even though aboard a foreign merchant ship, is certainly a breach of
the public order here established, because it causes such drug to produce its pernicious effects within our territory. It
seriously contravenes the purpose that our Legislature has in mind in enacting the aforesaid repressive statute.
Moreover, as the Attorney-General aptly observes:
. . . The idea of a person smoking opium securely on board a foreign vessel at anchor in the port of Manila in
open defiance of the local authorities, who are impotent to lay hands on him, is simply subversive of public
order. It requires no unusual stretch of the imagination to conceive that a foreign ship may come into the port
of Manila and allow or solicit Chinese residents to smoke opium on board.
The order appealed from is revoked and the cause ordered remanded to the court of origin for further proceedings in
accordance with law, without special findings as to costs. So ordered.

[G.R. No. 120135. March 31, 2003.]

BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD., Petitioners, v. COURT OF APPEALS,
HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA, JR., Respondents.
DECISION

AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November 29, 1994 decision
of the Court of Appeals 1 and the April 28, 1995 resolution denying petitioners motion for reconsideration.
The factual background of the case is as follows:chanrob1es virtual 1aw library
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a Complaint 2 before
the Regional Trial Court of Pasig against the Bank of America NT&SA and Bank of America International, Ltd.
(defendant banks for brevity) alleging that: they were engaged in the shipping business; they owned two vessels:
Don Aurelio and El Champion, through their wholly-owned corporations; they deposited their revenues from said
business together with other funds with the branches of said banks in the United Kingdom and Hongkong up to 1979;
with their business doing well, the defendant banks induced them to increase the number of their ships in operation,
offering them easy loans to acquire said vessels; 3 thereafter, the defendant banks acquired, through their
(Litonjuas) corporations as the borrowers: (a) El Carrier 4; (b) El General 5; (c) El Challenger 6; and (d) El Conqueror
7; the vessels were registered in the names of their corporations; the operation and the funds derived therefrom were
placed under the complete and exclusive control and disposition of the petitioners; 8 and the possession of the vessels
was also placed by defendant banks in the hands of persons selected and designated by them (defendant banks). 9
The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the income derived from
the operation of the vessels as well as of the proceeds of the subsequent foreclosure sale; 10 because of the breach of
their fiduciary duties and/or negligence of the petitioners and/or the persons designated by them in the operation of
private respondents six vessels, the revenues derived from the operation of all the vessels declined drastically; the
loans acquired for the purchase of the four additional vessels then matured and remained unpaid, prompting
defendant banks to have all the six vessels, including the two vessels originally owned by the private respondents,
foreclosed and sold at public auction to answer for the obligations incurred for and in behalf of the operation of the
vessels; they (Litonjuas) lost sizeable amounts of their own personal funds equivalent to ten percent (10%) of the
acquisition cost of the four vessels and were left with the unpaid balance of their loans with defendant banks. 11 The
Litonjuas prayed for the accounting of the revenues derived in the operation of the six vessels and of the proceeds of
the sale thereof at the foreclosure proceedings instituted by petitioners; damages for breach of trust; exemplary
damages and attorneys fees. 12
Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against
them. 13
On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:jgc:chanrobles.com.ph
"WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby DENIED. The defendant is
therefore, given a period of ten (10) days to file its Answer to the complaint.
"SO ORDERED." 14
Instead of filing an answer the defendant banks went to the Court of Appeals on a "Petition for Review on Certiorari"
15 which was aptly treated by the appellate court as a petition for certiorari. They assailed the above-quoted order as
well as the subsequent denial of their Motion for Reconsideration. 16 The appellate court dismissed the petition and
denied petitioners Motion for Reconsideration. 17
Hence, herein petition anchored on the following grounds:jgc:chanrobles.com.ph
"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE PERSONALITIES OF THE
PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL BORROWERS)
CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO
PERSONALITIES TO SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON
CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING

WHETHER THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE
INSTANT CASE, DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE
APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE
PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE
PRIVATE RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE
FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF FORUM SHOPPING." 18
As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the vessels are the
foreign corporations and not private respondents Litonjuas who are mere stockholders; and that the revenues derived
from the operations of all the vessels are deposited in the accounts of the corporations. Hence, petitioners maintain
that these foreign corporations are the legal entities that have the personalities to sue and not herein private
respondents; that private respondents, being mere shareholders, have no claim on the vessels as owners since they
merely have an inchoate right to whatever may remain upon the dissolution of the said foreign corporations and after
all creditors have been fully paid and satisfied; 19 and that while private respondents may have allegedly spent
amounts equal to 10% of the acquisition costs of the vessels in question, their 10% however represents their
investments as stockholders in the foreign corporations. 20
Anent the second assigned error, petitioners posit that while the application of the principle of forum non conveniens
is discretionary on the part of the Court, said discretion is limited by the guidelines pertaining to the private as well as
public interest factors in determining whether plaintiffs choice of forum should be disturbed, as elucidated in Gulf Oil
Corp. v. Gilbert 21 and Piper Aircraft Co. v. Reyno, 22 to wit:jgc:chanrobles.com.ph
"Private interest factors include: (a) the relative ease of access to sources of proof; (b) the availability of compulsory
process for the attendance of unwilling witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all
other practical problems that make trial of a case easy, expeditious and inexpensive. Public interest factors include:
(a) the administrative difficulties flowing from court congestion; (b) the local interest in having localized controversies
decided at home; (c) the avoidance of unnecessary problems in conflict of laws or in the application of foreign law; or
(d) the unfairness of burdening citizens in an unrelated forum with jury duty." 23
In support of their claim that the local court is not the proper forum, petitioners allege the
following:jgc:chanrobles.com.ph
"i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are based in Hongkong and
England. As such, the evidence and the witnesses are not readily available in the Philippines;
"ii) The loan transactions were obtained, perfected, performed, consummated and partially paid outside the
Philippines;
"iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels were part of an offshore
fleet, not based in the Philippines;
"iv) All the loans involved were granted to the Private Respondents foreign CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the laws of England;
"vi) The subsequent sales of the mortgaged vessels and the application of the sales proceeds occurred and transpired
outside the Philippines, and the deliveries of the sold mortgaged vessels were likewise made outside the Philippines;
"vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL deposited to the Accounts of
the foreign CORPORATIONS abroad; and
"viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in the Philippines." 24
Petitioners argue further that the loan agreements, security documentation and all subsequent restructuring
agreements uniformly, unconditionally and expressly provided that they will be governed by the laws of England; 25
that Philippine Courts would then have to apply English law in resolving whatever issues may be presented to it in the
event it recognizes and accepts herein case; that it would then be imposing a significant and unnecessary expense
and burden not only upon the parties to the transaction but also to the local court. Petitioners insist that the
inconvenience and difficulty of applying English law with respect to a wholly foreign transaction in a case pending in
the Philippines may be avoided by its dismissal on the ground of forum non conveniens. 26
Finally, petitioners claim that private respondents have already waived their alleged causes of action in the case at bar
for their refusal to contest the foreign civil cases earlier filed by the petitioners against them in Hongkong and

England, to wit:jgc:chanrobles.com.ph
"1.) Civil action in England in its High Court of Justice, Queens Bench Division Commercial Court (1992-Folio No.
2098) against (a) LIBERIAN TRANSPORT NAVIGATION, SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL
CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATORS CORP. SA; (f) EDDIE NAVIGATION
CORP. SA; (g) EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice, Queens Bench Division, Commercial Court (1992-Folio No.
2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN
LITONJUA and (d) AURELIO KATIPUNAN LITONJUA.
"3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992), against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP)
CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA.
"4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992); against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP)
CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA."cralaw virtua1aw
library
and that private respondents alleged cause of action is already barred by the pendency of another action or by litis
pendentia as shown above. 27
On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or
misrepresented in the present petition for certiorari; that the prefatory statement failed to state that part of the
security of the foreign loans were mortgages on a 39-hectare piece of real estate located in the Philippines; 28 that
while the complaint was filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by the
private respondents who are Filipinos and therefore under Philippine laws, aside from the said corporate borrowers
being but their alter-egos, they have interests of their own in the vessels. 29 Private respondents also argue that the
dismissal by the Court of Appeals of the petition for certiorari was justified because there was neither allegation nor
any showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in
the ordinary course of law from the Order of the trial judge denying their Motion to Dismiss; that the remedy available
to the petitioners after their Motion to Dismiss was denied was to file an Answer to the complaint; 30 that as upheld
by the Court of Appeals, the decision of the trial court in not applying the principle of forum non conveniens is in the
lawful exercise of its discretion. 31 Finally, private respondents aver that the statement of petitioners that the doctrine
of res judicata also applies to foreign judgment is merely an opinion advanced by them and not based on a categorical
ruling of this Court; 32 and that herein private respondents did not actually participate in the proceedings in the
foreign courts. 33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari.
Petitioners should have filed an answer to the complaint, proceed to trial and await judgment before making an
appeal. As repeatedly held by this Court:jgc:chanrobles.com.ph
"An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for
certiorari or mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the
objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire
case by appeal in due course. . . . Under certain situations, recourse to certiorari or mandamus is considered
appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction; (b) where there is
patent grave abuse of discretion by the trial court; or (c) appeal would not prove to be a speedy and adequate
remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken
order maintaining the plaintiffs baseless action and compelling the defendant needlessly to go through a protracted
trial and clogging the court dockets by another futile case." 34
Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners
motion to dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would
appeal, under the circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in
conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that
plaintiffs have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which
are the registered owners of the vessels and the borrowers of petitioners?

No. Petitioners argument that private respondents, being mere stockholders of the foreign corporations, have no
personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of
personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used
as a ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no
cause of action. 35 In San Lorenzo Village Association, Inc. v. Court of Appeals, 36 this Court clarified that a complaint
states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of
the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of
said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground
of failure to state a cause of action. 37 To emphasize, it is not the lack or absence of cause of action that is a ground
for dismissal of the complaint but rather the fact that the complaint states no cause of action. 38 "Failure to state a
cause of action" refers to the insufficiency of allegation in the pleading, unlike "lack of cause of action" which refers to
the insufficiency of factual basis for the action. "Failure to state a cause of action" may be raised at the earliest stages
of an action through a motion to dismiss the complaint, while "lack of cause of action" may be raised any time after
the questions of fact have been resolved on the basis of stipulations, admissions or evidence presented. 39
In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein
private respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by
reason of the fiduciary relationship that was created between the parties involving the vessels in question; (2)
petitioners have the obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the
same.chanrob1es virtua1 1aw 1ibrary
Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the
corporation; that the corporate entities have juridical personalities separate and distinct from those of the private
respondents. Private respondents maintain that the corporations are wholly owned by them and prior to the
incorporation of such entities, they were clients of petitioners which induced them to acquire loans from said
petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case, 40
". . . assuming that the allegation of facts constituting plaintiffs cause of action is not as clear and categorical as
would otherwise be desired, any uncertainty thereby arising should be so resolved as to enable a full inquiry into the
merits of the action."cralaw virtua1aw library
As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law
abhors, and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort
the action on account of the alleged fatal flaws of the complaint would obviously be indecisive and would not end the
controversy, since the institution of another action upon a revised complaint would not be foreclosed. 41
Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning the forum is inconvenient, emerged in private
international law to deter the practice of global forum shopping, 42 that is to prevent non-resident litigants from
choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure procedural
advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue.
Under this doctrine, 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. 43
Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the
particular case and is addressed to the sound discretion of the trial court. 44 In the case of Communication Materials
and Design, Inc. v. Court of Appeals, 45 this Court held that." . . [a] Philippine 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." 46 Evidently, all these requisites are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation v. Court of Appeals, 47 that the doctrine of forum
non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court
does not include said doctrine as a ground. This Court further ruled that 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; and that the propriety of dismissing a case
based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered
a matter of defense. 48
Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign action?chanrob1es

virtua1 1aw 1ibrary

No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case
will amount to res judicata in the other. 49 Parenthetically, for litis pendentia to be a ground for the dismissal of an
action there must be: (a) identity of the parties or at least such as to represent the same interest in both actions; (b)
identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the
two cases should be such that the judgment which may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other. 50
In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties,
notwithstanding the presence of other respondents, 51 as well as the reversal in positions of plaintiffs and defendants
52 , still the other requirements necessary for litis pendentia were not shown by petitioner. It merely mentioned that
civil cases were filed in Hongkong and England without however showing the identity of rights asserted and the reliefs
sought for as well as the presence of the elements of res judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:chanrob1es virtual 1aw library
. . . [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein . . ., failed
to provide this Court with relevant and clear specifications that would show the presence of the above-quoted
elements or requisites for res judicata. While it is true that the petitioners in their motion for reconsideration (CA
Rollo, p. 72), after enumerating the various civil actions instituted abroad, did aver that "Copies of the foreign
judgments are hereto attached and made integral parts hereof as Annexes B, C, D and `E", they failed, wittingly
or inadvertently, to include a single foreign judgment in their pleadings submitted to this Court as annexes to their
petition. How then could We have been expected to rule on this issue even if We were to hold that foreign judgments
could be the basis for the application of the aforementioned principle of res judicata? 53
Consequently, both courts correctly denied the dismissal of herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.chanrob1es virtua1 1aw 1ibrary
SO ORDERED.

[G.R. No. 120077. October 13, 2000.]

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS, Respondents.
DECISION

PARDO, J.:
The case before the Court is a petition for certiorari 1 to annul the following orders of the National Labor Relations
Commission (hereinafter referred to as "NLRC") for having been issued without or with excess jurisdiction and with
grave abuse of discretion: 2
(1) Order of May 31, 1993. 3 Reversing and setting aside its earlier resolution of August 28, 1992. 4 The questioned
order declared that the NLRC, not the Philippine Overseas Employment Administration (hereinafter referred to as
"POEA"), had jurisdiction over private respondents complaint;
(2) Decision of December 15, 1994. 5 Directing petitioners to jointly and severally pay private respondent twelve
thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired portion of his contract;
three thousand six hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period of his
contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and
eight hundred dollars (US$19,800.00) or its peso equivalent and attorneys fees amounting to ten percent (10%) of
the total award; and
(3) Order of March 30, 1995. 6 Denying the motion for reconsideration of the petitioners.chanrob1es virtua1 1aw
1ibrary
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker
employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly
hired by the Palace Hotel, Beijing, Peoples Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel International
Company, Limited (hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and
existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong. 7 MHC is an "incorporator" of
MHICL, owning 50% of its capital stock. 8
By virtue of a "management agreement" 9 with the Palace Hotel (Wang Fu Company Limited), MHICL 10 trained the
personnel and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a letter
dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed
respondent Santos that he was recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased
benefits. The position was slated to open on October 1, 1988. 11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to
respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to Mr.
Henk in Manila, together with his passport and two additional pictures for his visa to China.chanrob1es virtua1 1aw
1ibrary
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under the
pretext that he was needed at home to help with the familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henks letter. Respondent Santos

enclosed four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that he was going
to arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for a
period of two years. 12 It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable
fourteen (14) times a year. 13
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel. 14
Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel, effective
November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and
Development) of petitioner MHICL Miguel D. Cergueda signed the employment agreement under the word "noted" .
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China and
reassumed his post on July 17, 1989.chanrob1es virtua1 1aw 1ibrary
On July 22, 1989, Mr. Shmidts Executive Secretary, a certain Joanna suggested in a handwritten note that
respondent Santos be given one (1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his
employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the
political upheaval in China. 15 We quote the letter: 16
"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square incidents), our
business has been severely affected. To reduce expenses, we will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest assured this does in no way reflect your past
performance which we found up to our expectations."cralaw virtua1aw library
"Should a turnaround in the business happen, we will contact you directly and give you priority on future
assignment."cralaw virtua1aw library
On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all benefits due
him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full
compensation pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month notice clause
and Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still not operational and with a low business outlook,
retrenchment in various departments of the hotel is going on which is a normal management practice to control costs.
"When going through the latest performance ratings, please also be advised that his performance was below average
and a Chinese National who is doing his job now shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure."cralaw virtua1aw library
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National
Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine
hundred and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as
exemplary damages and attorneys fees equivalent to 20% of the damages prayed for. The complaint named MHC,
MHICL, the Palace Hotel and Mr. Shmidt as respondents.chanrob1es virtua1 1aw 1ibrary
The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before

the Labor Arbiter. 18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus: 19
"WHEREFORE, judgment is hereby rendered:jgc:chanrobles.com.ph
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorneys fees.
"SO ORDERED."cralaw virtua1aw library
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the
case.
On August 28, 1992, the NLRC promulgated a resolution, stating: 20
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction.
Complainant is hereby enjoined to file his complaint with the POEA.
"SO ORDERED."cralaw virtua1aw library
On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He argued that
the case was not cognizable by the POEA as he was not an "overseas contract worker." 21
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter Emerson
Tumanon to hear the case on the question of whether private respondent was retrenched or dismissed. 22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and documentary
evidence presented to and heard by him. 23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region, Arbitration
Branch, and the case was transferred to Labor Arbiter Jose G. de Vera. 24
On November 25, 1994, Labor Arbiter de Vera submitted his report. 25 He found that respondent Santos was illegally
dismissed from employment and recommended that he be paid actual damages equivalent to his salaries for the
unexpired portion of his contract. 26
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit: 27
"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by substantial evidence,
judgment is hereby rendered, directing the respondents to jointly and severally pay complainant the following
computed contractual benefits: (1) US$12,600.00 as salaries for the unexpired portion of the parties contract; (2)
US$3,600.00 as extra four (4) months salary for the two (2) years period (sic) of the parties contract; (3)
US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the parties or a total of
US$19,800.00 or its peso equivalent, plus (4) attorneys fees of 10% of complainants total award.
"SO ORDERED."cralaw virtua1aw library
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Veras
recommendation had no basis in law and in fact. 28
On March 30, 1995, the NLRC denied the motion for reconsideration. 29
Hence, this petition. 30
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary restraining
order and/or writ of preliminary injunction and a motion for the annulment of the entry of judgment of the NLRC
dated July 31, 1995. 31

On November 20, 1995, the Court denied petitioners urgent motion. The Court required respondents to file their
respective comments, without giving due course to the petition. 32
On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its annexes,
they can not defend and sustain the position taken by the NLRC in its assailed decision and orders. The Solicitor
General prayed that he be excused from filing a comment on behalf of the NLRC 33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own
comment to the petition. 35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign
elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace
Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here.chanrob1es virtua1
1aw 1ibrary
The employment contract. Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without
the intervention of the POEA or any authorized recruitment agency of the government. 36
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. 37 The conditions are unavailing in the case at
bar.
Not Convenient. We fail to see how the NLRC is a convenient 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. Henk are nonresidents of the Philippines.
No power to determine applicable law. Neither can an intelligent decision be made as to the law governing the
employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was made). 38
The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing
a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the Peoples Republic of
China.
No power to determine the facts. Neither can the NLRC determine the facts surrounding the alleged illegal dismissal
as all acts complained of took place in Beijing, Peoples Republic of China. The NLRC was not in a position to
determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify
respondent Santos retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming that a proper decision could be reached by
the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its person
was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign
employers. Neither are we saying that we do not have power over an employment contract executed in a foreign
country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would
protect him. 39 He is not an "overseas contract worker" a fact which he admits with conviction. 40

Even assuming that the NLRC was the proper forum, even on the merits, the NLRCs decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for
Santos retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough
to pierce the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a
mere alter ego or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals, 42 we held that "the mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities."cralaw virtua1aw library
The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or
complete domination of the other corporations finances, policy and business practices with regard to the transaction
attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control
or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the
elements prevents the piercing of the corporate veil. 43
It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of
any other legal entity to which it may be related. 44 Clear and convincing evidence is needed to pierce the veil of
corporate fiction. 45 In this case, we find no evidence to show that MHICL and MHC are one and the same
entity.chanrob1es virtua1 1aw 1ibrary
III. MHICL not Liable
Respondent Santos predicates MHICLs liability on the fact that MHICL "signed" his employment contract with the
Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the
employment contract as a mere witness. He merely signed under the word "noted" .
When one "notes" a contract, one is not expressing his agreement or approval, as a party would. 46 In Sichangco v.
Board of Commissioners of Immigration, 47 the Court recognized that the term "noted" means that the person so
noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that
which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no recitals,
after the parties (Emphasis ours)." 48 As opposed to a party to a contract, a witness is simply one who, "being
present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness." 49 One who "notes" something
just makes a "brief written statement" 50 a memorandum or observation.
Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In
determining the existence of an employer-employee relationship, the following elements are considered: 51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employees conduct."cralaw virtua1aw library
MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an
employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage
respondent Santos to work. The terms of employment were negotiated and finalized through correspondence between
respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not
MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it

was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos services.
Neither is there evidence to suggest that MHICL was a "labor-only contractor." 52 There is no proof that MHICL
"supplied" respondent Santos or even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the
Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and
the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship
existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction
over respondents claim in NLRC NCR Case No. 00-02-01058-90.chanrob1es virtua1 1aw 1ibrary
Labor Arbiters have exclusive and original jurisdiction only over the following: 53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of employment;
"4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations;
"5 Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and
lockouts; and
"6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement."cralaw virtua1aw library
In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from
an employer-employee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or
their collective bargaining agreements. 54
"To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that
jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein." 55
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss
the case amounts to grave abuse of discretion. 56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the
National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA
No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.

[G.R. Nos. 90306-07. July 30, 1990.]

K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., Petitioners, v. THE HONORABLE
COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL M/V "ESTELLA", Respondents.
DECISION

CORTES, J.:
Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered final and
conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step it to correct the
misapprehension. [Dela Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September
29, 1983, 124 SCRA 808.] This case is one such instance calling for the Courts review of the facts.
On January 7, 1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as "Kumagai"), a corporation formed and
existing under the laws of Japan, filed a complainant for the collection of a sum of money with preliminary attachment
against Atlantic Venus Co., S.A (hereinafter referred to as "Atlantic"), a corporation registered in Panama, the vessel
MV Estrella and Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine
corporation. Atlantic is the owner of the MV Estrella. The complaint, docketed as Civil Case No. 87-38930 of the
Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer and operator of the MV
Estrella, appointed N.S. Shipping Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as its
general agent in Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as
its local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and service but despite repeated
demands Crestamonte failed to pay the amount due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a "Keihin") filed complaints-in-intervention.
On May 19, 1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as "Fu Hing"), a corporation organized in
Hong Kong and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaintin-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for
the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56)
but such has remained unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of
attachment was also prayed for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as "K.K. Shell"), a
corporation organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an
attached complaint-in-intervention, alleging that upon request of NSS, Crestamontes general agent in Japan, K.K.
Shell provided and supplied marine diesel oil/fuel to the MV Estella at the ports of Tokyo and Mutsure in Japan and
that despite previous demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred NinetySix Dollars and Ninety-Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shells claim
constitutes a maritime lien on the MV Estella. The complaint-in-intervention sought the issuance of a writ of
preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19, 1987 and August 11, 1987, respectively.
Writs of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the
posting of counterbonds, the writs of attachment were discharged on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in-intervention filed by Fu Hing and K.K. Shell.
In the meantime, Atlantic and the MV Estella filed a petition in the Court of Appeals against the trial court judge,
Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial
court dated April 30, 1987 and August 11, 1987. Among others, the omnibus order dated August 11, 1987 denied the
motion to reconsider the order allowing Fu Hings intervention and granted K.K. Shells motion to intervene. Again Fu
Hing and K.K. Shell intervened, CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP No. 12341).
Fu Hing and K.K. Shell intervened in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease
and desist from proceeding with the case.
According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were
bound by the Agency Agreement between Crestamonte and NSS, particularly, the choice of forum clause, which
provides:chanrob1es virtual 1aw library

12.0 That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the
District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of Appeals. Hence
this petition. chanroblesvirtualawlibrary
In this case, we shall review the decision of the Court of Appeals only insofar as it relates to the intervention of K.K.
Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that an amicable
settlement had been reached with private respondents. The Court granted the motion on March 19, 1990.
After considering the pleadings filed by the parties and the arguments raised therein, the Court finds reversible error
on the part of the Court of Appeals insofar as it disallowed petitioners intervention in the case before the trial court
and ordered the latter to cease and desist from proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is,
therefore, bound by the agreement.
The body of the Agency Agreement entered into by and between Crestamonte (referred to in the agreement as
"Owner") and NSS ("Agent") provides:chanrob1es virtual 1aw library
WITNESSETH
That the OWNER has appointed and by these presents hereby appoints the AGENT as its General Agents for all Japan
in connection with the Owners vessels and/or providing suitable vessels for Japan Ports under the following terms and
conditions:chanrob1es virtual 1aw library
1.0 In general, the Agent will abide by the Owners decisions regarding the mode of operations of the vessels in
Japan and that all cargo bookings, vessels fixtures/charters, etc. by the Agent, shall always be subject to the prior
approval and consent of the Owners.
2.0 That the Agent shall provide for the necessary services required for the husbanding of the Owners vessels in all
Japan Ports and issue Bill(s) of Lading to Shippers in the form prescribed by the Owners.
3.0 That the Agent shall be responsible for fixing south-bound cargoes with revenues sufficient to cover ordinary
liner operation expenses such as bunkers, additives, lubricating oil, water, running repairs, drydocking expenses,
usual port disbursement accounts, cargo handling charges including stevedorage, provisions and ships stores and
cash advance to crew (excluding crew provisions).
The Agent expressly agrees that the Owners cash flow in Japan shall be essentially the Agents responsibility, and
should the revenue for south-bound cargoes as above mentioned be insufficient to cover the aforesaid expenses, the
Agent shall provide credit to the extent of the vessels requirements, provided however that said obligation shall be
secured by the Owner committing at least forty-eight (48) sailings of Japan/Philippines liner service per year.
cralawnad
The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation costs on Owners liner
service carried forward from the present Owners agent, subject to approval of Owners Representative in Japan in
regard to amount and nature thereof.
4.0 That the agent shall furnish office space of approximately thirty (30) square meters for the exclusive use of the
Owner and its representatives, within the premises of the Agents office, free of charge.
5.0 That the responsibilities of the Agent in regard to the cargo shall begin, in the case of imports into the territory
of Japan, from the time such cargo has left the ships tackles, and shall cease, in case of export, upon completion of
loading.
6.0 That the remuneration of the Agent from the Owner shall be as follows:chanrob1es virtual 1aw library
x

7.0 That the Agent shall exert best efforts to recommend to Owners stevedoring and other expenses incurred in
connection with work on board the Owners vessels, as well as customs house charges, pilotage, harbour dues, cables,

etc. which are for Owners account, on the cheapest possible terms. Owners shall decide and may appoint through the
Agent the services described herein.
8.0 That the Agent shall be responsible for the due collection of and due payment to the Owner of all outward
freight prepaid for cargo without delay upon the sailing of each vessel from the port. The Agent shall be also
responsible for the due collection of all inward freight payable at the port against delivery unless otherwise instructed
by the Owner to the contrary.
9.0 The account statements supported by vouchers in two copies itemized for each service and/or supply for each
vessel, shall be forwarded by the Agent to the Owner promptly after the departure of each vessel but in no case later
than 60 days thereafter.
10.0 That the freightage to be collected by the Agent in Japan shall be paid to the Owner after deducting the total
amount of disbursements incurred in Japan.
11.0 That this Agreement takes effect as of April 15, 1983 and shall remain in force unless terminated by either
party upon 60 days notice.
12.0 That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the
District Courts of Japan. [Annex "G" of the Petition, Rollo, pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of the terms of the agreement, particularly
the choice-of-forum clause, to sub-agents is made in the text of the agreement. What the contract clearly states are
NSS principal duties, i.e., that it shall provide for the necessary services required for the husbanding of Crestamontes
vessels in Japanese ports (section 2.0) and shall be responsible for fixing southbound cargoes with revenues sufficient
to cover ordinary expenses (section 3.0).
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the MV Estella
with marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed agent of Crestamonte
[Rollo, pp. 116-117.] There is thus no basis for the Court of Appeals finding, as regards K.K. Shell in relation to its
intervention in Civil Case No. 87-38930, that "the sub-agents admitted in their pleadings that they were appointed as
local agent/sub-agent or representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.]
What the Court of Appeals could have been referring to was K.K. Shells Urgent Motion for Leave to Intervene dated
February 24, 1987 in another case (Civil Case No. 86-38704) in another court and involving other vessels (MV Ofelia
and MV Christina C), where it was alleged that K.K. Shell is "one of the representatives of N.S. Shipping Corporation
for the supply of bunker oil, fuel oil, provisions and other necessaries to vessels of which N.S. Shipping Corporation
was the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not conclusively establish a
sub-agency between NSS and K.K. Shell. It is therefore surprising how the Court of Appeals could have come to the
conclusion, just on the basis of the Agency Agreement and the pleadings filed in the trial court, that "Crestamonte is
the principal, NSS is the agent and . . . Fu Hing and K.K. Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence,
if there be any, would still have to be presented to establish the allegation that K.K. Shell is a sub-agent of NSS.
cralawnad
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown
to be binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense, K.K.
Shell cannot therefore, as of yet, be barred from instituting an action in the Philippines.
2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound
by the Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine of forum
non conveniens would be a valid ground to cause the dismissal of K.K. Shells complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521,
the Ship Mortgage Decree of 1978, which provides:chanrob1es virtual 1aw library
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien. Any person furnishing repairs, supplies,
towage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the
order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel,
which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the
maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of
Crestamonte in general. Under the law it must be established that the credit was extended to the vessel itself. Now,

this is a defense that calls precisely for a factual determination by the trial court of who benefitted from the delivery of
the fuel. Hence, again, the necessity for the reception of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their
answer in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed
maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be
established.
Neither are we ready to rule on the private respondents invocation of the doctrine of forum non conveniens, as the
exact nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of
the trial court judge who is in the best position, after some vital facts are established, to determine whether special
circumstances require that his court desist from assuming jurisdiction over the suit. chanroblesvirtualawlibrary
It was clearly reversible error on the part of the Court of Appeals to annul the trial courts orders, insofar as K.K. Shell
is concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 87-38930. There are
still numerous material facts to be established in order to arrive at a conclusion as to the true nature of the
relationship between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have
been to allow the trial court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised
by private respondents after they have filed their answer and evidence to support their conflicting claims has been
presented. The Court of Appeals, however, substituted its judgment for that of the trial court and decided the merits
of the case, even in the absence of evidence, on the pretext of reviewing an interlocutory order.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-G.R. SP No.
12999, insofar as it annulled the order of the August 11, 1987 and directed the trial court to cease and desist from
proceeding with Civil Case No. 87-38930.
SO ORDERED.

[G.R. No. 102223. August 22, 1996.]

COMMUNICATIONS MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., (formerly ASPAC-ITEC
PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, Petitioners, v. 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, unwelcome 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 twenty-four 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, preliminary 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 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:jgc:chanrobles.com.ph
"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 it 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. v. 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:jgc:chanrobles.com.ph

"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.
x

3.0 Duties of Representative

3.1. REPRESENTATIVE SHALL:chanrob1es virtual 1aw library
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.
x

6.0. Representative as Independent Contractor

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 bear
witness to the respondents activities within the Philippines in pursuit of their business dealings:jgc:chanrobles.com.ph
"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. v. 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:jgc:chanrobles.com.ph
"(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 indentors, 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:jgc:chanrobles.com.ph
"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.
x

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 respondent charges ASPAC of admitting its independence from ITEC by entering and
ascribing to provision No. 6 of the Representative Agreement.
"6.0. Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement, REPRESENTATIVE shall act as an independent
contractor and not as an employee, worker, laborer, partner, joint venturer of ITEC as these terms are defined by the
laws, regulations, decrees or the like of any jurisdiction, including the jurisdiction of the United States, the state of
Alabama and the Territory." 22
Although it admits that the Representative Agreement contains provisions which both support and belie the
independence of ASPAC, private respondent echoes the respondent 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 Philippines 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:jgc:chanrobles.com.ph
"soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the
Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts
that imply a continuity or commercial dealings or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization."cralaw virtua1aw library
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. v. 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. v. 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 respondent required its local technical representative to
provide the employees of the technical and service center with ITEC identification cards and business cards, and to
correspond only on ITEC, Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC
Technical Assistance Center.", such telephone being listed in the telephone book under the heading of ITEC Technical
Assistance Center, and all calls being recorded and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure and repair of ITEC
products, and to requisition monthly the materials and components needed to replace stock consumed in the warranty
repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the respondents shows that there are provisions which are
highly restrictive in nature, such as to reduce petitioner ASPAC to a mere extension or instrument of the private
Respondent.
The "No Competing Product" provision of the Representative Agreement between ITEC and ASPAC provides: "The
Representative shall not represent or offer for sale within the Territory any product which competes with an existing
ITEC product or any product which ITEC has under active development." Likewise pertinent is the following provision:
"When acting under this Agreement, REPRESENTATIVE is authorized to solicit sales within the Territory on 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."cralaw virtua1aw library
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:chanrob1es virtual 1aw library
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. v. Court of Appeals, Et. Al. 46 we expressed our chagrin over this commonly used scheme
of defaulting local companies which are being used 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 is 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.

[G.R. NO. 162894 : February 26, 2008]

RAYTHEON INTERNATIONAL, INC., Petitioner, v. STOCKTON W. ROUZIE, JR., Respondent.
DECISION
TINGA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks
the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the
civil case filed by respondent against petitioner with the trial court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws of
the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen,
entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of services in
several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11 March
1992, respondent secured a service contract with the Republic of the Philippines on behalf of BMSI for the dredging of
rivers affected by the Mt. Pinatubo eruption and mudflows. 3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a
suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for alleged
nonpayment of commissions, illegal termination and breach of employment contract.4 On 28 September 1995, Labor
Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondent's money claims. 5 Upon
appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter and dismissed respondent's complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a Resolution dated 26
November 1997. The Resolution became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional
Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants
herein petitioner Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier
labor case. The complaint essentially reiterated the allegations in the labor case that BMSI verbally employed
respondent to negotiate the sale of services in government projects and that respondent was not paid the
commissions due him from the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also
averred that BMSI and RUST as well as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent's claim, it was a foreign corporation duly licensed to do
business in the Philippines and denied entering into any arrangement with respondent or paying the latter any sum of
money. Petitioner also denied combining with BMSI and RUST for the purpose of assuming the alleged obligation of
the said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the written agreement
between respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and
obligations of the parties shall be governed by the laws of the State of Connecticut. 10 Petitioner sought the dismissal
of the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages
by way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for
Summary Judgment12 seeking the dismissal of the complaint on grounds of forum non conveniens and failure to state
a cause of action. Respondent opposed the same. Pending the resolution of the omnibus motion, the deposition of
Walter Browning was taken before the Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner's omnibus motion. The trial court held that the
factual allegations in the complaint, assuming the same to be admitted, were sufficient for the trial court to render a
valid judgment thereon. It also ruled that the principle of forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a foreign corporation licensed to do business in the Philippines. 15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by respondent.17 In an Order
dated 31 July 2001,18 the trial court denied petitioner's motion. Thus, it filed a Rule 65 Petition19 with the Court of
Appeals praying for the issuance of a writ of certiorari and a writ of injunction to set aside the twin orders of the trial
court dated 13 September 2000 and 31 July 2001 and to enjoin the trial court from conducting further proceedings. 20

On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition for certiorari for lack of
merit. It also denied petitioner's motion for reconsideration in the assailed Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the allegations in the complaint
and should have also considered evidence aliunde in resolving petitioner's omnibus motion, it found the evidence
presented by petitioner, that is, the deposition of Walter Browning, insufficient for purposes of determining whether
the complaint failed to state a cause of action. The appellate court also stated that it could not rule one way or the
other on the issue of whether the corporations, including petitioner, named as defendants in the case had indeed
merged together based solely on the evidence presented by respondent. Thus, it held that the issue should be
threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the latter
decided not to desist from assuming jurisdiction on the ground of the inapplicability of the principle of forum non
conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT ON THE GROUND OF
FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on
record for respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations
with the law firm even before the filing of the instant petition and that it could no longer find the whereabouts of Atty.
Karagdag or of respondent despite diligent efforts. In a Resolution 25 dated 20 November 2006, the Court resolved to
dispense with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law clause,
that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of
foreign elements in the dispute - namely, the parties and witnesses involved are American corporations and citizens
and the evidence to be presented is located outside the Philippines - that renders our local courts inconvenient
forums. Petitioner theorizes that the foreign elements of the dispute necessitate the immediate application of the
doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of
conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus,
in the instances27 where the Court held that the local judicial machinery was adequate to resolve controversies with a
foreign element, the following requisites had to be proved: (1) that the Philippine Court is one to which the parties
may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision. 28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where
the court has jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even
if the rules of conflict-of-laws or the convenience of the parties point to a foreign forum. This is an exercise of
sovereign prerogative of the country where the case is filed. 29
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law 30 and by the
material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of
the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach
of contract. Undoubtedly, the nature of the action and the amount of damages prayed are within the jurisdiction of the
RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff)
upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was
acquired by its voluntary appearance in court.32
That the subject contract included a stipulation that the same shall be governed by the laws of the State of
Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded
from hearing the civil action. Jurisdiction and choice of law are two 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 which will determine the merits of the case is fair to both parties. 33 The choice of law stipulation will
become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits
proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking
remedies elsewhere.34 Petitioner's averments of the foreign elements in the instant case are not sufficient to oust the
trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual
determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the
trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court's desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can
assume jurisdiction over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to
the sound discretion of the lower courts because their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against
petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading. 36 As a general rule,
the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would
justify the relief demanded.37
The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner
contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of
Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing
shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a
cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and
Constructors, Inc. (REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project
in General Santos City, after Rust International ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly conclude that Raytheon International, Inc., Rust
International[,] Inc. and Brand Marine Service, Inc. have combined into one company, so much so that Raytheon
International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie
for unpaid commissions. Neither these documents clearly speak otherwise. 38
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together
requires the presentation of further evidence, which only a full-blown trial on the merits can afford.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

[G.R. No. 125078 : May 30, 2011]

Navida vs Dizon
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, which arose out of
two civil cases that were filed in different courts but whose factual background and issues are closely
intertwined.chanroblesvirtuallawlibrary
The petitions in G.R. Nos. 125078[1] and 125598[2] both assail the Order [3] dated May 20, 1996 of the Regional Trial Court
(RTC) of General Santos City, Branch 37, in Civil Case No. 5617. The said Order decreed the dismissal of the case in view of
the perceived lack of jurisdiction of the RTC over the subject matter of the complaint. The petition in G.R. No. 125598 also
challenges the Orders dated June 4, 1996 [4] and July 9, 1996,[5] which held that the RTC of General Santos City no longer
had jurisdiction to proceed with Civil Case No. 5617.chanroblesvirtuallawlibrary
On the other hand, the petitions in G.R. Nos. 126654,[6]127856, [7] and 128398 [8] seek the reversal of the Order[9] dated
October 1, 1996 of the RTC of Davao City, Branch 16, in Civil Case No. 24,251-96, which also dismissed the case on the
ground of lack of jurisdiction.chanroblesvirtuallawlibrary
G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the Resolutions dated February 10, 1997, [10]
April 28, 1997[11] and March 10, 1999.[12]
The factual antecedents of the petitions are as follows:
Proceedings before the Texas Courts
Beginning 1993, a number of personal injury suits were filed in different Texas state courts by citizens of twelve foreign
countries, including the Philippines. The thousands of plaintiffs sought damages for injuries they allegedly sustained from
their exposure to dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working on farms in 23
foreign countries. The cases were eventually transferred to, and consolidated in, the Federal District Court for the Southern
District of Texas, Houston Division. The cases therein that involved plaintiffs from the Philippines were "Jorge Colindres
Carcamo, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-94-1359, and "Juan Ramon Valdez, et al. v.
Shell Oil Co., et al.," which was docketed as Civil Action No. H-95-1356. The defendants in the consolidated cases prayed for
the dismissal of all the actions under the doctrine of forum non conveniens.chanroblesvirtuallawlibrary
In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally granted the defendants'
motion to dismiss. Pertinently, the court ordered that:
Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the entry of this Memorandum and Order
provided that defendants and third- and fourth-party defendants have:
(1)

participated in expedited discovery in the United States xxx;

(2)

either waived or accepted service of process and waived any other jurisdictional defense within 40 days after the
entry of this Memorandum and Order in any action commenced by a plaintiff in these actions in his home
country or the country in which his injury occurred. Any plaintiff desiring to bring such an action will do so within
30 days after the entry of this Memorandum and Order;

(3)

waived within 40 days after the entry of this Memorandum and Order any limitations-based defense that has
matured since the commencement of these actions in the courts of Texas;

(4)

stipulated within 40 days after the entry of this Memorandum and Order that any discovery conducted during the
pendency of these actions may be used in any foreign proceeding to the same extent as if it had been conducted
in proceedings initiated there; and

(5)

submitted within 40 days after the entry of this Memorandum and Order an agreement binding them to satisfy
any final judgment rendered in favor of plaintiffs by a foreign court.

xxxx
Notwithstanding the dismissals that may result from this Memorandum and Order, in the event that the highest court of any
foreign country finally affirms the dismissal for lack of jurisdiction of an action commenced by a plaintiff in these actions in
his home country or the country in which he was injured, that plaintiff may return to this court and, upon proper motion, the
court will resume jurisdiction over the action as if the case had never been dismissed for [forum non conveniens].[13]

Civil Case No. 5617 before the RTC

of General Santos City and G.R. Nos.
125078 and 125598
In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General Santos City (the petitioners in
G.R. No. 125078, hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint [14] in the RTC of General Santos City on
August 10, 1995. The case was docketed as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co. (SHELL);
Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co., Standard
Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands, Inc. and Chiquita
Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter
collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and
Amvac Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to as defendant companies.)
Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the reproductive systems which
they allegedly suffered because of their exposure to DBCP. They claimed, among others, that they were exposed to this
chemical during the early 1970's up to the early 1980's when they used the same in the banana plantations where they
worked at; and/or when they resided within the agricultural area where such chemical was used. Navida, et al., claimed that
their illnesses and injuries were due to the fault or negligence of each of the defendant companies in that they produced, sold
and/or otherwise put into the stream of commerce DBCP-containing products. According to NAVIDA, et al., they were
allowed to be exposed to the said products, which the defendant companies knew, or ought to have known, were highly
injurious to the former's health and well-being.chanroblesvirtuallawlibrary
Instead of answering the complaint, most of the defendant companies respectively filed their Motions for Bill of
Particulars.[15] During the pendency of the motions, on March 13, 1996, NAVIDA, et al., filed an Amended Joint
Complaint, [16] excluding Dead Sea Bromine Co., Ltd., Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical
Corp. as party defendants.chanroblesvirtuallawlibrary
Again, the remaining defendant companies filed their various Motions for Bill of Particulars. [17] On May 15, 1996, DOW filed
an Answer with Counterclaim.[18]
On May 20, 1996, without resolving the motions filed by the parties, the RTC of General Santos City issued an Order
dismissing the complaint. First, the trial court determined that it did not have jurisdiction to hear the case, to wit:
THE COMPLAINT FOR DAMAGES
FILED WITH THE REGIONAL TRIAL
COURT SHOULD BE DISMISSED FOR
LACK OF JURISDICTION
xxxx
The substance of the cause of action as stated in the complaint against the defendant foreign companies cites activity on
their part which took place abroad and had occurred outside and beyond the territorial domain of the Philippines. These acts
of defendants cited in the complaint included the manufacture of pesticides, their packaging in containers, their distribution
through sale or other disposition, resulting in their becoming part of the stream of commerce.chanroblesvirtuallawlibrary
Accordingly, the subject matter stated in the complaint and which is uniquely particular to the present case, consisted of
activity or course of conduct engaged in by foreign defendants outside Philippine territory, hence, outside and beyond the
jurisdiction of Philippine Courts, including the present Regional Trial Court.[19]
Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their complaint is a tort category
that is not recognized in Philippine laws. Said the trial court:
THE TORT ASSERTED IN THE
PRESENT COMPLAINT AGAINST
DEFENDANT FOREIGN COMPANIES
IS NOT WITHIN THE SUBJECT MATTER
JURISDICTION OF THE REGIONAL
TRIAL COURT, BECAUSE IT IS NOT
A TORT CATEGORY WITHIN THE
PURVIEW OF THE PHILIPPINE LAW
The specific tort asserted against defendant foreign companies in the present complaint is product liability tort. When the
averments in the present complaint are examined in terms of the particular categories of tort recognized in the Philippine
Civil Code, it becomes stark clear that such averments describe and identify the category of specific tort known as product
liability tort. This is necessarily so, because it is the product manufactured by defendant foreign companies, which is
asserted to be the proximate cause of the damages sustained by the plaintiff workers, and the liability of the defendant

foreign companies, is premised on being the manufacturer of the pesticides.chanroblesvirtuallawlibrary

It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and only if the Civil Code of the
Philippines, or a suppletory special law prescribes a product liability tort, inclusive of and comprehending the specific tort
described in the complaint of the plaintiff workers. [20]
Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting their case to the Philippine
courts, viz:
FILING OF CASES IN THE PHILIPPINES
- COERCED AND ANOMALOUS
The Court views that the plaintiffs did not freely choose to file the instant action, but rather were coerced to do so, merely to
comply with the U.S. District Court's Order dated July 11, 1995, and in order to keep open to the plaintiffs the opportunity to
return to the U.S. District Court.[21]
Fourth, the trial court ascribed little significance to the voluntary appearance of the defendant companies therein, thus:
THE DEFENDANTS' SUBMISSION TO
JURISDICTION IS CONDITIONAL AS
IT IS ILLUSORY
Defendants have appointed their agents authorized to accept service of summons/processes in the Philippines pursuant to
the agreement in the U.S. court that defendants will voluntarily submit to the jurisdiction of this court. While it is true that
this court acquires jurisdiction over persons of the defendants through their voluntary appearance, it appears that such
voluntary appearance of the defendants in this case is conditional. Thus in the "Defendants' Amended Agreement Regarding
Conditions of Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S. District Court, defendants
declared that "(t)he authority of each designated representative to accept service of process will become effective upon final
dismissal of these actions by the Court". The decision of the U.S. District Court dismissing the case is not yet final and
executory since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended Complaint). Consequently,
since the authority of the agent of the defendants in the Philippines is conditioned on the final adjudication of the case
pending with the U.S. courts, the acquisition of jurisdiction by this court over the persons of the defendants is also
conditional. x x x.chanroblesvirtuallawlibrary
The appointment of agents by the defendants, being subject to a suspensive condition, thus produces no legal effect and is
ineffective at the moment. [22]
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case in the Philippine courts violated
the rules on forum shopping and litis pendencia. The trial court expounded:
THE JURISDICTION FROWNS UPON
AND PROHIBITS FORUM SHOPPING
This court frowns upon the fact that the parties herein are both vigorously pursuing their appeal of the decision of the U.S.
District court dismissing the case filed thereat. To allow the parties to litigate in this court when they are actively pursuing
the same cases in another forum, violates the rule on `forum shopping' so abhorred in this jurisdiction. x x
x.chanroblesvirtuallawlibrary
xxxx
THE FILING OF THE CASE IN U.S.
DIVESTED THIS COURT OF ITS OWN
JURISDICTION
Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction. This court takes note that the
U.S. District Court did not decline jurisdiction over the cause of action. The case was dismissed on the ground of forum non
conveniens, which is really a matter of venue. By taking cognizance of the case, the U.S. District Court has, in essence,
concurrent jurisdiction with this court over the subject matter of this case. It is settled that initial acquisition of jurisdiction
divests another of its own jurisdiction. x x x.chanroblesvirtuallawlibrary
xxxx
THIS CASE IS BARRED BY THE RULE
OF "LITIS PENDENCIA"
Furthermore, the case filed in the U.S. court involves the same parties, same rights and interests, as in this case. There
exists litis pendencia since there are two cases involving the same parties and interests. The court would like to emphasize

that in accordance with the rule on litis pendencia x x x; the subsequent case must be dismissed. Applying the foregoing
[precept] to the case-at-bar, this court concludes that since the case between the parties in the U.S. is still pending, then
this case is barred by the rule on "litis pendencia."[23]
In fine, the trial court held that:
It behooves this Court, then to dismiss this case. For to continue with these proceedings, would be violative of the
constitutional provision on the Bill of Rights guaranteeing speedy disposition of cases (Ref. Sec. 16, Article III,
Constitution). The court has no other choice. To insist on further proceedings with this case, as it is now presented, might
accord this court a charming appearance. But the same insistence would actually thwart the very ends of justice which it
seeks to achieve.chanroblesvirtuallawlibrary
This evaluation and action is made not on account of but rather with due consideration to the fact that the dismissal of this
case does not necessarily deprive the parties - especially the plaintiffs - of their possible remedies. The court is cognizant
that the Federal Court may resume proceedings of that earlier case between the herein parties involving the same acts or
omissions as in this case.chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing considerations, this case is now considered DISMISSED.[24]
On June 4, 1996, the RTC of General Santos City likewise issued an Order,[25] dismissing DOW's Answer with
Counterclaim.chanroblesvirtuallawlibrary
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration [26] of the RTC Order dated May 20, 1996, while
DOW filed a motion for reconsideration [27] of the RTC Order dated June 4, 1996. Subsequently, DOW and OCCIDENTAL also
filed a Joint Motion for Reconsideration[28] of the RTC Order dated May 20, 1996.chanroblesvirtuallawlibrary
In an Order[29] dated July 9, 1996, the RTC of General Santos City declared that it had already lost its jurisdiction over the
case as it took into consideration the Manifestation of the counsel of NAVIDA, et al., which stated that the latter had already
filed a petition for review on certiorari before this Court.chanroblesvirtuallawlibrary
CHIQUITA and SHELL filed their motions for reconsideration [30] of the above order.chanroblesvirtuallawlibrary
On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail the RTC Order dated May 20,
1996, which was docketed as G.R. No. 125078.chanroblesvirtuallawlibrary
The RTC of General Santos City then issued an Order[31] dated August 14, 1996, which merely noted the incidents still
pending in Civil Case No. 5617and reiterated that it no longer had any jurisdiction over the case.chanroblesvirtuallawlibrary
On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on Certiorari,[32] challenging the orders of the RTC
of General Santos City dated May 20, 1996, June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No.
125598.chanroblesvirtuallawlibrary
In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in ruling that it has no jurisdiction
over the subject matter of the case as well as the persons of the defendant companies.chanroblesvirtuallawlibrary
In a Resolution [33] dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598 with G.R. No.
125078.chanroblesvirtuallawlibrary
CHIQUITA filed a Petition for Review on Certiorari,[34] which sought the reversal of the RTC Orders dated May 20, 1996, July
9, 1996 and August 14, 1996. The petition was docketed as G.R. No. 126018. In a Resolution[35] dated November 13, 1996,
the Court dismissed the aforesaid petition for failure of CHIQUITA to show that the RTC committed grave abuse of
discretion. CHIQUITA filed a Motion for Reconsideration, [36] but the same was denied through a Resolution [37] dated January
27, 1997.chanroblesvirtuallawlibrary
Civil Case No. 24,251-96 before the RTC
of Davao City and G.R. Nos. 126654,
127856, and 128398
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed before
Branch 16 of the RTC of Davao City by 155 plaintiffs from Davao City. This case was docketed as Civil Case No. 24,25196. These plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.) amended their JointComplaint on May 21, 1996.[38]
Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana plantation and/or as
residents near the said plantation, they were made to use and/or were exposed to nematocides, which contained the
chemical DBCP. According to ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health,
including, but not limited to, sterility and severe injuries to their reproductive capacities." [39] ABELLA, et al., claimed that the
defendant companies manufactured, produced, sold, distributed, used, and/or made available in commerce, DBCP without

warning the users of its hazardous effects on health, and without providing instructions on its proper use and application,
which the defendant companies knew or ought to have known, had they exercised ordinary care and
prudence.chanroblesvirtuallawlibrary
Except for DOW, the other defendant companies filed their respective motions for bill of particulars to which ABELLA, et al.,
filed their opposition. DOW and DEL MONTE filed their respective Answers dated May 17, 1996 and June 24,
1996.chanroblesvirtuallawlibrary
The RTC of Davao City, however, junked Civil Case No. 24,251-96in its Order dated October 1, 1996, which, in its entirety,
reads:
Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the plaintiffs against the
defendants Shell Oil Company, DOW Chemicals Company, Occidental Chemical Corporation, Standard Fruit Company,
Standard Fruit and Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands
International, Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign corporations with Philippine
Representatives, the Court, as correctly pointed out by one of the defendants, is convinced that plaintiffs "would have this
Honorable Court dismiss the case to pave the way for their getting an affirmance by the Supreme Court" (#10 of Defendants'
Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated July 22, 1996). Consider these:
1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the Philippines; they have no agents
as well (par. 18); plaintiffs are suing the defendants for tortuous acts committed by these foreign corporations on their
respective countries, as plaintiffs, after having elected to sue in the place of defendants' residence, are now compelled by a
decision of a Texas District Court to file cases under torts in this jurisdiction for causes of actions which occurred abroad (par.
19); a petition was filed by same plaintiffs against same defendants in the Courts of Texas, USA, plaintiffs seeking for
payment of damages based on negligence, strict liability, conspiracy and international tort theories (par. 27); upon
defendants' Motion to Dismiss on Forum non [conveniens], said petition was provisionally dismissed on condition that these
cases be filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine Courts refuse or deny
jurisdiction, the U. S. Courts will reassume jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District Court issued a Memorandum
and Order conditionally dismissing several of the consolidated actions including those filed by the Filipino complainants. One
of the conditions imposed was for the plaintiffs to file actions in their home countries or the countries in which they were
injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that should the highest court of any foreign
country affirm the dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home countries [or] the
countries where they were injured, the said plaintiffs may return to that court and, upon proper motion, the Court will
resume jurisdiction as if the case had never been dismissed for forum non conveniens.chanroblesvirtuallawlibrary
The Court however is constrained to dismiss the case at bar not solely on the basis of the above but because it shares the
opinion of legal experts given in the interview made by the Inquirer in its Special report "Pesticide Cause Mass St erility," to
wit:
1.

Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines should be an
inconvenient forum to file this kind of damage suit against foreign companies since the causes of action
alleged in the petition do not exist under Philippine laws. There has been no decided case in Philippine
Jurisprudence awarding to those adversely affected by DBCP. This means there is no available evidence
which will prove and disprove the relation between sterility and DBCP.

2.

Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in the Philippines
the device has been employed strictly. Mass sterility will not qualify as a class suit injury within the
contemplation of Philippine statute.

3.

Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine here that
permits these causes to be heard. No product liability ever filed or tried here.

Case ordered dismissed.[40]

Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by ABELLA, et al., assails before this
Court the above-quoted order of the RTC of Davao City.chanroblesvirtuallawlibrary
ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-96 on the ground of lack of
jurisdiction.chanroblesvirtuallawlibrary
According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of the case since Articles 2176
and 2187 of the Civil Code are broad enough to cover the acts complained of and to support their claims for
damages.chanroblesvirtuallawlibrary

ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal luminaries reported in a newspaper,
by the RTC of Davao City is bereft of basis. According to them, their cause of action is based on quasi-delict under Article
2176 of the Civil Code. They also maintain that the absence of jurisprudence regarding the award of damages in favor of
those adversely affected by the DBCP does not preclude them from presenting evidence to prove their allegations that their
exposure to DBCP caused their sterility and/or infertility.chanroblesvirtuallawlibrary
SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the Order dated October 1, 1996 of the
RTC of Davao City. DEL MONTE also filed its motion for reconsideration, which contained an additional motion for the
inhibition of the presiding judge.chanroblesvirtuallawlibrary
The presiding judge of Branch 16 then issued an Order [41] dated December 2, 1996, voluntarily inhibiting himself from trying
the case. Thus, the case was re-raffled to Branch 13 of the RTC of Davao City.chanroblesvirtuallawlibrary
In an Order[42] dated December 16, 1996, the RTC of Davao City affirmed the Order dated October 1, 1996, and denied the
respective motions for reconsideration filed by defendant companies.chanroblesvirtuallawlibrary
Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the Orders dated October 1, 1996 and
December 16, 1996 of the RTC of Davao City. This case was docketed as G.R. No. 128398.chanroblesvirtuallawlibrary
In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case motu proprio as it acquired
jurisdiction over the subject matter of the case as well as over the persons of the defendant companies which voluntarily
appeared before it. CHIQUITA also claims that the RTC of Davao City cannot dismiss the case simply on the basis of opinions
of alleged legal experts appearing in a newspaper article.chanroblesvirtuallawlibrary
Initially, this Court in its Resolution [43] dated July 28, 1997, dismissed the petition filed by CHIQUITA for submitting a
defective certificate against forum shopping. CHIQUITA, however, filed a motion for reconsideration, which was granted by
this Court in the Resolution[44] dated October 8, 1997.chanroblesvirtuallawlibrary
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court assailing the above-mentioned
orders of the RTC of Davao City. Its petition was docketed as G.R. No. 127856.chanroblesvirtuallawlibrary
DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-96, as defined under the law and
that the said court already obtained jurisdiction over its person by its voluntary appearance and the filing of a motion for bill
of particulars and, later, an answer to the complaint. According to DEL MONTE, the RTC of Davao City, therefore, acted
beyond its authority when it dismissed the case motu proprio or without any motion to dismiss from any of the parties to the
case.chanroblesvirtuallawlibrary
In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court consolidated G.R. Nos. 125078,
125598, 126654, 127856, and 128398.chanroblesvirtuallawlibrary
The Consolidated Motion to Drop DOW,
OCCIDENTAL, and SHELL as Party-Respondents
filed by NAVIDA, et al. and ABELLA, et al.
On September 26, 1997, NAVIDA, et al.,and ABELLA, et al., filed before this Court a Consolidated Motion (to Drop PartyRespondents).[45] The plaintiff claimants alleged that they had amicably settled their cases with DOW, OCCIDENTAL, and
SHELL sometime in July 1997. This settlement agreement was evidenced by facsimiles of the "Compromise Settlement,
Indemnity, and Hold Harmless Agreement," which were attached to the said motion. Pursuant to said agreement, the
plaintiff claimants sought to withdraw their petitions as against DOW, OCCIDENTAL, and SHELL.chanroblesvirtuallawlibrary
DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the settlement entered into between the plaintiff
claimants and DOW, OCCIDENTAL, and SHELL.chanroblesvirtuallawlibrary
The Memoranda of the Parties
Considering the allegations, issues, and arguments adduced by the parties, this Court, in a Resolution dated June 22,
1998,[46] required all the parties to submit their respective memoranda.chanroblesvirtuallawlibrary
CHIQUITA filed its Memorandum on August 28, 1998; [47] SHELL asked to be excused from the filing of a memorandum
alleging that it had already executed a compromise agreement with the plaintiff claimants. [48] DOLE filed its Memorandum on
October 12, 1998[49] while DEL MONTE filed on October 13, 1998. [50] NAVIDA, et al., and ABELLA, et al., filed their
Consolidated Memorandum on February 3, 1999; [51] and DOW and OCCIDENTAL jointly filed a Memorandum on December
23, 1999. [52]
The Motion to Withdraw Petition for
Review in G.R. No. 125598
On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in G.R. No. 125598, [53] explaining
that the said petition "is already moot and academic and no longer presents a justiciable controversy" since they have

already entered into an amicable settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied
with their obligations set forth in the 1997 Compromise Agreements.chanroblesvirtuallawlibrary
DOLE filed its Manifestation dated September 6, 2004,[54] interposing no objection to the withdrawal of the petition, and
further stating that they maintain their position that DOW and OCCIDENTAL, as well as other settling defendant companies,
should be retained as defendants for purposes of prosecuting the cross-claims of DOLE, in the event that the complaint below
is reinstated.chanroblesvirtuallawlibrary
NAVIDA, et al., also filed their Comment dated September 14, 2004, [55] stating that they agree with the view of DOW and
OCCIDENTAL that the petition in G.R. No. 125598 has become moot and academic because Civil Case No. 5617 had already
been amicably settled by the parties in 1997.chanroblesvirtuallawlibrary
On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for Review Filed by Petitioners in G.R.
No. 125598, [56] stating that it has no objections to the withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No.
125598.chanroblesvirtuallawlibrary
In a Resolution[57] dated October 11, 2004, this Court granted, among others, the motion to withdraw petition for review filed
by DOW and OCCIDENTAL.chanroblesvirtuallawlibrary
THE ISSUES
In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the following issues for our consideration:
IN REFUTATION
I.

THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION.chanroblesvirtuallawlibrary

a) The court did not simply dismiss the case because it was filed in bad faith with petitioners intending to
have the same dismissed and returned to the Texas court.chanroblesvirtuallawlibrary
b) The court dismissed the case because it was convinced that it did not have
jurisdiction.chanroblesvirtuallawlibrary
IN SUPPORT OF THE PETITION

II.

THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE
CASE.chanroblesvirtuallawlibrary
a.

The acts complained of occurred within Philippine territory.

b.

Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts complained of.

c.

Assumption of jurisdiction by the U.S. District Court over petitioner[s'] claims did not divest
Philippine [c]ourts of jurisdiction over the same.

d.

The Compromise Agreement and the subsequent Consolidated Motion to Drop Party Respondents
Dow, Occidental and Shell does not unjustifiably prejudice remaining respondents Dole, Del Monte
and Chiquita. [58]

DISCUSSION
On the issue of jurisdiction
Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos City and the RTC of
Davao City erred in dismissing Civil Case Nos. 5617 and 24,251-96, respectively, for lack of
jurisdiction.chanroblesvirtuallawlibrary
Remarkably, none of the parties to this case claims that the courts a quo are bereft of jurisdiction to determine and resolve
the above-stated cases. All parties contend that the RTC of General Santos City and the RTC of Davao City have jurisdiction
over the action for damages, specifically for approximately P2.7 million for each of the plaintiff
claimants.chanroblesvirtuallawlibrary
NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of defendant companies occurred
within Philippine territory. Specifically, the use of and exposure to DBCP that was manufactured, distributed or otherwise put
into the stream of commerce by defendant companies happened in the Philippines. Said fact allegedly constitutes reasonable
basis for our courts to assume jurisdiction over the case. Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the
provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as Article 2176 thereof, are broad enough to cover

their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the respective rulings of the RTC of General
Santos City and the RTC of Davao City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said cases be
remanded to the courts a quo for further proceedings.chanroblesvirtuallawlibrary
DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-delict, which falls under Article
2176 of the Civil Code. In addition, DOLE states that if there were no actionable wrongs committed under Philippine law, the
courts a quo should have dismissed the civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et al., and
ABELLA, et al., stated no cause of action against the defendant companies. DOLE also argues that if indeed there is no
positive law defining the alleged acts of defendant companies as actionable wrong, Article 9 of the Civil Code dictates that a
judge may not refuse to render a decision on the ground of insufficiency of the law. The court may still resolve the case,
applying the customs of the place and, in the absence thereof, the general principles of law. DOLE posits that the Philippines
is the situs of the tortious acts allegedly committed by defendant companies as NAVIDA, et al., and ABELLA, et al., point to
their alleged exposure to DBCP which occurred in the Philippines, as the cause of the sterility and other reproductive system
problems that they allegedly suffered. Finally, DOLE adds that the RTC of Davao City gravely erred in relying upon
newspaper reports in dismissing Civil Case No. 24,251-96 given that newspaper articles are hearsay and without any
evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were taken judicial notice of, without
any notice to the parties. DOLE, however, opines that the dismissal of Civil Case Nos. 5617 and 24,251-96 was proper,
given that plaintiff claimants merely prosecuted the cases with the sole intent of securing a dismissal of the actions for the
purpose of convincing the U.S. Federal District Court to re-assume jurisdiction over the cases.chanroblesvirtuallawlibrary
In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter of the cases filed before
them. The Amended Joint-Complaints sought approximately P2.7 million in damages for each plaintiff claimant, which
amount falls within the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place of the alleged
exposure to DBCP, not the place of manufacture, packaging, distribution, sale, etc., of the said chemical. This is in
consonance with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law of the place
where the alleged wrong was committed will govern the action. CHIQUITA and the other defendant companies also
submitted themselves to the jurisdiction of the RTC by making voluntary appearances and seeking for affirmative reliefs
during the course of the proceedings. None of the defendant companies ever objected to the exercise of jurisdiction by the
courts a quo over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of
General Santos City and the RTC of Davao City, respectively.chanroblesvirtuallawlibrary
The RTC of General Santos City and the
RTC of Davao City have jurisdiction over
Civil Case Nos. 5617 and 24,251-96,
respectively
The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegati ons
in the complaint and the character of the relief sought, irrespective of whether the plaintiffs are entitled to all or some of the
claims asserted therein.[59] Once vested by law, on a particular court or body, the jurisdiction over the subject matter or
nature of the action cannot be dislodged by anybody other than by the legislature through the enactment of a
law.chanroblesvirtuallawlibrary
At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas Pambansa Blg. 129, as
amended by Republic Act No. 7691, was:
SEC. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in
such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000.00). [60]
Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:
2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19 (8) and
Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental to
or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action,
or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court.
Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended Joint-Complaints filed before the courts a
quo, the following prayer:
PRAYER
WHEREFORE, premises considered, it is most respectfully prayed that after hearing, judgment be rendered in favor of the
plaintiffs ordering the defendants:

a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred Thousand Pesos (P1,500,00.00);
b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand Pesos (P400,000.00) each;
c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand Pesos (P600,000.00);
d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos (P200,000.00); and
e) TO PAY THE COSTS of the suit.[61]
From the foregoing, it is clear that the claim for damages is the main cause of action and that the total amount sought in the
complaints is approximately P2.7 million for each of the plaintiff claimants. The RTCs unmistakably have jurisdiction over the
cases filed in General Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall within the
purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.chanroblesvirtuallawlibrary
Moreover, the allegations in both Amended Joint-Complaints narrate that:
THE CAUSES OF ACTION
4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN COMMERCE nematocides containing
the chemical dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as
the nematode, which plagued banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED OUT, DBCP not only
destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human
reproductive system as well.chanroblesvirtuallawlibrary
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used this product in
the banana plantations WHERE they were employed, and/or (b) they resided within the agricultural area
WHERE IT WAS USED. As a result of such exposure, the plaintiffs suffered serious and permanent injuries TO THEIR
HEALTH, including, but not limited to, STERILITY and severe injuries to their reproductive
capacities.chanroblesvirtuallawlibrary
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY MANUFACTURED, produced, sold,
and/or USED DBCP and/or otherwise, PUT THE SAME into the stream of commerce, WITHOUT INFORMING THE
USERS OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND
APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which THEY knew, or in the exercise of
ordinary care and prudence ought to have known, were highly harmful and injurious to the Plaintiffs' health and wellbeing.chanroblesvirtuallawlibrary
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE
STREAM OF COMMERCE were negligent OR AT FAULT in that they, AMONG OTHERS:
a.

Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their subsidiaries
or affiliates to so warn plaintiffs;

b.

Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient clothing and
proper protective equipment and appliances, if any, to protect plaintiffs from the harmful effects of exposure
to DBCP, or to cause their subsidiaries or affiliates to do so;

c.

Failed to place adequate warnings, in a language understandable to the worker, on containers of DBCPcontaining materials to warn of the dangers to health of coming into contact with DBCP, or to cause their
subsidiaries or affiliates to do so;

d.

Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce a safety
plan and a safe method of handling and applying DBCP, or to cause their subsidiaries or affiliates to do so;

e.

Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or affiliates to do
so; and

f.

Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies and the
public, or to cause their subsidiaries or affiliate to do so.

8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of defendants Standard Fruit Company,
Dole Fresh Fruit Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that
they failed to exercise reasonable care to prevent each plaintiff's harmful exposure to DBCP-containing products which
defendants knew or should have known were hazardous to each plaintiff in that they, AMONG OTHERS:

a.

Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCP-containing
products;

b.

Failed to implement proper methods and techniques of application of said products, or to cause such to be
implemented;

c.

Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so warned;

d.

Failed to test said products for adverse health effects, or to cause said products to be tested;

e.

Concealed from Plaintiffs information concerning the observed effects of said products on Plaintiffs;

f.

Failed to monitor the health of plaintiffs exposed to said products;

g.

Failed to place adequate labels on containers of said products to warn them of the damages of said
products; and

h.

Failed to use substitute nematocides for said products or to cause such substitutes to [be] used. [62]
(Emphasis supplied and words in brackets ours.)

Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., attribute to
defendant companies certain acts and/or omissions which led to their exposure to nematocides containing the chemical
DBCP. According to NAVIDA, et al., and ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and
illnesses, specifically to their reproductive system.chanroblesvirtuallawlibrary
Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants - a quasi-delict, which under the
Civil Code is defined as an act, or omission which causes damage to another, there being fault or negligence. To be precise,
Article 2176 of the Civil Code provides:
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al., point to the acts and/or omissions
of the defendant companies in manufacturing, producing, selling, using, and/or otherwise putting into the stream of
commerce, nematocides which contain DBCP, "without informing the users of its hazardous effects on health and/or without
instructions on its proper use and application." [63]
Verily, in Citibank, N.A. v. Court of Appeals,[64] this Court has always reminded that jurisdiction of the court over the subject
matter of the action is determined by the allegations of the complaint, irrespective of whether or not the plaintiffs are ent itled
to recover upon all or some of the claims asserted therein. The jurisdiction of the court cannot be made to depend upon the
defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would almost entirely
depend upon the defendants. What determines the jurisdiction of the court is the nature of the action pleaded as appearing
from the allegations in the complaint. The averments therein and the character of the relief sought are the ones to be
consulted.chanroblesvirtuallawlibrary
Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-delict which is the basis for
the claim for damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims of approximately P2.7 million for
each plaintiff claimant, which obviously falls within the purview of the civil action jurisdiction of the
RTCs.chanroblesvirtuallawlibrary
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly suffered resulted from their exposure
to DBCP while they were employed in the banana plantations located in the Philippines or while they were residing within the
agricultural areas also located in the Philippines. The factual allegations in the Amended Joint-Complaints all point to their
cause of action, which undeniably occurred in the Philippines. The RTC of General Santos City and the RTC of Davao City
obviously have reasonable basis to assume jurisdiction over the cases.chanroblesvirtuallawlibrary
It is, therefore, error on the part of the courts a quo when they dismissed the cases on the ground of lack of jurisdiction on
the mistaken assumption that the cause of action narrated by NAVIDA, et al., and ABELLA, et al., took place abroad and had
occurred outside and beyond the territorial boundaries of the Philippines, i.e., "the manufacture of the pesticides, their
packaging in containers, their distribution through sale or other disposition, resulting in their becoming part of the stream of
commerce,"[65] and, hence, outside the jurisdiction of the RTCs.chanroblesvirtuallawlibrary
Certainly, the cases below are not criminal cases where territoriality, or the situs of the act complained of, would be
determinative of jurisdiction and venue for trial of cases. In personal civil actions, such as claims for payment of damages,
the Rules of Court allow the action to be commenced and tried in the appropriate court, where any of the plaintiffs or
defendants resides, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff. [66]

In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and ABELLA, et al., are available
only in the Philippines. First, plaintiff claimants are all residents of the Philippines, either in General Santos City or in Davao
City. Second, the specific areas where they were allegedly exposed to the chemical DBCP are within the territorial
jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages. Third, the
testimonial and documentary evidence from important witnesses, such as doctors, co-workers, family members and other
members of the community, would be easier to gather in the Philippines. Considering the great number of plaintiff claimants
involved in this case, it is not far-fetched to assume that voluminous records are involved in the presentation of evidence to
support the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact that the alleged cause of action
of NAVIDA, et al., and ABELLA, et al., against the defendant companies for damages occurred in the Philippines,
demonstrate that, apart from the RTC of General Santos City and the RTC of Davao City having jurisdiction over the subject
matter in the instant civil cases, they are, indeed, the convenient fora for trying these cases. [67]
The RTC of General Santos City and the
RTC of Davao City validly acquired
jurisdiction over the persons of all the
defendant companies
It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction over the cases filed before
them. All parties are one in asserting that the RTC of General Santos City and the RTC of Davao City have validly acquired
jurisdiction over the persons of the defendant companies in the action below. All parties voluntarily, unconditionally and
knowingly appeared and submitted themselves to the jurisdiction of the courts a quo.chanroblesvirtuallawlibrary
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendant's voluntary appearance in the action
shall be equivalent to service of summons." In this connection, all the defendant companies designated and authorized
representatives to receive summons and to represent them in the proceedings before the courts a quo. All the defendant
companies submitted themselves to the jurisdiction of the courts a quo by making several voluntary appearances, by praying
for various affirmative reliefs, and by actively participating during the course of the proceedings
below.chanroblesvirtuallawlibrary
In line herewith, this Court, in Meat Packing Corporation of the Philippines v. Sandiganbayan,[68] held that jurisdiction over
the person of the defendant in civil cases is acquired either by his voluntary appearance in court and his submission to its
authority or by service of summons. Furthermore, the active participation of a party in the proceedings is tantamount to an
invocation of the court's jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from later
on impugning the court or body's jurisdiction. [69]
Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of the
defendant companies, as well as over the subject matter of the instant case. What is more, this jurisdiction, which has been
acquired and has been vested on the courts a quo, continues until the termination of the
proceedings.chanroblesvirtuallawlibrary
It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction." Jurisdiction refers to the
authority to decide a case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over
the persons of the defendants and the subject matter, as in the case of the courts a quo, the decision on all questions arising
therefrom is but an exercise of such jurisdiction. Any error that the court may commit in the exercise of its jurisdiction is
merely an error of judgment, which does not affect its authority to decide the case, much less divest the court of the
jurisdiction over the case. [70]
Plaintiffs' purported bad faith in
filing the subject civil cases in
Philippine courts
Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith merely to procure a dismissal of the
same and to allow them to return to the forum of their choice, this Court finds such argument much too speculative to
deserve any merit.chanroblesvirtuallawlibrary
It must be remembered that this Court does not rule on allegations that are unsupported by evidence on record. This Court
does not rule on allegations which are manifestly conjectural, as these may not exist at all. This Court deals with facts, not
fancies; on realities, not appearances. When this Court acts on appearances instead of realities, justice and law will be
short-lived.[71] This is especially true with respect to allegations of bad faith, in line with the basic rule that good faith is
always presumed and bad faith must be proved. [72]
In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the subject
matter of the amended complaints filed by NAVIDA, et al., and ABELLA, et al., and that the courts a quo have also acquired
jurisdiction over the persons of all the defendant companies, it therefore, behooves this Court to order the remand of Civil
Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City,
respectively.chanroblesvirtuallawlibrary
On the issue of the dropping of DOW,

OCCIDENTAL and SHELL as

respondents in view of their amicable
settlement with NAVIDA, et al.,
and ABELLA, et al.
NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and SHELL be dropped as respondents in
G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96. The non-settling defendants allegedly
manifested that they intended to file their cross-claims against their co-defendants who entered into compromise
agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling defendants did not aver any cross-claim in their
answers to the complaint and that they subsequently sought to amend their answers to plead their cross-claims only after
the settlement between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and
ABELLA, et al., therefore, assert that the cross-claims are already barred.chanroblesvirtuallawlibrary
In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et al., and ABELLA, et al., since the
latter's Amended Complaints cited several instances of tortious conduct that were allegedly committed jointly and severally
by the defendant companies. This solidary obligation on the part of all the defendants allegedly gives any co-defendant the
statutory right to proceed against the other co-defendants for the payment of their respective shares. Should the subject
motion of NAVIDA, et al., and ABELLA, et al., be granted, and the Court subsequently orders the remand of the action to the
trial court for continuance, CHIQUITA and DOLE would allegedly be deprived of their right to prosecute their cross-claims
against their other co-defendants. Moreover, a third party complaint or a separate trial, according to CHIQUITA, would only
unduly delay and complicate the proceedings. CHIQUITA and DOLE similarly insist that the motion of NAVIDA, et al., and
ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as respondents in G.R. Nos. 125078 and 126654, as well as in Civil
Case Nos. 5617 and 24,251-96, be denied.chanroblesvirtuallawlibrary
Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda, DEL MONTE filed a Manifestation
and Motion[73] before the Court, stating that similar settlement agreements were allegedly executed by the plaintiff claimants
with DEL MONTE and CHIQUITA sometime in 1999. Purportedly included in the agreements were Civil Case Nos. 5617 and
24,251-96. Attached to the said manifestation were copies of the Compromise Settlement, Indemnity, and Hold Harmless
Agreement between DEL MONTE and the settling plaintiffs, as well as the Release in Full executed by the latter. [74] DEL
MONTE specified therein that there were "only four (4) plaintiffs in Civil Case No. 5617 who are claiming against the Del
Monte parties" [75] and that the latter have executed amicable settlements which completely satisfied any claims against DEL
MONTE. In accordance with the alleged compromise agreements with the four plaintiffs in Civil Case No. 5617, DEL MONTE
sought the dismissal of the Amended Joint-Complaint in the said civil case. Furthermore, in view of the above settlement
agreements with ABELLA, et al., in Civil Case No. 24,251-96, DEL MONTE stated that it no longer wished to pursue its
petition in G.R. No. 127856 and accordingly prayed that it be allowed to withdraw the same.chanroblesvirtuallawlibrary
Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the RTC of General Santos City and the
RTC of Davao City, respectively, the Court deems that the Consolidated Motions (to Drop Party-Respondents) filed by
NAVIDA, et al., and ABELLA, et al., should likewise be referred to the said trial courts for appropriate
disposition.chanroblesvirtuallawlibrary
Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced." Like any other contract, an extrajudicial compromise agreement
is not excepted from rules and principles of a contract. It is a consensual contract, perfected by mere consent, the latter
being manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract.[76] Judicial approval is not required for its perfection. [77] A compromise has upon the parties the effect and
authority of res judicata[78] and this holds true even if the agreement has not been judicially approved. [79] In addition, as a
binding contract, a compromise agreement determines the rights and obligations of only the parties to it.[80]
In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao City should first receive in
evidence and examine all of the alleged compromise settlements involved in the cases at bar to determine the propriety of
dropping any party as a defendant therefrom.chanroblesvirtuallawlibrary
The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed by NAVIDA, et al., and ABELLA, et
al., only pertained to DOW, OCCIDENTAL and SHELL in view of the latter companies' alleged compromise agreements with
the plaintiff claimants. However, in subsequent developments, DEL MONTE and CHIQUITA supposedly reached their own
amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it entered into a settlement agreement with
only four of the plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were allegedly the only ones who
were asserting claims against DEL MONTE. However, the said allegation of DEL MONTE was simply stipulated in their
Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could not be verified with certainty based on
the records elevated to this Court. Significantly, the 336 plaintiff claimants in Civil Case No. 5617 jointly filed a complaint
without individually specifying their claims against DEL MONTE or any of the other defendant companies. Furthermore, not
one plaintiff claimant filed a motion for the removal of either DEL MONTE or CHIQUITA as defendants in Civil Case Nos. 5617
and 24,251-96.chanroblesvirtuallawlibrary
There is, thus, a primary need to establish who the specific parties to the alleged compromise agreements are, as well as
their corresponding rights and obligations therein. For this purpose, the courts a quo may require the presentation of
additional evidence from the parties. Thereafter, on the basis of the records of the cases at bar and the additional evidence
submitted by the parties, if any, the trial courts can then determine who among the defendants may be dropped from the

said cases.chanroblesvirtuallawlibrary
It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the same
quasi-delict is solidary. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of
the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. [81]
In solidary obligations, the paying debtor's right of reimbursement is provided for under Article 1217 of the Civil Code, to wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to
pay, the creditor may choose which offer to accept.chanroblesvirtuallawlibrary
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the debt is due, no interest for the intervening period may be
demanded.chanroblesvirtuallawlibrary
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the debt of each.
The above right of reimbursement of a paying debtor, and the corresponding liability of the co-debtors to reimburse, will only
arise, however, if a solidary debtor who is made to answer for an obligation actually delivers payment to the creditor. As
succinctly held in Lapanday Agricultural Development Corporation v. Court of Appeals,[82] "[p]ayment, which means not only
the delivery of money but also the performance, in any other manner, of the obligation, is the operative fact which will entitle
either of the solidary debtors to seek reimbursement for the share which corresponds to each of the [other] debtors." [83]
In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must necessarily
be conducted first in order to establish whether or not defendant companies are liable for the claims for
damages filed by the plaintiff claimants, which would necessarily give rise to an obligation to pay on the part of
the defendants.
At the point in time where the proceedings below were prematurely halted, no cross-claims have been interposed by any
defendant against another defendant. If and when such a cross-claim is made by a non-settling defendant against a settling
defendant, it is within the discretion of the trial court to determine the propriety of allowing such a cross-claim and if the
settling defendant must remain a party to the case purely in relation to the cross claim.chanroblesvirtuallawlibrary
In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals,[84] the Court had the occasion to state
that "where there are, along with the parties to the compromise, other persons involved in the litigation who have not taken
part in concluding the compromise agreement but are adversely affected or feel prejudiced thereby, should not be precluded
from invoking in the same proceedings an adequate relief therefor."[85]
Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, [86] the Court upheld the ruling of the trial court that, in a
joint and solidary obligation, the paying debtor may file a third-party complaint and/or a cross-claim to enforce his right to
seek contribution from his co-debtors.chanroblesvirtuallawlibrary
Hence, the right of the remaining defendant(s) to seek reimbursement in the above situation, if proper, is not affected by the
compromise agreements allegedly entered into by NAVIDA, et al., and ABELLA, et al., with some of the defendant
companies.chanroblesvirtuallawlibrary
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos. 125078, 126654, and
128398. We REVERSE and SET ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General Santos City,
Branch 37, in Civil Case No. 5617, and the Order dated October 1, 1996 of the Regional Trial Court of Davao City, Branch 16,
and its subsequent Order dated December 16, 1996 denying reconsideration in Civil Case No. 24,251-96, and REMAND the
records of this case to the respective Regional Trial Courts of origin for further and appropriate proceedings in line with the
ruling herein that said courts have jurisdiction over the subject matter of the amended complaints in Civil Case Nos. 5617
and 24,251-96.chanroblesvirtuallawlibrary
The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R. No. 127856. In view of the
previous grant of the motion to withdraw the petition in G.R. No. 125598, both G.R. Nos. 127856 and 125598 are considered
CLOSED AND TERMINATED.chanroblesvirtuallawlibrary
No pronouncement as to costs.chanroblesvirtuallawlibrary
SO ORDERED.chanroblesvirtuallawlibrary

[G.R. NO. 149177 : November 23, 2007]

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., Petitioners, v. MINORU
KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the April 18, 2001
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001 Resolution2 denying the
motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm
providing technical and management support in the infrastructure projects of foreign governments, 3 entered into an
Independent Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently residing
in the Philippines.4 The agreement provides that respondent was to extend professional services to Nippon for a year
starting on April 1, 1999.5 Nippon then assigned respondent to work as the project manager of the Southern Tagalog
Access Road (STAR) Project in the Philippines, following the company's consultancy contract with the Philippine
Government.6
When the STAR Project was near completion, the Department of Public Works and Highways (DPWH) engaged the
consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering and construction
supervision of the Bongabon-Baler Road Improvement (BBRI) Project.7 Respondent was named as the project
manager in the contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division,
informed respondent 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 on March 31, 2000, just in time
for the ICA's expiry.9
Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation conference and
demanded that he be assigned to the BBRI project. Nippon insisted that respondent's contract was for a fixed term
that had already expired, and refused to negotiate for the renewal of the ICA. 10
As he was not able to generate a positive response from the petitioners, respondent consequently initiated on June 1,
2000 Civil Case No. 00-0264 for specific performance and damages with the Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between
Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper
pre-termination of respondent's ICA could only be heard and ventilated in the proper courts of Japan following the
principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by a
certain Y. Kotake as project manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that matters connected with the
performance of contracts are regulated by the law prevailing at the place of performance, 15 denied the motion to
dismiss.16 The trial court subsequently denied petitioners' motion for reconsideration,17 prompting them to file with
the appellate court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No.
60205].18 On August 23, 2000, the CA resolved to dismiss the petition on procedural grounds'for lack of statement of
material dates and for insufficient verification and certification against forum shopping.19 An Entry of Judgment was
later issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the reglementary
period, a second Petition for Certiorari under Rule 65 already stating therein the material dates and attaching thereto
the proper verification and certification. This second petition, which substantially raised the same issues as those in
the first, was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001 Decision 22 finding
no grave abuse of discretion in the trial court's denial of the motion to dismiss. The CA ruled, among others, that 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. The CA thus declared that the trial court was correct in applying instead the
principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25, 2001 Resolution. 24
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for Review
on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT VALIDLY EXERCISED
JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN
THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE
TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE
INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of Philippine
courts in civil cases for specific performance and 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.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already barred the
filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues as those in the
first one) and the instant Petition for Review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective certification of
non-forum shopping, it was a dismissal without prejudice.27 The same holds true in the CA's dismissal of the said case
due to defects in the formal requirement of verification28 and in the other requirement in Rule 46 of the Rules of Court
on the statement of the material dates.29 The dismissal being without prejudice, petitioners can re-file the petition, or
file a second petition attaching thereto the appropriate verification and certification as they, in fact did and stating
therein the material dates, within the prescribed period 30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the parties free
to litigate the matter in a subsequent action as though the dismissed action had not been commenced. In other
words, the termination of a case not on the merits does not bar another action involving the same parties, on the
same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res judicataeffect, and even if petitioners still
indicated in the verification and certification of the second certiorari petition that the first had already been dismissed
on procedural grounds,33 petitioners are no longer required by the Rules to indicate in their certification of non-forum
shopping in the instant Petition for Review of the second certiorari petition, the status of the aforesaid first petition
before the CA. In any case, an omission in the certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal
and nullification of the entire proceedings, considering that the evils sought to be prevented by the said certificate are
no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify and
certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant petition. True, the
Authorization35 dated September 4, 2000, which is attached to the second certiorari petition and which is also
attached to the instant Petition for Review, is limited in scope its wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition filed with the appellate court, and that
authority cannot extend to the instant Petition for Review .36 In a plethora of cases, however, this Court has liberally
applied the Rules or even suspended its application whenever a satisfactory explanation and a subsequent fulfillment
of the requirements have been made.37 Given that petitioners herein sufficiently explained their misgivings on this
point and appended to their Reply38 an updated Authorization39 for Hasegawa to act on behalf of the company in the
instant petition, the Court finds the same as sufficient compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the verification and certification. As
respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act on behalf of Nippon in this
case. The aforesaid September 4, 2000 Authorization and even the subsequent August 17, 2001 Authorization were
issued only by Nippon's president and chief executive officer, not by the company's board of directors. In not a few
cases, we have ruled that corporate powers are exercised by the board of directors; thus, no person, not even its
officers, can bind the corporation, in the absence of authority from the board. 40 Considering that Hasegawa verified
and certified the petition only on his behalf and not on behalf of the other petitioner, the petition has to be denied
pursuant to Loquias v. Office of the Ombudsman.41 Substantial compliance will not suffice in a matter that demands
strict observance of the Rules.42 While technical rules of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly disposition of cases and effectively prevent the
clogging of court dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial court's denial
of their motion to dismiss. It is a well-established rule that an order denying a motion to dismiss is interlocutory, and
cannot be the subject of the extraordinary Petition for Certiorari or mandamus. The appropriate recourse is to file an
answer and to interpose as defenses the objections raised in the motion, to proceed to trial, and, in case of an
adverse decision, to elevate the entire case by appeal in due course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear and resolve
the civil case for specific performance and damages filed by the respondent. The ICA subject of the litigation was
entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the Japanese language.
Thus, petitioners posit that local courts have no substantial relationship to the parties 46 following the [state of the]
most significant relationship rule in Private International Law. 47
The Court notes that petitioners adopted an additional but different theory when they elevated the case to the
appellate court. In the Motion to Dismiss48 filed with the trial court, petitioners never contended that the RTC is an
inconvenient forum. They merely argued that the applicable law which will determine the validity or invalidity of
respondent's claim is that of Japan, following the principles of lex loci celebrationis and lex contractus.49 While not
abandoning this stance in their petition before the appellate court, petitioners on certiorari significantly invoked the
defense of forum non conveniens.50 On Petition for Review before this Court, petitioners dropped their other
arguments, maintained the forum non conveniens defense, and introduced their new argument that the applicable
principle is the [state of the] most significant relationship rule. 51
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in theory, as
explained in Philippine Ports Authority v. City of Iloilo.52 We only pointed out petitioners' inconstancy in their
arguments to emphasize their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction, choice
of law, and recognition and enforcement of judgments. Corresponding to these phases are the following questions: (1)
Where can or should litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting
judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct concepts. 54 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
which 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.55 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. 56
In this case, only the first phase is at issue jurisdiction.rbl r l l lbrr
Jurisdiction, however, has various aspects. For a court to validly exercise its power to adjudicate a controversy, it
must have jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the subject
matter, over the issues of the case and, in cases involving property, over the res or the thing which is the subject of
the litigation.57 In assailing the trial court's jurisdiction herein, petitioners are actually referring to subject matter
jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which establishes
and organizes the court. It is given only by law and in the manner prescribed by law.58 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.59 To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the
claim,60 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.61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested by
law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific performance and
damages is one not capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City. 62 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"63 or the law of the place where a contract is
made.64 The doctrine of lex contractus or lex loci contractus means the "law of the place where a contract is executed
or to be performed."65 It controls the nature, construction, and validity of the contract 66 and it may pertain to the law
voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly.67 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.68 This rule takes into account several contacts and evaluates them
according to their relative importance with respect to the particular issue to be resolved. 69
Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper
for the second phase, the choice of law.70 They determine which state's law is to be applied in resolving the
substantive issues of a conflicts problem.71 Necessarily, as the only issue in this case is that of jurisdiction, choice-oflaw rules are not only inapplicable but also not yet called for.
Further, petitioners' 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, first there should
exist a conflict of laws situation requiring the application of the conflict of laws rules. 72 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.73
It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or
administrative agency, there are three 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.74 The court's 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.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial court of its jurisdiction
herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not
include it as a ground.77 Second, 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 trial court. 78 In
this case, the RTC decided to assume jurisdiction. Third, 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. 79
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent and
the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly
denied the petitioners' motion to dismiss.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED.
SO ORDERED.