1

3. COURT PRACTICE
A. DECLINE JURISDICTION; FORUM NON-CONVENIENCE

50 F.2d 382 (1931)

HEINE
v.
NEW YORK LIFE INS. CO.
No. 6405.
Circuit Court of Appeals, Ninth Circuit.
May 25, 1931.
The agency in Germany was established as a distinct entity, a German creation under German law. A reserve fund was
made and all premiums received were placed in that fund and invested in Germany under German official approval.
Upon creation of "Kronos," all funds and property of appellee in Germany were delivered to and supervision and
execution of power assumed by the German Federal Insurance Board, and additional deposits made by the appellee, as
required by the German valorization laws, in accordance with the decisions of the German Federal Insurance Board. The
laws in relation thereto have been interpreted to apply to like policies, and many similar cases are now pending before
the German courts, they being open, able, competent, and efficient, and the German Federal Insurance Board being
active and fully functioning.
It is obvious that this litigation is not the normal outgrowth of usual business activity and relation, but that it is the
creation of activity to secure representation of some 28,000 insurance policies executed in Germany by American
companies, written in the German language, in the relation of collection agent or agencies, and file actions thereon in
the state and federal courts of the United States, an indirect appeal from the German judiciary and the German Federal
Insurance Board.

Incidentally, it may be said that the courts of the United States have uniformly applied the law of the place to insurance
contracts. Orient Insurance Co. v. Daggs, 172 U.S. 557, 19 S. Ct. 281, 43 L. Ed. 552; Mutual Life Ins. Co. of N. Y. v.
Cohen, 179 U.S. 262, 21 S. Ct. 106, 45 L. Ed. 181; Mutual Life Ins. Co. v. Hill, 193 U.S. 551, 24 S. Ct. 538, 48 L. Ed. 788;
Northwestern Mut. Life Ins. Co. v. McCue, 223 U.S. 234, 32 S. Ct. 220, 56 L. Ed. 419, 38 L. R. A. (N. S.) 57. *386 And, when
suit was entertained, the cause of which arose in a foreign country, the courts granted relief according to the laws of the
country where the action arose. Slater v. Mexican Nat. Ry. Co., 194 U.S. 120, 24 S. Ct. 581, 48 L. Ed. 900. It has been held
that discharge under a foreign obligation in accordance with the foreign law is a complete defense. Zimmerman v.
Sutherland, 274 U.S. 253, 47 S. Ct. 625, 71 L. Ed. 1034. It has also been held that the courts of the United States will not
inquire into the validity, wisdom or justice of the laws of a foreign country, or the administration of foreign agencies.
League v. De Young, 52 U. S. (11 How.) 185, 13 L. Ed. 657; Canada Southern Ry. Co. v. Gebhard, 109 U.S. 527, 3 S. Ct. 363,
27 L. Ed. 1020; Underhill v. Hernandez, 168 U.S. 250, 18 S. Ct. 83, 42 L. Ed. 456; Hewitt v. Speyer (C. C. A.) 250 F. 367.

Nor does it appear that enlarged rights may be obtained over the German law should a suit by a policyholder be
entertained by the courts of the United States. Sutherland v. Mayer, 271 U.S. 272, 46 S. Ct. 538, 70 L. Ed. 943; Deutsche
Bank v. Humphrey, 272 U.S. 517, 47 S. Ct. 166, 71 L. Ed. 383; see, also, Zimmerman v. Sutherland, supra. Such holding is
in harmony with other courts. See, Chesterman's Trust, (1923) 2 Chancery 466, where the court had before it a debt
payable in German marks which had greatly depreciated, and it was held that it might be paid in the depreciated marks
or in their exchange value converted into British currency. The same rule was applied in British Bank v. Russian Bank,
(1921) 38 Times Law Reports 65, in which Mr. Justice Russell said that he "had great sympathy with the defendants, but it
must be remembered that the same causes that caused the fall in the value of roubles had produced great depreciation
in the plaintiff's securities." This was approved in Anderson v. Equitable Assurance Society, (1926) 134 Law Times 557.
 2

It is asserted by appellant that, jurisdiction being apparent on the face of the record, it may not be challenged by motion
but must be by plea, and that when, as here, jurisdiction is challenged by plea, by the answer, and put in issue by the
reply, issue must be submitted to the jury for decision on the merits, and that there is no precedent for the order of the
trial court.

As to the last objection, to have a precedent there must be an antecedent case; but the lack thereof does not defeat a
right or privilege. No fault can be found with the cases cited by the appellant, the following of which are the more
prominent: Farmington v. Pillsbury, 114 U.S. 138, 5 S. Ct. 807, 29 L. Ed. 114; Hartog v. Memory, 116 U.S. 588, 6 S. Ct. 521,
29 L. Ed. 725; Mexican Central Railway Co. v. Pinkney, 149 U.S. 194, 13 S. Ct. 859, 37 L. Ed. 699; City Railway Co. v.
Citizen's Street Railroad Co., 166 U.S. 557, 17 S. Ct. 653, 41 L. Ed. 1114; Union Mutual Life Insurance Co. v. Kirchoff, 169
U.S. 103, 18 S. Ct. 260, 42 L. Ed. 677; York County Sav. Bank v. Abbot (C. C.) 131 F. 980. These cases do not point the way.
One sustains dismissal when the fact appears to a legal certainty; another, where a party is collusively added; another
holds that the evidence considered must be pertinent to the issue, or to the inquiry by the court; another holds that
where there is reasonable plausibility of bona fide claim, jurisdiction will be passed to trial on the merits, and another is
one where the court holds that claim rightly viewed unfounded must be denied.

Every requirement appears to be met substantially by the record. Process in this case was served upon the statutory
agent of the appellee in Oregon, appointed as a condition to do business in that state and for the convenience and
protection of residents to whom policies may be issued and afford them access to the courts of the state or district.

The appellant contends that, notwithstanding the agreement that the German courts shall have exclusive jurisdiction,
such agreement is not binding on the federal courts, vested with their jurisdiction by the United States Constitution, of
which they cannot be deprived by foreign laws or agreement. The appellant also contends that these are not actions
upon the policies. But, whatever the designation may be, the basis is the policies.

No alien has a constitutional right to sue in the United States courts. Kline v. Burke Construction Co., 260 U.S. 226, 43 S.
Ct. 79, 67 L. Ed. 226, 24 A. L. R. 1077. The United States District Courts have such jurisdiction as the Congress confers. 28
USCA 41, grants jurisdiction as follows:

"First. Of all suits of a civil nature, at common law or in equity * * * between citizens of a State and foreign States,
citizens, or subjects. * * *

"Third. Of all civil causes of admiralty and maritime jurisdiction, saving to suitors in all cases the right of a common-law
remedy. * * *"

*387 Civil cases and actions in admiralty and maritime jurisdiction have equal status, and the courts have uniformly,
where the question has arisen, declined to entertain jurisdiction in admiralty suits by nonresidents when in the
discretion of the court it would be inconvenient and inexpedient to do so. And no distinction has been made to civil
cases.

Nor is the right to challenge the jurisdiction or to invite the discretion of the court waived or forfeited by removal from
the state to the federal court, or the right of the court, after issue joined, to make investigation on notice and, in its
discretion, decline jurisdiction after such inquiry. 28 USCA, 81, provides that in all suits removed the court shall proceed
as if the suit had been originally commenced in the district court and the same proceedings had been taken in such suit
in said district court as shall have been had therein in said state court prior to its removal.

Upon the face of the record the district court had jurisdiction when the case came to it from the state court. When the
issue first came to its attention, and upon inquiry and examination, the court became cognizant of the status and relation
 3

and no doubt had inherent power to protect itself from a deluge of litigation by nonresidents, inspired by contingent
retainers to avoid or overcome foreign laws and interpretation and application thereof by foreign courts of the country of
the situs of the contract; and it had the power to prefer resident litigants of the district in access to overcrowded
calendars, for, as Justice Holmes said in Douglas v. New York, N. H. & H. R. Co., 279 U.S. 377, 387, 49 S. Ct. 355, 356, 73 L.
Ed. 747: "There are manifest reasons for preferring residents in access to often overcrowded Courts, both in convenience
and in the fact that broadly speaking it is they who pay for maintaining the Courts concerned"; and it had the power to
prevent imposition upon its jurisdiction and use of the court as a "cover for injustice to the defendants" (Cuba R. Co. v.
Crosby, 222 U.S. 473, 479, 32 S. Ct. 132, 133, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40) by reason of the enormous expense
involved in bringing across the continent witnesses from Germany and New York and the records of appellee which
plaintiff demands as necessary in another case and, if so, must also be necessary in this case, the removal of which
would destroy the ability of the appellee, representing more than 2,500,000 policyholders, to function.

Comity between the United States and Germany should also have consideration.

With the foregoing, nothing can be added to the opinion of Judge Robert S. Bean, who at the time of his recent demise
was the dean of the American bench, and whose death terminated a creditable judicial career of more than forty-eight
years on the state and federal bench. His opinion is reported in (D. C.) 45 F.(2d) 426, and is adopted as a part of the
opinion of the court.

Affirmed.
 4

In re UNION CARBIDE CORPORATION GAS PLANT DISASTER AT BHOPAL, INDIA IN DECEMBER, 1984.
Misc. No. 21-38 (JFK).
United States District Court, S.D. New York.
May 12, 1986.
As Amended June 10, 1986.
FACTUAL BACKGROUND
On the night of December 2-3, 1984 the most tragic industrial disaster in history occurred in the city of Bhopal, state of
Madhya Pradesh, Union of India. Located there was a chemical plant owned and operated by Union Carbide India
Limited ("UCIL"). The plant, situated in the northern sector of the city, had numerous hutments adjacent to it on its
southern side which were occupied by impoverished squatters. UCIL manufactured the pesticides Sevin and Temik at the
Bhopal plant at the request of, and with the approval of, the Government of India. (Affidavit of John MacDonald
("MacDonald Aff.") at 2). UCIL was incorporated under Indian law in 1934. 50.9% of its stock is owned by the defendant,
Union Carbide Corporation, a New York corporation. (MacDonald Aff. at 1). Methyl isocyanate (MIC), a highly toxic gas, is
an ingredient in the production of both Sevin and Temik. On the night of the tragedy MIC leaked from the plant in
substantial quantities for reasons not yet determined.

The prevailing winds on the early morning of December 3, 1984 were from Northwest to Southeast. They blew the
deadly gas into the overpopulated hutments adjacent to the plant and into the most densely occupied parts of the city.
The results were horrendous. Estimates of deaths directly attributable to the leak range as high as 2,100. No one is sure
exactly how many perished. Over 200,000 people suffered injuriessome serious and permanent some mild and
temporary. Livestock were killed and crops damaged. Businesses were interrupted.

On December 7, 1984 the first lawsuit was filed by American lawyers in the United States on behalf of thousands of
Indians. Dawani et al. v. Union Carbide Corp., S.D.W.Va. (84-2479). Since then 144 additional actions have been
commenced in federal courts in the United States. The actions have all been joined and assigned by the Judicial Panel on
Multidistrict Litigation to the Southern District of New York by order of February 6, 1985, 601 F. Supp. 1035.

The individual federal court complaints have been superseded by a consolidated complaint filed on June 28, 1985.

The Indian Government on March 29, 1985 enacted legislation, the Bhopal Gas Leak Disaster (Processing of Claims) Act
(21 of 1985) ("Bhopal Act"), providing that the Government of India has the exclusive right to represent Indian plaintiffs
in India and elsewhere in connection with the tragedy. Pursuant to the Bhopal Act, the Union of India, on April 8, 1985,
filed a complaint with this Court setting forth claims for relief similar to those in the consolidated complaint of June 28,
1985.

By order of April 25, 1985 this Court established a Plaintiffs' Executive Committee, comprised of F. Lee Bailey and Stanley
M. Chesley, Esqs., who represented individual plaintiffs and Michael V. Ciresi, Esq., whose firm represents the Union of
India. Jack S. Hoffinger, Esq., who represents individual plaintiffs, was appointed liaison counsel for the Plaintiffs'
Executive Committee.[1]

On September 24, 1985, pursuant to the Bhopal Act, the Central Government of India framed a "scheme" for the
Registration and Processing of Claims arising out of the disaster. According to the Union of India's *845 counsel, over
487,000 claims have been filed in India pursuant to the "scheme."

There presently are 145 actions filed in the United States District Court for the Southern District of New York under the
Judicial Panel for Multidistrict Litigation's order of February 6, 1985, involving approximately 200,000 plaintiffs.
 5

Before this Court is a motion by the defendant Union Carbide Corporation ("Union Carbide") to dismiss the consolidated
action on the grounds of forum non conveniens.

DISCUSSION

The doctrine of forum non conveniens allows a court to decline jurisdiction, even when jurisdiction is authorized by a
general venue statute. In support of its position that the consolidated action before the Court should be transferred to a
more convenient forum within the Union of India pursuant to this doctrine, Union Carbide relies on the United States
Supreme Court's decisions in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055 (1947) and Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 102 S. Ct. 252, 70 L. Ed. 2d 419 (1981). The plaintiffs cite numerous other lower United States
federal court cases in their briefs and seek to distinguish the Supreme Court's decisions from this case. Of
course, Gilbertand Piper are the touchstones in sorting out and examining the contentions of both sides to this motion
on the various factors bearing on convenience.

Piper teaches a straightforward formulation of the doctrine of forum non conveniens. A district court is advised to
determine first whether the proposed alternative forum is "adequate." This inquiry should proceed in the order followed
below. Then, as a matter within its "sound discretion," Piper at 257, 102 S. Ct. at 266, the district court should consider
relevant public and private interest factors, and reasonably balance those factors, in order to determine whether
dismissal is favored. This Court will approach the various concerns in the same direct manner in
which Piper and Gilbertset them out.

At this juncture, it would be appropriate to discuss the presumptions on a forum non conveniens motion. In Piper, the
Court discussed its earlier finding in Koster v. Lumbermens Mutual Casualty Co., 330 U.S. 518, 67 S. Ct. 828, 91 L. Ed.
1067 (1947), which suggested that a plaintiff's choice of forum was entitled to great deference when the forum chosen
was the home of the plaintiff. This presumption was based on the fact that the choice of the home forum indicated a
reasonable assumption that the choice was convenient. Koster at 524, 67 S. Ct. at 831. Conversely, the Piper Court found:

When the plaintiff is foreign, however, this assumption is much less reasonable. Because the central purpose of
any forum non conveniens inquiry is to ensure that the trial is convenient, a foreign plaintiff's choice deserves less
deference.

Piper 454 U.S. at 256, 102 S. Ct. at 266 (footnote omitted).

In the case now before the Court, in which the plaintiffs, including the Union of India, are foreign, and share a home
forum which is not the instant forum, the assumption that this forum is convenient is not completely reasonable. The
foreign plaintiffs' choice of the United States forum "deserves less deference" than would be accorded a United States
citizen's choice. This Court will apply the presumption in favor of plaintiffs' choice of forum with "less than maximum
force." Piper at 261, 102 S. Ct. at 268. See note 23 at 864, infra.

1. Preliminary Considerations.

"At the outset of any forum non conveniens inquiry, the court must determine whether there exists an alternative
forum." Piper at 254, n. 22, 102 S. Ct. at 265, n. 22. The elements of that inquiry are set forth in Piper. First, the Court
said, "[o]rdinarily, this requirement will be satisfied when the defendant is `amenable to process' in the other
jurisdiction." Piperat 254, n. 22, *846 102 S. Ct. at 265, n. 22, quoting Gilbert 330 U.S. at 506-507, 67 S. Ct. at
 6

842. Gilbert states that the doctrine of forum non conveniens "presupposes at least two forums in which the defendant
is amenable to process."

Extending the limited inquiry of Gilbert, the Piper Court delved into the relevance of the substantive and procedural
differences in law which would be applied in the event a case was transferred on the grounds of forum non
conveniens.The Piper Court determined that it was theoretically inconsistent with the underlying doctrine of forum non
conveniens, as well as grossly impractical, to consider the impact of the putative transferee forum's law on the plaintiff in
its decision on a forum non conveniens motion: "[I]f conclusive or substantial weight were given to the possibility of a
change in law, the forum non conveniens doctrine would become virtually useless." Piper 454 U.S. at 250, 102 S. Ct. at
263.[2]

The Court listed numerous practical considerations which led to its conclusion that an unfavorable change in law for
plaintiff was not a relevant factor in the forum analysis. First, the Court observed that if the chance of a change in law
were given substantial weight, choice of law questions would "become extremely important." Piper at 251, 102 S. Ct. at
263. U.S. courts would "have to compare the rights, remedies, and procedures available" within the two proposed
alternative forums, to determine whether a disadvantageous change in law would occur upon transfer. Id. Since "[t]he
doctrine of forum non conveniens, however, is designed in part to help courts avoid conducting complex exercises in
comparative law," the change in law analysis would subvert the doctrine itself. Id. Thus, a court engaged in the inquiry
regarding the existence and adequacy of an alternative forum should not hinge its decision on an unfavorable change in
law.[3]

Another practical concern relating to the "change in law" inquiry was discussed by the Piper court. Based on the liberality
of United States federal law as compared to much foreign law with respect to availability of strict liability for tort,
malleable and diverse choice of law rules among the 50 states, availability of jury trials, contingent fee arrangements and
extensive discovery provisions, the Court observed that a change of forum might frequently involve an unfavorable
change of law for foreign plaintiffs suing American defendants. Piper at 252, n. 18, 102 S. Ct. at 264, n. 18. Consequently,
if the unfavorable change in law were a major factor in the analysis:

[T]he American courts, which are already extremely attractive to foreign plaintiffs, would become even more attractive.
The flow of litigation into the United States would increase and further congest already crowded courts.

Piper at 252, 102 S. Ct. at 264 (footnotes omitted).

At the point, however, where the possible change in law would provide "no remedy at all" to plaintiff, a court may
conclude that no adequate alternative exists. As the Piper Court observed, it did not hold that:

[T]he possibility of an unfavorable change in law should never be a relevant consideration in a forum non
conveniens inquiry. Of course, if the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory
that it is no remedy at all, the unfavorable change in law may be given substantial weight; the district court may conclude
that dismissal would not be in the interests of justice.

Piper at 254, 102 S. Ct. at 265 (emphasis in original) (footnote omitted). Thus, while it *847 is not a "major factor" in the
analysis, a court must at least consider the effect on plaintiffs of a change in law upon transfer.
 7

To a great extent, the plaintiffs in this case argue that Indian courts do not offer an adequate forum for this litigation by
virtue of the relative "procedural and discovery deficiencies [which] would thwart the victims' quest for" justice.
(Memorandum in Opposition by Plaintiffs' Executive Committee ("Memo in Opp.") at 2). The defendant disputes this
contention.

Plaintiffs' preliminary concern, regarding defendant's amenability to process in the alternative forum, is more than
sufficiently met in the instant case. Union Carbide has unequivocally acknowledged that it is subject to the jurisdiction of
the courts of India (Defendant's Memorandum in Reply filed December 20, 1985 ("Reply Memo") at 8); (oral argument
January 3, 1986, transcript at 29, comment of Bud Holman, counsel for Union Carbide). Union Carbide is definitely
amenable to process in India.

Beyond this initial test, plaintiffs and amicus curiae[4] argue that the Indian legal system is inadequate to handle the
Bhopal litigation. In support of this position, plaintiffs have submitted the affidavit of Professor Marc S. Galanter of the
University of Wisconsin Law School. Professor Galanter's credentials are impressive; he was a Fulbright Scholar at the
Faculty of Law of Delhi University and specializes in South Asian Studies at the University of Wisconsin Law School. He is
not, however, admitted to practice in India and the Court views his opinions concerning the Indian legal system, its
judiciary and bar as far less persuasive than those of N.A. Palkhivala and J.B. Dadachanji, each of whom has been
admitted to practice in India for over 40 years. Both are Senior Advocates before the Supreme Court of India. Mr.
Palkhivala served as Indian Ambassador to the United States from 1977 to 1979, and has represented the Indian
government on three occasions before international tribunals.

Although the outcome of this analysis, given the rule of Piper regarding change in law, seems self-evident, the Court will
review plaintiffs' argument on the inadequacy of the Indian forum out of deference to the plaintiffs.

A. Innovation in the Indian Judicial System.

Professor Galanter describes the Indian common law legal system, inherited from the British, in terms of its similarity to
that of other common law systems. He compares the system favorably to that of the United States or Great Britain in
terms of the appellate structure, the rule of stare decisis, the role of the judiciary as "guardian of [India's] democratic
structure and protector of citizens' rights." (Galanter Aff., at 6-12) before pointing to its ostensible deficiencies. According
to Professor Galanter, India's legal system "was imposed on it" during the period of colonial rule. (Galanter Aff. at 11).
Galanter argues that "Indian legal institutions still reflect their colonial origins," (Galanter Aff. at 12), in terms of the lack
of broadbased legislative activity, inaccessibility of legal information and legal services, burdensome court filing fees and
limited innovativeness with reference to legal practice and education. (Galanter Aff. at 12).

On the question of innovativeness, Mr. Palkhivala responds with numerous examples of novel treatment of complex legal
issues by the Indian Judiciary.[5] In the words of the former ambassador of India to the United States, "a legal system is
not *848 a structure of fossils but is a living organism which grows through the judicial process and statutory
enactments." (Palkhavala Aff. at 3). The examples cited by defendant's experts suggest a developed and independent
judiciary. Plaintiffs present no evidence to bolster their contention that the Indian legal system has not sufficiently
emerged from its colonial heritage to display the innovativeness which the Bhopal litigation would demand. Their claim
in this regard is not compelling.

B. Endemic Delays in the Indian Legal System.

Galanter discusses the problems of delay and backlog in Indian courts. Indeed, it appears that India has approximately
one-tenth the number of judges, per citizen, as the United States,[6] and that postponements and high caseloads are
 8

widespread. Galanter urges that the backlog is a result of Indian procedural law, which allows for adjournments in mid-
hearing, and for multiple interlocutory and final appeals. Numerous appeals and "[c]onsiderable delay [are] caused by
the tendency of courts to avoid the decision of all the matters in issue in a suit, on the ground that the suit could be
disposed of on a preliminary point." (Galanter Aff. at 17; 18-20, 21, quoting Indian Law Commission, 54th Report (1973)
pp. 12-13).

This Court acknowledges that delays and backlog exist in Indian courts, but United States courts are subject to delays and
backlog, too. See Remarks of Honorable Warren E. Burger, Chief Justice, Supreme Court of the United States, 100 F.R.D.
499, 534 (1983).

However, as Mr. Palkhivala states, while delays in the Indian legal system are a fact of judicial life in the proposed
alternative forum, there is no reason to assume that the Bhopal litigation will be treated in ordinary fashion.

The Bhopal tragedy has already been approached with imagination in India. Demonstrating the creativity and flexibility
of the Indian system, the Parliament of India has passed the Bhopal Act in order to deal with the cases arising from the
sad events of December 3, 1984. The Bhopal Act permits the cases to be treated "speedily, effectively, equitably and to
the best advantage of the claimants." (Palkhivala Aff. at 11).

Mr. Dadachanji refers to another Indian case which arose from a gas leak in New Delhi. The Chief Justice and another
Justice of the Supreme Court of India ordered the presiding court to expedite adjudication of claims. MC Mehta v. Union
of India. (Dadachanji Aff. at 11 and Annexure A thereto). In another instance, the Indian Supreme Court directed the High
Court to hear a given matter on a daily basis, and set a deadline for delivering judgment (Dadachanji Aff. at 11 and
Annexure B thereto). Other means of coping with delay are appointment of special tribunals by the Government of India
(Dadachanji Aff. at 12 and Annexure C thereto), and assignment of daily hearing duties to a single special judge,
otherwise unburdened, to hear a special matter. (Dadachanji Aff. at 11). This Court is persuaded, by the example of the
Bhopal Act itself and other cases where special measures to expedite were taken by the Indian judiciary, that the most
significant, urgent and extensive litigation ever to arise from a single event could be handled through special judicial
accommodation in India, if required.

C. Procedural and Practical Capacity of Indian Courts.

Plaintiffs contend that the Indian legal system lacks the wherewithal to allow it "to deal effectively and expeditiously"
with the issues raised in this lawsuit. (Memo in Opp. p. 53).

Plaintiffs urge that Indian practitioners emphasize oral skills rather than written briefs. They allegedly lack specialization,
practical investigative techniques and coordination into partnerships. These factors, *849 it is argued, limit the Indian
bar's ability to handle the Bhopal litigation. As Mr. Dadachanji indicates, Indian lawyers have competently dealt with
complex technology transfers, suggesting capability within the technological and scientific areas of legal practice, if not
"specialization." (Dadachanji Aff. at 8). Moreover, Indian attorneys use experts, when necessary. As to investigative
ability, Mr. Dadachanji persuasively points out that the Central Bureau of Investigation ("CBI") of the Union of India is well
equipped to handle factual inquiry, as is the Commission of Enquiry constituted by the state of Madhya Pradesh.
(Dadachanji Aff. at 8). While Indian attorneys may not customarily join into large law firms, and as Mr. Palkhivala states,
are limited by present Indian law to partnerships of no more than twenty, this alone or even in concert with other factors
does not establish the inadequacy of the Indian legal system. (Palkhivala Aff. at 8). There is no reason the Indian
legislature could not provide for the expansion of lawfirms, if such a choice is required. In any event, this Court is not
convinced that the size of a law firm has that much to do with the quality of legal service provided. Many small firms in
this country perform work at least on a par with the largest firms. Bigger is not necessarily better.
 9

Moreover, since the Union of India purports to represent all the claimants, it is likely that if the case were transferred to
India, the Attorney General or Solicitor General of India and the Advocate General of Madhya Pradesh, with attendant
staffs, would represent the claimants. The Indian bar appears more than capable of shouldering the litigation if it should
be transferred to India. (Palkhivala Aff. at 9).

Next, plaintiffs and Professor Galanter argue that the substantive tort law of India is not sufficiently developed to
accommodate the Bhopal claims. Plaintiffs trace the lack of sophistication in Indian tort law to the presence of court fees
for litigants as inhibiting the filing of civil suits. Though the filing fees may have had historical significance, they are
irrelevant here. Professor Galanter acknowledges that court fees may be waived for "poor parties or for specific classes
of litigants." (Galanter Aff. at 28). In fact, filing fees have been waived for claimants in India in the Bhopal litigation
already begun there.

Professor Galanter asserts that India lacks codified tort law, has little reported case law in the tort field to serve as
precedent, and has no tort law relating to disputes arising out of complex product or design liability. (Galanter Aff. at 30-
36). As an illustration of the paucity of Indian tort law, Professor Galanter states that a search through the All-India
Reportsfor the span from 1914 to 1965 revealed only 613 tort cases reported. (Galanter Aff. at 32). Mr. Dadachanji
responds that tort law is sparsely reported in India due to frequent settlement of such cases, lack of appeal to higher
courts, and the publication of tort cases in specialized journals other than the All-India Reports. (Dadachanji Aff. at 16-17;
Palkhivala Aff. at 10). In addition, tort law has been codified in numerous Indian statutes. (Dadachanji Aff. at 16-17).

As Professor Galanter himself states, "the major categories of tort, their elements, the [theories] of liability,
defenses, respondeat superior, the theories of damagesare all familiar." (Galanter Aff. at 37). What is different, Galanter
asserts, is the complete absence of tort law relating to high technology or complex manufacturing processes. This is of no
moment with respect to the adequacy of the Indian courts. With the groundwork of tort doctrine adopted from the
common law and the precedential weight awarded British cases, as well as Indian ones, it is obvious that a well-
developed base of tort doctrine exists to provide a guide to Indian courts presiding over the Bhopal litigation. In any
event, much tort law applied in American cases involving complex technology has its source in legal principles first
enunciated in Victorian England. See, e.g., Rylands v. Fletcher, 1868, L.R. 3 H.L. 330. As Mr. Palkhivala stated in his
affidavit:

*850 The plant itself was the product of highly complex technology, but complexity of the technology cannot be equated
with complexity of legal issues. The principles of liability and damages involved in the Bhopal cases are all well
established in India. The complexity is not in the nature or determination of legal issues but in the application of the law
to the events which took place in Bhopal. Well settled law is to be applied to an unusual occurrence.

(Palkhivala Aff. at 7).

Plaintiffs next assert that India lacks certain procedural devices which are essential to the adjudication of complex cases,
the absence of which prevent India from providing an adequate alternative forum. They urge that Indian pre-trial
discovery is inadequate and that therefore India is an inadequate alternative forum. Professor Galanter states that the
only forms of discovery available in India are written interrogatories, inspection of documents, and requests for
admissions. Parties alone are subject to discovery. Third-party witnesses need not submit to discovery. Discovery may be
directed to admissible evidence only, not material likely to lead to relevant or admissible material, as in the courts of the
United States. Parties are not compelled to provide what will be actual proof at trial as part of discovery.
 10

These limits on discovery are adopted from the British system. Similar discovery tools are used in Great Britain today.
This Court finds that their application would perhaps, however, limit the victims' access to sources of proof. Therefore,
pursuant to its equitable powers, the Court directs that the defendant consent to submit to the broad discovery afforded
by the United States Federal Rules of Civil Procedure if or when an Indian court sits in judgment or presides over pretrial
proceedings in the Bhopal litigation.[7] Any dismissal of the action now before this Court is thus conditioned on
defendant's consent to submit to discovery on the American model, even after transfer to another jurisdiction.

The ostensible lack of devices for third-party impleader or for organizing complex cases under the law of the state of
Madhya Pradesh are two other procedural deficiencies which plaintiffs assert preclude a finding that India offers an
adequate alternative forum. Assuming for the moment that, upon appropriate transfer, the Bhopal litigation would be
adjudicated by the local district court in Bhopal, and that the law of Madhya Pradesh would be applied, this Court is still
not moved by plaintiffs' argument regarding impleader or complex litigation.

Although no specific provision in the Indian Code of Civil Procedure permits the impleading of third-parties from whom
contribution is sought, other provisions in the Code do provide for impleader. As both parties to this motion state, Order
1, Rule 10(2) of the Indian Code of Civil Procedure "allows the court to add additional parties if the presence of those
parties is `necessary in order to enable the Court effectively and completely to adjudicate upon and settle all questions
involved in the suit.'" (Galanter Aff. at 60; Dadachanji Aff. at 18). Professor Galanter posits that a joint tortfeasor would
not be considered a necessary party, and would not be joined. Defendant's expert, conversely, asserts that a party can be
added to prevent multiplicity of suits and conflicts of decisions. Thus, Mr. Dadachanji argues, defendants would be able
to seek contribution from third-parties if joinder would prevent repetitive litigation or inconsistency. Moreover, the
broad provision of inherent powers to aid the ends of justice, as codified at Section 151 of the Indian Code of Civil
Procedure would prevent an ultimate miscarriage of *851 justice in the area of impleader. (Dadachanji Aff. at 19).[8]

The absence of procedures or mechanisms within the Indian judiciary to handle complex litigation is presented as
support for plaintiffs' position regarding the non-existence of an adequate alternative forum. Professor Galanter asserts,
for example, that Indian judges do not promote settlements. The point is wholly irrelevant to the question of whether an
adequate alternative forum exists. In any event, this Court has labored hard and long to promote settlement between
the parties for over a year, to no avail. It would appear that settlement, although desirable for many reasons, including
conservation of attorneys' fees and costs of litigation, preservation of judicial resources, and speed of resolution, is
unlikely regardless of the level of activism of the presiding judge.

Plaintiffs' next contention is that since no class action procedure exists in India expeditious litigation of the Bhopal suits
would be impossible. As with all of plaintiffs' other arguments, this purported deficiency does not constitute "no
remedy" at all. Professor Galanter himself acknowledges that Order 1, Rule 8 of the Indian Code of Civil Procedure
provides a mechanism for "representative" suits, "where there are numerous persons having the same interest in one
suit." (Galanter Aff. at 54). Even if the current state of Indian law regarding "representative" suits involves application of
the mechanism to pre-existing groups such as religious sects or associations, there is no reason to conclude that the
Indian legislature, capable of enacting the Bhopal Act, would not see its way to enacting a specific law for class actions. In
addition, it does not appear on the face of Order 1, Rule 8 that the "representative" suit is expressly limited to
preexisting groups. The Indian district court could adopt the rule for use in a newly created class of injured, whose
members all have "the same interest" in establishing the liability of the defendant. An Indian court has law available to
create a representative class, or perhaps a few different representative classes. The "scheme" for registration and
processing of claims, see supra, at 4, could perform the task of evaluating the specific amounts of claims. Moreover, Mr.
Dadachanji gives at least three examples where Indian courts have consolidated suits pursuant to their inherent power
under Section 151 of the Indian Code of Civil Procedure. In at least one case, such consolidation allegedly occurred
 11

without consent of the parties. (Dadachanji Aff. at 9). The absence of a rule for class actions which is identical to the
American rule does not lead to the conclusion that India is not an adequate alternative forum.

Final points regarding the asserted inadequacies of Indian procedure involve unavailability of juries or contingent fee
arrangements in India. Plaintiffs do not press these arguments, but Mr. Palkhivala touches upon them. They are easily
disposed of. The absence of juries in civil cases is a feature of many civil law jurisdictions, and of the United
Kingdom. Piper at 252, n. 18, 102 S. Ct. at 264, n. 18 and citations therein. Furthermore, contingency fees are not found
in most foreign jurisdictions. Piper at 252, n. 18, 102 S. Ct. at 264, n. 18. In any event, the lack of contingency fees is not
an insurmountable barrier to filing claims in India, as demonstrated by the fact that more than 4,000 suits have been
filed by victims of the Bhopal gas leak in India, already. According to Mr. Palkhivala, moreover, well-known lawyers have
been known to serve clients without charging any fees. (Palkhivala Aff. at 8).

Plaintiffs' final contention as to the inadequacy of the Indian forum is that a judgment rendered by an Indian court
cannot be enforced in the United States without *852 resort to further extensive litigation. Conversely, plaintiffs assert,
Indian law provides res judicata effect to foreign judgments, and precludes plaintiffs from bringing a suit on the same
cause of action in India. (Galanter Aff. at 63-65). Mr. Dadachanji disputes this description of the Indian law of res
judicata. He asserts that the pendency, or even final disposition, of an action in a foreign court does not prevent plaintiffs
from suing in India upon the original cause of action. Plaintiffs would not be limited, Mr. Dadachanji argues, to an Indian
action to enforce the foreign judgment. (Dadachanji Aff. at 19-20). In addition, he states that an Indian court, before
ordering that a foreign judgment be given effect, would seek to establish whether the foreign court had failed to apply
Indian law, or misapplied Indian law. (Dadachanji Aff. at 20).

The possibility of non-enforcement of a foreign judgment by courts of either country leads this Court to conclude that
the issue must be addressed at this time. Since it is defendant Union Carbide which, perhaps ironically, argues for the
sophistication of the Indian legal system in seeking a dismissal on grounds of forum non conveniens, and plaintiffs,
including the Indian Government, which state a strong preference for the American legal system, it would appear that
both parties have indicated a willingness to abide by a judgment of the foreign nation whose forum each seeks to visit.
Thus, this Court conditions the grant of a dismissal on forum non conveniens grounds on Union Carbide's agreement to
be bound by the judgment of its preferred tribunal, located in India, and to satisfy any judgment rendered by the Indian
court, and affirmed on appeal in India. Absent such consent to abide by and to "make good" on a foreign judgment,
without challenge except for concerns relating to minimal due process, the motion to dismiss now under consideration
will not be granted. The preference of both parties to play ball on a distant field will be taken to its limit, with each party
being ordered to be bound by the decision of the respective foreign referees.

To sum up the discussion to this point, the Court determines that the Indian legal system provides an adequate
alternative forum for the Bhopal litigation. Far from exhibiting a tendency to be so "inadequate or unsatisfactory" as to
provide "no remedy at all," the courts of India appear to be well up to the task of handling this case. Any unfavorable
change in law for plaintiffs which might be suffered upon transfer to the Indian courts, will, by the rule of Piper, not be
given "substantial weight." Differences between the two legal systems, even if they inure to plaintiffs' detriment, do not
suggest that India is not an adequate alternative forum. As Mr. Palkhivala asserts with some dignity, "[w]hile it is true to
say that the Indian system today is different in some respects from the American system, it is wholly untrue to say that it
is deficient or inadequate. Difference is not to be equated with deficiency." (Palkhivala Aff. at 4). Piper at 254, 102 S. Ct.
at 265. The inquiry now turns to a weighing of the public and private interest factors.

2. Private Interest Concerns.

 12

The Gilbert Court set forth a list of considerations which affect the interests of the specific litigants to an action, and
which should be weighed in making a forum non conveniens determination. The so-called private interest factors, along
with public interest factors discussed below, were not intended to be rigidly applied. As the Court stated in Piper,

"[E]ach case turns on its facts." If central emphasis were placed on any one factor, the forum non conveniens doctrine
would lose much of the flexibility that makes it so valuable.

Piper at 249-50, 102 S. Ct. at 263. Recognizing that "[p]articularly with respect to the question of relative ease of access
to sources of proof," "the private interests point in both directions," the Supreme Court nevertheless upheld a district
court's decision to dismiss a case in favor of the relative convenience of a forum in Scotland. Piper at 257, 102 S. Ct. at
267. By contrast, this Court finds that the private interests *853 point strongly one way. As in Piper, it appears that the
burdensome effect of a trial in this forum supports a finding that the private interest factors in this case weigh strongly in
favor of dismissal.

A. Sources of Proof.

The first example of a private interest consideration discussed in Gilbert is "relative ease of access to sources of proof."
As stated, the analysis of this issue must hinge on the facts. Limited discovery on the issue of forum non conveniens has
taken place, pursuant to the Court's order of August 14, 1985.[9] The Court can therefore proceed to discuss this
question.

Union Carbide argues that virtually all of the evidence which will be relevant at a trial in this case is located in India.
Union Carbide's position is that almost all records relating to liability, and without exception, all records relevant to
damages, are to be found in and around Bhopal. On the liability question Union Carbide asserts that the Bhopal plant
was managed and operated entirely by Indian nationals, who were employed by UCIL. (Affidavit of Warren J. Woomer,
formerly Works Manager of the Bhopal plant ("Woomer Aff.") at 2). Defendant asserts that the Bhopal plant is part of
UCIL's Agricultural Products Division, which has been a separate division of UCIL for at least 15 years, and that the plant
had "limited contact" with UCIL's Bombay headquarters, and almost no contact with the United States. (Woomer Aff. at
4, 32). Woomer claims to have been the last American employed by UCIL. He departed from Bhopal in 1982. (Woomer
Aff. at 2).

Woomer describes the structure and organization of the Bhopal facility at the time of the accident. The plant had seven
operating units, each headed by a manager or department head, each an Indian national.[10] The managers or
department heads each reported either directly to the plant's General Works Manager, or to one of three Assistant
Works Managers. (Woomer Aff. at 6). Each of these is also an Indian national. Three of the operating units which at this
very early stage of inquiry into liability appear to have been potentially involved in the MIC leak are the Carbon
Monoxide, MIC/Phosgene and Carbamoylation units. (Woomer Aff. at 7-10). The Carbon Monoxide and MIC/Phosgene
units together employed 63 employees, all Indian nationals. (Woomer Aff. at 9). The Carbamoylation unit employed 99
Indian nationals. (Woomer Aff. at 10). Mr. Woomer states that an inquiry into the cause of the accident would require
interviews with at least those employees who were on duty at the Bhopal facility "immediately prior or after the
accident;" Mr. Woomer asserts that there are 193 employees, all Indians, who must be interviewed. (Woomer Aff. at 58).
[11]

In addition to the seven operating units, the Bhopal plant contained seven functional departments which serviced
operations.[12] The seven heads of the units reported within the plant much as the department heads did.
 13

The maintenance unit was apparently subdivided into departments including Instrumentation, Mechanical Maintenance,
both part of the Agricultural Chemical Maintenance unit, which employed 171 people in total, and Plant Engineering and
Formulation Maintenance, which employed 46 people. (Woomer Aff. at 11-12). In *854 addition, the Utilities and
Electrical department employed 195 people. (Woomer Aff. at 13). According to Mr. Woomer, the various maintenance
organizations performed repairs on equipment, provided engineering support, fabricated certain equipment, salvaged
other portions, and controlled utilities, temperatures and pressures throughout the plant. (Woomer Aff. at 11-14).

Moreover, according to Mr. Woomer, these UCIL departments also kept daily, weekly and monthly records of plant
operations, many of which were purportedly seized by the CBI and selected for copying by CBI immediately after the
accident.[13] The records and reports of the various maintenance units would likely be relevant to the question of
liability at trial.

Of the additional functional units, it is possible that Quality Control, with 54 employees, Purchasing, with 53, or Stores
may have been directly involved in the disaster by virtue of their participation in analyzing plant output, procuring raw
materials for the chemical processes of the plant, and maintaining spare parts and certain chemicals. (Woomer Aff. at 14-
19). Thus, the records and reports of these three departments may be necessary to an investigation of liability. While
examination of members of the Works Office department and Industrial Relations department would likely be less
directly useful, information regarding plant budgets and employee histories might be of relevance. Of great importance
are the records and reports of the Safety/Medical department, which was responsible for daily auditing of safety
performance in all departments, training and testing on safety rules, maintaining safety statistics and planning and
implementing safety drills. (Woomer Aff. at 22-23). The 31 Indian employees of this department worked with the Central
Safety Committee of the plant, whose members were drawn from plant management, and the Departmental Safety
Committees. Operating units were required to monitor plant safety mechanisms weekly, and to keep monthly checklists.
(Holman Aff. # 2 at 9). The Central Safety Committee met monthly, as did the Departmental Safety Committees. (Woomer
Aff. at 39). The MIC Unit held monthly safety committee meetings, for example, and issued monthly reports. (Woomer
Aff. at 41). Quarterly "Measures of Performance" reviews also covered safety issues, and were required of each operating
unit. (Woomer Aff. at 40). Certainly, interviews of the plant personnel involved in safety reports and audits would be
particularly relevant to the investigation of the disaster.

Plaintiffs refer to three occasions upon which Union Carbide, not UCIL, employees conducted safety audits at the Bhopal
plant. As defendant correctly argues, these three events constitute a very small fraction of the thousands of safety audits
conducted at the Bhopal facility. The three audits, moreover, were conducted in 1979, the fall of 1980 and in May of
1982, many years prior to the accident which is the subject of this lawsuit. (Plaintiffs' Memo in Opp. at 25).[14]

Two accidents which occurred previously at the Bhopal plant might also be of relevance to the liability inquiry in this
litigation. On December 24, 1981, a phosgene gas leak killed a UCIL maintenance worker. *855 Reports of the fatality
were sent to Union Carbide management in the United States. (Woomer Deposition, Exs. 30 and 31). Plaintiffs assert that
the accident report called for increased training in Bhopal by United States employees of Union Carbide's Institute, West
Virginia, plant. Defendant states that the responsibility for remedying problems in the Bhopal plant rested with the plant
itself, and that Union Carbide did not make any recommendations, and was involved only to the extent of receiving a
copy of the report which called for its involvement in further training. (Woomer Aff. at 41).

The second accident at Bhopal prior to the disaster of December, 1984 took place on February 9, 1982, when a pump
seal, perhaps improperly used, failed. (Memo in Opp. at 24; Woomer Aff. at 41). Many employees were injured, and at
least 25 were hospitalized. Plaintiffs discuss the fact that Robert Oldford, president of Union Carbide Agricultural
Products Company ("UCAPC") a wholly-owned subsidiary of Union Carbide headquartered in the United States, was in
 14

Bhopal at the time of the February 1982 leak. (Memo in Opp. at 24). Union Carbide asserts that Mr. Oldford was visiting
UCIL's Research and Development Centre, located several miles from the Bhopal plant for an unrelated purpose, and was
only coincidentally in Bhopal when the leak occurred. To the extent that this presence in India in 1982 has any
significance, Mr. Oldford, and any other United States employees of Union Carbide who conducted safety audits in
Bhopal or were present when accidents occurred there, may be flown to Bhopal for testimony or discovery.

In addition to safety data, two other types of proof may be relevant to a trial of this case on the merits. Information
regarding plant design, commissioning and start-up may bear upon the liability question. Information pertinent to
employee training should also have significance.

Leaving aside the question of whether the Government of India or UCIL chose the site and product of the Bhopal plant,
the Court will evaluate the facts which bear on the issue of relevant records. The findings below concern the location of
proof only, and bear solely upon the forum non conveniens motion. The Court expressly declines to make findings as to
actual liability at this stage of the litigation.

Plaintiffs and defendant agree that in 1973 Union Carbide entered into two agreements with UCIL which were entitled
"Design Transfer Agreement" and "Technical Service Agreement." According to plaintiffs, Union Carbide, pursuant to the
Design Transfer Agreement, provided a process design to UCIL, the "detailing [of which] was undertaken in India."
(Memo in Opp. at 17). The process design package consisted of the basic plan of the factory, which was to be fleshed out
in the detailing phase. Plaintiffs state that at least nine Union Carbide technicians travelled to India to monitor the
progress of the project. Union Carbide also allegedly assigned a "key engineer," John Couvaras, to serve as UCIL Bhopal
project manager. Mr. Couvaras allegedly "assumed responsibility for virtually every aspect of the detailing of the process
design," and approved detail reports of "not only UCIL but also independent contractors, including Humphreys &
Glasgow Consultants Private Ltd. and Power Gas Limited" of Bombay, India. (Memo in Opp. at 17-20).[15]

Plaintiffs also claim that "[n]o change of any substance was made from Union Carbide's design during the detailing
phase." Plaintiffs note that only "one portion" of the process design work provided to UCIL by Union Carbide was not
used. (Memo in Opp. at 20). In effect, plaintiffs seek to establish that Union Carbide was the creator of the design used in
the Bhopal plant, and directed UCIL's relatively minor detailing program. They urge that for the most *856 part relevant
proof on this point is located in the United States.

Defendant seeks to refute this contention, with notable success. Turning first to the affidavit of Robert C. Brown, who
describes himself as "chief negotiator for Union Carbide Corporation in connection with the two agreements it entered
into with ... UCIL in November, 1973," the Court is struck by the assertion that the two agreements were negotiated at
"arms-length" pursuant to Union Carbide corporate policy, and that the Union of India mandated that the Government
retain "specific control over the terms of any agreements UCIL made with foreign companies such as Union Carbide
Corporation." (Brown Aff. at 3-4).[16]

Mr. Brown alleges that the Letter of Intent issued by the Union of India in March 1972, pursuant to which construction
and design of the plant were allowed to ensue provided, inter alia, that:

(2) [F]oreign collaboration and import of equipment be settled to the satisfaction of the Government.

Mr. Brown claims, on personal information, that UCIL told him that Union Carbide would not be allowed to be involved in
the Bhopal project beyond the provision of process design packages. (Brown Aff. at 5). The Design Transfer Agreement
indicates that Union Carbide's duty under the Agreement was to provide process design packages, and that UCIL, not
 15

Union Carbide, would be responsible to "detail design, erect and commission the plant." (Defendant's Ex. 4, 4.1). Union
Carbide, accordingly, issued limiting warranties with respect to the design packages, detailing of which it would not be
involved with. (Brown Aff. at 7, Ex. 4, 4.1, 12.3).

The nature of UCIL's detail design work is discussed in the affidavit of Ranjit K. Dutta, who has held various positions at
UCIL and UCAPC. From 1973 through 1976, Mr. Dutta was employed as General Manager of the Agricultural Products
Division of UCIL. (Dutta Aff. at 2).

Mr. Dutta asserts that the Bhopal facility was built by UCIL over the eight years from 1972 to 1980. (Dutta Aff. at 8). He
asserts that Union Carbide's role in the project was "narrow", and limited to providing "certain process design packages
for certain parts of the plant." (Dutta Aff. at 9). He continues, stating:

Once it did that, it had no further design or engineering role,

and that:

[T]he process design packages which Union Carbide Corporation provided are nothing more than summary design
starting points.... They set forth only the general parameters.... A plant cannot be constructed from a process design
package. The detail design comprises approximately 80 percent of the sum of the man hours involved in the design of
any project and transposes the general process design parameters into an actual design which can be used for
purchasing equipment and actual construction.

(Dutta Aff. at 9-12). (emphasis omitted).

According to Mr. Dutta, during the five years between the date upon which Union Carbide submitted process designs,
and the date upon which the plant started-up, there were only four visits to Bhopal by Union Carbide process design
engineers. (Dutta Aff. at 14). In contrast, he asserts that ten to fifteen UCIL engineers, working primarily out of Bombay,
were involved in design detailing. (Dutta Aff. at 16). These UCIL engineers oversaw the 55 to 60 Indian
engineers *857 employed by the Bombay engineering firm which performed the detail design work. This firm,
Humphreys and Glasgow, submitted designs and drawings to the UCIL engineers for approval. Corrected drawings were
returned by UCIL to Humphreys and Glasgow for changes, and sent back to UCIL for final approval. (Dutta Aff. at 19-24).
[17] Mr. Dutta alleges that "at no time were Union Carbide Corporation engineering personnel from the United States
involved in approving the detail design or drawings prepared upon which construction was based. Nor did they receive
notices of changes made." (Dutta Aff. at 24).

Mr. Dutta expressly states that the MIC storage tank and monitoring instrumentation were fabricated or supplied by two
named Indian sub-contractors. The vent gas scrubber is alleged to have been fabricated in the Bhopal plant shop. (Dutta
Aff. at 25).

Of the 12,000 pages of documents purportedly seized by the CBI regarding design and construction of the Bhopal plant,
an asserted 2,000 are design reports of Humphreys and Glasgow, UCIL or other contractors. Defendant claims that
blueprints and calculations comprise another 1,700 pages of documents held by the CBI. Five thousand pages of
contractors' files, including specifications and contracts are asserted to be in India. In addition, Union Carbide claims that
blueprints and diagrams may not reflect final design changes as incorporated into the actual plant, and that the detail
design engineers' testimony will be needed to determine the configuration of the actual plant.[18] (Holman Aff. # 2 at 15-
16).
 16

One final point bearing on the information regarding liability is contained in the affidavit of Edward Munoz, at a relevant
time the General Manager of UCIL's Agricultural Products Division. He later acted as Managing Director of UCIL. Mr.
Munoz has submitted an affidavit in which he states that Union Carbide decided to store MIC in large quantities at the
Bhopal plant, despite Mr. Munoz' warnings that MIC should be stored only in small amounts because of safety. (Memo in
Opp. at 15-16; Munoz Aff.). Mr. Dutta, for defendant, asserts that there was never any issue of token storage of MIC at
Bhopal, as Mr. Munoz states, and that there is no truth to Mr. Munoz' assertion that he was involved in the storage issue.
(Dutta Aff. at 30).[19]*858 The Court cannot make any determination as to the conflicting affidavits before it. This
question, which involves credibility concerns, is left for later in the litigation. To the extent that this particular matter
bears upon the relative ease of access to sources of proof, Mr. Munoz and Mr. Dutta both may be called to testify at trial
or discovery. Mr. Dutta's home is in Bhopal. (Dutta Aff. at 1). The Court is not aware of the whereabouts of Mr. Munoz at
this time. Either of the two could travel to either alternative forum.

In addition to design and safety records, material regarding training of Bhopal personnel is likely to be relevant to the
question of liability. Plaintiffs state that Warren Woomer supervised the training of UCIL personnel at Union Carbide's
Institute, West Virginia plant. According to plaintiffs, 40 UCIL employees were transported to Institute's MIC facility for
lengthy training. (Memo in Opp. at 22). Mr. Woomer states in reply that the 40 employees thus trained represented a
fraction of the over 1,000 employees who were trained exclusively in Bhopal. (Woomer Aff. at 43). In addition, Mr.
Woomer asserts that the training at Institute was pursuant to an arms-length agreement, that UCIL selected the parties
to be trained, and that UCIL paid Union Carbide for the training. (Woomer Aff. at 43). Moreover, Mr. Woomer's
description of the training provided at Bhopal suggests that each of the plant's employees had lengthy cumulative
training, of which the Institute training was but a very small portion. (Woomer Aff. at 46). Personnel records, in any
event, are located in Bhopal. (Holman Aff. # 2 at 4).

The briefs and affidavits contain considerable discussion on the matter of commissioning and start-up of the Bhopal
plant. The Court need not resolve the question of who was responsible for these aspects of plant operation. However,
the Court determines that the manual regarding start-up was prepared by Indian nationals employed by UCIL. (Woomer
Aff. at 48).

In the aggregate, it appears to the Court that most of the documentary evidence concerning design, training, safety and
start-up, in other words, matters bearing on liability, is to be found in India. Much of the material may be held by the
Indian CBI. Material located in this country, such as process design packages and training records of the 40 UCIL
employees trained at Institute, constitutes a smaller portion of the bulk of the pertinent data than that found in India.
Moreover, while records in this country are in English, a language understood in the courts of India, certain of the
records in India are in Hindi or other Indian languages, as well as in English. (Holman Aff. # 2 at 12). The Indian language
documents would have to be translated to be of use in the United States. The reverse is not true. It is evident to the
Court that records concerning the design, manufacture and operation of the Bhopal plant are relatively more accessible
in India than in the United States, and that fewer translation problems would face an Indian court than an American
court. Since Union Carbide has been directed to submit to discovery in India pursuant to the liberal grant of the
American Federal Rules of Civil Procedure, and this opinion is conditioned upon such submission, any records sought by
plaintiffs must be made available to them in India. The private interest factor of relative ease of access to sources of
proof bearing on liability favors dismissal of the consolidated case.[20] The Indian *859 Government is asserted to have
been involved in safety, licensing and other matters relating to liability. Records relating thereto are located in India, as
are the records seized by the CBI. Although plaintiffs state that all such records could and would be made available to this
Court, it would be easier to review them in India. Transmittal and translation problems would thereby be avoided.

B. Access to Witnesses.
 17

Gilbert teaches a second important consideration under the heading of private interests, the "availability of compulsory
process for attendance of willing, and the cost of obtaining attendance of unwilling, witnesses." Gilbert, 330 U.S. at 508,
67 S. Ct. at 843. As discussed in detail above, most witnesses whose testimony would relate to questions of causation
and liability are in India. Engineers from UCIL and Humphreys and Glasgow and other subcontractors, of whom there are
hundreds, are located in India. Shift employees from the possibly malfunctioning units, safety monitoring personnel,
those responsible for training, safety auditing, procurement, compliance with regulations and other operations might be
required to testify. More than likely, many of these potential witnesses do not speak English, and would require
translators. Many of the witnesses are not parties to this litigation. Therefore, as the Court of Appeals for the Second
Circuit has stated in the context of a forum non conveniens motion:

In fact, the plaintiffs' cases on liability will depend in large measure upon the knowledge and activities of such witnesses
as the employees of [companies] who are not parties to this litigation, but who directly participated in the events which
gave rise to it. The United States District Court in New York, however, has no power to subpoena any of these witnesses.
It is unlikely that many would be willing to travel to New York to testify; and the cost, in any event, would be prohibitively
great.

Fitzgerald v. Texaco, 521 F.2d 448, 451-52 (2d Cir. 1975), cert. denied, 423 U.S. 1052, 96 S. Ct. 781, 46 L. Ed. 2d 641 (1976)
(footnote omitted). In contrast, the relatively few witnesses who reside in the United States are primarily employed by
Union Carbide. As employees of a party they would probably be subject to the subpoena power of Indian courts.
Transportation costs would also be lower, since fewer people would have to make the journey to testify.

The presence of the Indian Government in this action is also of critical importance on this motion. Plaintiffs assert that
"all necessary officials and employees of the Central Government will voluntarily comply with requests to attend trial."
(Memo in Opp. at 70; Answer to No. 124 of Defendant's First Requests for Admission, Exhibit 55). This statement does
not provide for attendance by officials of Madhya Pradesh or the Bhopal municipality, whom Union Carbide indicates
might be impleaded as third-party defendants. As witnesses only, these officials would not be subject to this Court's
subpoena power. As third-party defendants, they might be immune from suit in the United States by the terms of the
Foreign Sovereign Immunities Act, 28 U.S.C. 1602 et seq. State and city officials might also lack sufficient contacts with
this district to allow this Court to exercise personal jurisdiction over them.

While Union Carbide might be deprived of testimony of witnesses or even potential third-parties if this action were to
proceed in this forum, no such problem would exist if litigation went forward in India.

The unavailability of compulsory process for Indian non-party witnesses, of whom *860 there are many, such as would
ensure their presence at a trial in this country, the high cost of transporting the large number of Indian nationals to the
United States, as well as the need to translate their testimony should they appear, all support the argument favoring
dismissal of this action on forum non conveniens grounds. The private interest concerns regarding witnesses emphasize
the logic of defendant's position. Relatively fewer witnesses reside in the United States than in India. Almost all of the
witnesses located in this country are employees of defendant, and would be subject to compulsory process in India as a
result. Transportation costs for the relative few would not compare to the alternate costs of transporting hundreds of
Indian witnesses. Since English is widely spoken in India, less translation would be required for foreign witnesses in India
than in the converse situation. Should this case be tried in India, fewer obstacles to calling state and local officials as
witnesses or parties would face the defendant. The Court determines that this private interest factor weighs in favor of
dismissal.
 18

C. Possibility of View.

The third private interest factor articulated in Gilbert is the ease of arranging for a view of the premises around which the
litigation centers. Plaintiffs assert that the notion that a jury view of the plant and environs is necessary is "simply
preposterous." (Memo in Opp. at 71). Plaintiffs note that a viewing of the premises is rarely conducted in products
liability cases, since videotapes, pictures, diagrams, schematics and models are more instructive than an actual view.
(Memo in Opp. at 71). A viewing of the plant and hutments would probably not be of utmost importance in determining
liability, and this consideration is not afforded great weight on this motion.

However, the instant case is not identical to the product design defect case cited by plaintiffs, in which a district court
judge determined that "the present appearance of the defendants' facilities may or may not be relevant to production
which occurred" in the period in which the allegedly violative manufacture occurred. Hodson v. A.H. Robins Co., Inc., 528
F. Supp. 809, 822 (E.D.Va.1981), aff'd, 715 F.2d 142 (4th Cir. 1983). In the instant case, the site of the accident was sealed
after the leak, and the present condition of the plant might be relevant to a finding of liability. A viewing may not be
necessary, but conceivably could be called for later in the litigation. An Indian court is in a far better position than this
Court to direct and supervise such a viewing should one ever be required. This consideration, though minor, also weighs
in favor of dismissal.

In summary, then, the private interest factors weigh greatly in favor of dismissal on grounds of forum non
conveniens. Since the "balance is strongly in favor of the defendant" and foreign plaintiffs' choice of a foreign forum is
given less than maximum deference, the Court determines that dismissal is favored at this point in the
inquiry. Gilbert 330 U.S. at 508, 67 S. Ct. at 843.

3. Public Interest Concerns.

The Gilbert Court articulated certain factors which affected the interests of non-parties to a litigation to be considered in
the context of the doctrine of forum non conveniens. These public interest concerns were held to be relevant to a court's
determination of whether to dismiss on these grounds. The Supreme Court expressly identified a few factors:

Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its
origin. Jury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the
litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach
rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having
localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a
forum that is at home with the state law that must govern the case, rather than *861 having a court in some other forum
untangle problems in conflict of laws, and in law foreign to itself.

Gilbert at 508-09, 67 S. Ct. at 843. The Court will consider these various factors in turn, as well as others discussed by the
parties and amicus curiae.

A. Administrative Difficulties.

As is evident from the discussion thus far, the mere size of the Bhopal case, with its multitude of witnesses and
documents to be transported and translated, obviously creates administrative problems.
 19

There can be no doubt that the Bhopal litigation will take its toll on any court which sits in judgment on it. This Court sits
in one of the busiest districts in the country, and finds, as a matter within its experience, that this is a "congested center"
of litigation as described in Gilbert at 508. The burden which would be imposed should litigation continue here was aptly
described by the Court of Appeals for the Second Circuit in Schertenlieb v. Traum, 589 F.2d 1156 (2d Cir.1978). Reviewing
a district judge's ruling for dismissal on the grounds of forum non conveniens, the Second Circuit observed that "were it
not for the somewhat unusual fact that it is the forum resident who seeks dismissal, we would have to say very little
regarding the exercise of Judge Metzner's discretion in dismissing this case." Schertenlieb at 1164. In affirming the ruling
for dismissal, the Court of Appeals asked the rhetorical question:

If litigation is in a clearly inconvenient forum, why should defendant and the court be burdened with its continuing there,
if an alternative forum now exists so that plaintiff will not be without a remedy?

Schertenlieb at 1163.

This Court has already determined that because of the location of the preponderance of the evidence in India, and the
difficulty of transporting documents and witnesses to this forum, this district is clearly an inconvenient forum for the
litigation. An alternative forum is seen to exist in India. This Court feels that the answer to the Schertenlieb question is
clear.

A district judge in this district, in Domingo v. States Marine Lines, 340 F. Supp. 811 (S.D.N.Y.1972) evaluated the
administrative concerns of the Southern District of New York, relevant to this Court today, a full fourteen years later.
The Domingo court stated:

It is scarcely necessary to dwell on the fact that this Court is the most heavily burdened Federal District Court in the
country. The Civil Calendar grows more congested all the time. The priority now properly given to the disposition of
criminal cases tends to increase this congestion.

******

I see no reason why this Court, with its heavy burdens and responsibilities, should be burdened with cases like these
which, from every point of view, should be tried in the courts of the nation where all the relevant events occurred and
whose citizens are primarily involved. Certainly, this district and the Metropolitan area in which it is situated have no
conceivable relation to this litigation except for the fact that the defendant happens to be doing business here.

Domingo at 816.

The defendant in this case, involved as it appears to have been in the process design phase of the plant's construction,
may have a slightly less tenuous connection to this forum than a corporation which is merely doing business here.
Certain business conducted in New York, or in corporate headquarters in Danbury, Connecticut, may have been directly
related to development or operation of the UCIL facility in Bhopal. However, almost "all the relevant events" leading to
and following from the accident occurred in India. Indian citizens are primarily involved in the case, both as witnesses
and claimants. The substantial administrative weight of this case should be centered on a court with the most significant
contacts with the event. Thus, a court in Bhopal, rather than New York, should bear the load.
 20

*862 In addition to the burden on the court system, continuation of this litigation in this forum would tax the time and
resources of citizens directly. Trial in this case will no doubt be lengthy. An assigned jury would be compelled to sit for
many months of proof. Because of the large number of Indian language-speaking witnesses, the jurors would be required
to endure continual translations which would double the length of trial. The burden on the jurors themselves, and on
their families, employers and communities would be considerable. The need for translation would be avoided if trial
were to be held in Bhopal.

Clearly, the administrative costs of this litigation are astounding and significant. Despite its deep concern for the victims
of the tragedy, this Court is persuaded by a recent relevant decision of the New York State Court of Appeals. In the
opinion in Islamic Republic of Iran v. Pahlavi, 62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245 (1984), cert. denied, ___
U.S. ___, 105 S. Ct. 783, 83 L. Ed. 2d 778 (1985), with reference to a decision discussing actions brought in New York by
the Iranian Government against the Shah and his wife, the Court of Appeals stated that:

[T]he taxpayers of this State should not be compelled to assume the heavy financial burden attributable to the cost of
administering the litigation contemplated when their interest in the suit and the connection of its subject matter ... is so
ephemeral.

Islamic Republic at 483, 478 N.Y.S.2d 597, 467 N.E.2d 245 (citations omitted). Administrative concerns weigh against
retention of this case.

B. The Interests of India and the United States.

Plaintiffs, and especially amicus curiae emphasize this point of argument in opposition to the motion to dismiss.
Concerned with the asserted possibility of developing a "double-standard" of liability for multinational corporations,
plaintiffs urge that American courts should administer justice to the victims of the Bhopal disaster as they would to
potential American victims of industrial accidents. The public interest is served, plaintiffs and amicus argue, when United
States corporations assume responsibility for accidents occurring on foreign soil. "To abandon that
responsibility," amicus asserts, "would both injure our standing in the world community and betray the spirit of fairness
inherent in the American character." (Amicus Brief at 4). The specific American interests allegedly to be served by this
Court's retention of the case include the opportunity of creating precedent which will "bind all American multinationals
henceforward," (Amicus Brief at 20); promotion of "international cooperation," (Amicus Brief at 22-23); avoidance of an
asserted "double standard" of liability, and the prevention of "economic blackmail of hazardous industries which would
extract concessions on health and environmental standards as the price of continuing operations in the United States."
(Amicus Brief at 20). An additional American public interest ostensibly to be served by retention of the litigation in this
forum is advanced by plaintiffs themselves. They assert that the deterrent effect of this case can be distinguished from
the situation in Piper, where the Court rejected the argument that "American citizens have an interest in ensuring that
American manufacturers are deterred from producing defective products, and that additional deterrence might be
obtained if Piper and [its co-defendant] were tried in the United States, where they could be sued on the basis of both
negligence and strict liability." Piper 454 U.S. at 260, 102 S. Ct. at 268. The Court stated that:

[T]he incremental deterrence that would be gained if this trial were held in an American court is likely to be insignificant.
The American interest in this accident is simply not sufficient to justify the enormous commitment of judicial time and
resources that would inevitably be required if the case were to be tried here.
 21

Piper at 260-61, 102 S. Ct. at 268. According to plaintiffs, the potential for greater deterrence in this case is "self-
evident."

*863 The opposing interest of India is argued to be ill-served by sending this litigation to India. Pointing to the fact that
the Union of India chose this forum, plaintiffs state that there can be "no question as to the public interest of India."
(Memo in Opp. at 91). Union Carbide's statements regarding the interests of India in this litigation are summarily
dismissed by the plaintiffs, who state that "Union Carbide, whose actions caused the suffering of an entire city, has no
standing to assert this belated concern for the welfare of the Indian populace." (Memo in Opp. at 91).

Union Carbide, not surprisingly, argues that the public interest of the United States in this litigation is very slight, and that
India's interest is great. In the main, the Court agrees with the defendant.

As noted, Robert C. Brown states in his affidavit on behalf of Union Carbide that the Indian Government preserved the
right to approve foreign collaboration and import of equipment to be used in connection with the plant. See supra at
856. In addition, Mr. Brown quoted excerpts from the 1972 Letter of Intent entered into by the Union of India and UCIL,
one term of which required that "the purchase of only such design and consultancy services from abroad as are not
available within the country" would be allowed. (Brown Aff. at 6). Ranjit K. Dutta states that the Indian Government, in a
process of "Indianization," restricted the amount of foreign materials and foreign consultants' time which could be
contributed to the project, and mandated the use of Indian materials and experts whenever possible. (Dutta Aff. at 35).
In an alleged ongoing attempt to minimize foreign exchange losses through imports, the Union of India insisted on
approving equipment to be purchased abroad, through the mechanism of a "capital goods license." (Dutta Aff. at 48-50).

The Indian Government, through its Ministry of Petroleum and Chemicals, allegedly required information from UCIL
regarding all aspects of the Bhopal facility during construction in 1972 and 1973, including "information on toxicity" of
chemicals. (Dutta Aff. at 44). The Ministry required progress reports throughout the course of the construction project.
These reports were required by the Secretariat for Industrial Approvals, the Director General of Technical Development
and the Director of Industries of Madhya Pradesh. (Dutta Aff. at 45). Moreover, UCIL was ultimately required to obtain
numerous licenses during development, construction and operation of the facility. (Dutta Aff. at 46). The list of licenses
obtained fills five pages.[21]

The Indian Government regulated the Bhopal plant indirectly under a series of environmental laws, enforced by
numerous agencies, much as the Occupational Safety and Health Administration, the Environmental Protection Agency
and state and local agencies regulate the chemical industry in the United States. (Dutta Aff. at 53-56). Emissions from the
facility were monitored by a state water pollution board, for example. (Dutta Aff. at 64). In addition, state officials
periodically inspected the fully-constructed plant.[22] (Dutta Aff. at 56). A detailed inquiry into the plant's operations was
conducted by the Indian Government in the aftermath of the December, 1981 fatality at the MIC unit and the February,
1982 incident involving a pump seal. (Dutta Aff. at 58-62). Numerous federal, state and local commissions, obviously,
investigated the most tragic incident of all, the MIC leak of December, 1984.

The recital above demonstrates the immense interest of various Indian governmental agencies in the creation,
operation, *864 licensing and regulation, and investigation of the plant. Thus, regardless of the extent of Union Carbide's
own involvement in the UCIL plant in Bhopal, or even of its asserted "control" over the plant, the facility was within the
sphere of regulation of Indian laws and agencies, at all levels. The comments of the Court of Appeals for the Sixth Circuit
with respect to its decision to dismiss a products liability action on forum non conveniens grounds seem particularly
apposite. In In re Richardson-Merrell, Inc., 545 F. Supp. 1130 (S.D.Ohio 1982), modified sub. nom. Dowling v. Richardson-
Merrell Inc., 727 F.2d 608 (6th Cir.1984), the court reviewed a dismissal involving an action brought by a number of
plaintiffs, all of whom were citizens of Great Britain.[23] Defendant in the action was a drug company which had
 22

developed and tested a drug in the United States which was manufactured and marketed in England. The suit was
brought against the American parent, not the British subsidiary, for injuries allegedly resulting from ingestion of the
offending drug in England and Scotland. The district court, in dismissing the case, stated that:

This action involves the safety of drugs manufactured in the United Kingdom and sold to its citizens pursuant to licenses
issued by that government. The interest of the United Kingdom is overwhelmingly apparent. New York, and Ohio [the
United States forums] for that matter, have a minimal interest in the safety of products which are manufactured,
regulated and sold abroad by foreign entities, even though development or testing occurred in this country.

In re Richardson-Merrell, Inc., 545 F. Supp. at 1135 (footnote omitted). The Sixth Circuit confirmed this view of the public
interests, stating:

The interest of the United Kingdom in this litigation is great. The drug was manufactured under a British license by British
companies and was marketed and prescribed in the United Kingdom. The alleged injuries took place in England and
Scotland and the plaintiffs are citizens and residents of those countries. When a regulated industry, such as
pharmaceuticals in this case and passenger aircraft operations in Piper Aircraft, is involved, the country where the injury
occurs has a particularly strong interest in product liability litigation.... Though no single factor should be determinative
in ruling on a forum non conveniens motion, the nature of the product and its status as regulated or not must be
considered.

Dowling, 727 F.2d at 616.

The Indian government, which regulated the Bhopal facility, has an extensive and deep interest in ensuring that its
standards for safety are complied with. As regulators, the Indian government and individual citizens even have an
interest in knowing whether extant regulations are adequate. This Court, sitting in a foreign country, has considered the
extent of regulation by Indian agencies of the Bhopal plant. It finds that this is not the appropriate tribunal to determine
whether the Indian regulations were breached, or whether the laws themselves were sufficient to protect Indian citizens
from harm. It would be sadly paternalistic, if not misguided, of this Court to attempt to evaluate the regulations and
standards imposed in a foreign country. As another district court stated in the context of a drug product liability action
brought by foreign plaintiffs in this country,

*865 Each government must weigh the merits of permitting the drug's use.... Each makes its own determination as to the
standards of degree of safety and duty of care.... This balancing of the overall benefits to be derived from a product's use
with the risk of harm associated with that use is peculiarly suited to a forum of the country in which the product is to be
used.... The United States should not impose its own view of the safety, warning, and duty of care required of drugs sold
in the United States upon a foreign country when those same drugs are sold in that country.

Harrison v. Wyeth Laboratories, 510 F. Supp. 1, 4 (E.D.Pa.1980), aff'd mem., 676 F.2d 685 (3d Cir.1982). India no doubt
evaluated its need for a pesticide plant against the risks inherent in such development. Its conclusions regarding
"[q]uestions as to the safety of [products] marketed" or manufactured in India were "properly the concern of that
country." Harrison at 4 (emphasis omitted). This is particularly true where, as here, the interests of the regulators were
possibly drastically different from concerns of American regulators. The Court is well aware of the moral danger of
creating the "double-standard" feared by plaintiffs and amicus curiae. However, when an industry is as regulated as the
chemical industry is in India, the failure to acknowledge inherent differences in the aims and concerns of Indian, as
 23

compared to American citizens would be naive, and unfair to defendant. The district court in Harrison considered the
hypothetical instance in which a products liability action arising out of an Indian accident would be brought in the United
States. The court speculated as follows:

The impropriety of [applying American standards of product safety and care] would be even more clearly seen if the
foreign country involved was, for example, India, a country with a vastly different standard of living, wealth, resources,
level of health care and services, values, morals and beliefs than our own. Most significantly, our two societies must deal
with entirely different and highly complex problems of population growth and control. Faced with different needs,
problems and resources in our example India may, in balancing the pros and cons ... give different weight to various
factors than would our society.... Should we impose our standards upon them in spite of such differences? We think not.

Harrison at 4-5. This Court, too, thinks that it should avoid imposing characteristically American values on Indian
concerns.

The Indian interest in creating standards of care, enforcing them or even extending them, and of protecting its citizens
from ill-use is significantly stronger than the local interest in deterring multinationals from exporting allegedly dangerous
technology. The supposed "blackmail" effect of dismissal by which plaintiffs are troubled is not a significant interest of
the American population, either. Surely, there will be no relaxing of regulatory standards by the responsible legislators of
the United States as a response to lower standards abroad.[24] Other concerns than bald fear of potential liability, such
as convenience or tax benefits, bear on decisions regarding where to locate a plant. Moreover, the purported public
interest of seizing this chance to create new law is no real interest at all. This Court would exceed its authority were it to
rule otherwise when restraint was in order.

The Court concludes that the public interest of India in this litigation far outweighs the public interest of the United
States. This litigation offers a developing nation the opportunity to vindicate the suffering of its own people within the
framework of *866 a legitimate legal system. This interest is of paramount importance.[25]

C. The Applicable Law.

Gilbert and Piper explicitly acknowledge that the need of an American court to apply foreign law is an appropriate
concern on a forum non conveniens motion, and can in fact point toward dismissal. Gilbert, 330 U.S. at 509, 67 S. Ct. at
843; Piper, 454 U.S. at 260, 102 S. Ct. at 268. Especially when, as here, all other factors favor dismissal, the need to apply
foreign law is a significant consideration on this type of motion. Piper at 260, n. 29, 102 S. Ct. at 268, n. 29. A federal
court is bound to apply the choice of law rules of the state in which an action was originally brought; even upon transfer
to a different district, "the transferee district court must be obligated to apply the state law that would have been
applied if there had been no change of venue." Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S. Ct. 805, 821, 11 L. Ed. 2d
945 (1964). Thus, this Court, sitting over a multidistrict litigation, must apply the various choice of law rules of the states
in which the actions now consolidated before it were brought.[26] Rather than undertake the task of evaluating the
choice of law rules of each state separately, the Court will treat the choice of law doctrine in toto. The "governmental
interest" analysis, employed by many jurisdictions, requires a court to look to the question of which state has the most
compelling interest in the outcome of the case. India's interest in the outcome of the litigation exceeds America's, see
supra at 44-58. The lex loci delicti analysis used in other jurisdictions indicates that the law of the state where the tort
occurred should be applied. The place in which the tort occurred was, to a very great extent, India. Other states apply
the "most significant relationship" test, or "weight of contacts" test, which evaluate in which state most of the events
constituting the tort occurred. The contacts with India with respect to all phases of plant construction, operation,
 24

malfunction and subsequent injuries are greater in number than those with the United States. Thus, under any one of
these three doctrines, it is likely that Indian law will emerge as the operative law. An Indian court, therefore, would be
better able to apply the controlling law than would this United States Court, or a jury working with it. This public interest
factor also weighs in favor of dismissal on the grounds of forum non conveniens.

CONCLUSION

It is difficult to imagine how a greater tragedy could occur to a peacetime population than the deadly gas leak in Bhopal
on the night of December 2-3, 1984. The survivors of the dead victims, the injured and others who suffered, or may in
the future suffer due to the disaster, are entitled to compensation. This Court is firmly convinced that the Indian legal
system is in a far better position than the American courts to determine the cause of the tragic event and thereby fix
liability. Further, the Indian courts have greater access to all the information needed to arrive at the amount of the
compensation to be awarded the victims.

The presence in India of the overwhelming majority of the witnesses and evidence, both documentary and real, would
by itself suggest that India is the most convenient forum for this consolidated case. The additional presence in India of all
but the less than handful of claimants underscores the convenience of holding trial in India. All of the private interest
factors described in Piper and Gilbert weigh heavily toward *867 dismissal of this case on the grounds of forum non
conveniens.

The public interest factors set forth in Piper and Gilbert also favor dismissal. The administrative burden of this immense
litigation would unfairly tax this or any American tribunal. The cost to American taxpayers of supporting the litigation in
the United States would be excessive. When another, adequate and more convenient forum so clearly exists, there is no
reason to press the United States judiciary to the limits of its capacity. No American interest in the outcome of this
litigation outweighs the interest of India in applying Indian law and Indian values to the task of resolving this case.

The Bhopal plant was regulated by Indian agencies. The Union of India has a very strong interest in the aftermath of the
accident which affected its citizens on its own soil. Perhaps Indian regulations were ignored or contravened. India may
wish to determine whether the regulations imposed on the chemical industry within its boundaries were sufficiently
stringent. The Indian interests far outweigh the interests of citizens of the United States in the litigation.

Plaintiffs, including the Union of India, have argued that the courts of India are not up to the task of conducting the
Bhopal litigation. They assert that the Indian judiciary has yet to reach full maturity due to the restraints placed upon it
by British colonial rulers who shaped the Indian legal system to meet their own ends. Plaintiffs allege that the Indian
justice system has not yet cast off the burden of colonialism to meet the emerging needs of a democratic people.

The Court thus finds itself faced with a paradox. In the Court's view, to retain the litigation in this forum, as plaintiffs
request, would be yet another example of imperialism, another situation in which an established sovereign inflicted its
rules, its standards and values on a developing nation. This Court declines to play such a role. The Union of India is a
world power in 1986, and its courts have the proven capacity to mete out fair and equal justice. To deprive the Indian
judiciary of this opportunity to stand tall before the world and to pass judgment on behalf of its own people would be to
revive a history of subservience and subjugation from which India has emerged. India and its people can and must
vindicate their claims before the independent and legitimate judiciary created there since the Independence of 1947.

This Court defers to the adequacy and ability of the courts of India. Their interest in the sad events of December 2-3,
1984 at the UCIL plant in the City of Bhopal, State of Madhya Pradesh, Union of India, is not subject to question or
 25

challenge. The availability of the probative, relevant, material and necessary evidence to Indian courts is obvious and has
been demonstrated in this opinion.

Therefore, the consolidated case is dismissed on the grounds of forum non conveniens under the following conditions:

1. Union Carbide shall consent to submit to the jurisdiction of the courts of India, and shall continue to waive defenses
based upon the statute of limitations;

2. Union Carbide shall agree to satisfy any judgment rendered against it by an Indian court, and if applicable, upheld by
an appellate court in that country, where such judgment and affirmance comport with the minimal requirements of due
process;

3. Union Carbide shall be subject to discovery under the model of the United States Federal Rules of Civil Procedure after
appropriate demand by plaintiffs.

SO ORDERED.

NOTES

[1] All counsel on the Plaintiffs' Executive Committee were most professional and helpful to the Court in this case. Mr.
Hoffinger agreed to proceed pro bono in this case, and waived any possible fee. The Court has been informed that
neither Mr. Hoffinger, nor anyone else on the Plaintiffs' Executive Committee, nor anyone in their law firms went to India
on the days immediately following the tragedy to "sign up" Indian plaintiffs. The behavior of many American lawyers who
went to Bhopal, India during December 1984 and January 1985 is not before this Court on this motion. Suffice it to say
that those members of the American bar who travelled the 8,200 miles to Bhopal in those months did little to better the
American image in the Third Worldor anywhere else. None of them were on the Plaintiffs' Executive Committee.

[2] The Court found a theoretical flaw in the opposite rule, as set forth by the Third Circuit. Noting that a plaintiff would
choose the forum with the most favorable choice of law rules in the first instance, "if the possibility of an unfavorable
change in substantive law is given weight in the forum non conveniens inquiry, dismissal would rarely be proper." Piper at
250, 102 S. Ct. at 263.

[3] Similarly, the Court determined that "the possibility of a change in law favorable to defendant should not be
considered." Piper at 252, n. 19, 102 S. Ct. at 264, n. 19.

[4] Rob Hager, Esq. for Citizens Commission on Bhopal, National Council of Churches, United Church of Christ
Commission for Racial Justice, et al.

[5] For example, Mr. Palkhivala describes four cases in which the Indian Supreme Court crafted new and "courageous"
remedies in situations relating to abridgements of fundamental rights. (Palkhivala Aff. at 6-7). Mr. Dadachanji describes
similar decisions in which he participated as an advocate, in his affidavit. (Dadachanji Aff. at 2-3). The Court recognizes
the innovativeness of the Indian Courts, while refraining from an exhaustive survey of Indian case law.
 26

[6] India allegedly has 10.5 judges per million population, as compared to 107 judges per million in the United States
(Galanter Aff. at 15).

[7] A federal court has the power to condition transfer under the doctrine of forum non conveniens upon "the condition
that defendant corporations agree to provide the records relevant to the plaintiff's claims." Piper at 257, n. 25, 102 S. Ct.
267, n. 25. While the Court feels that it would be fair to bind the plaintiffs to American discovery rules, too, it has no
authority to do so.

[8] The Court observes that the alleged problem would appear to act to the detriment of defendant, not plaintiffs. It is
Union Carbide which urges that third-party defendants are necessary. (Memo in Support at 27-28). Defendant discounts
the supposed unavailability of third-party impleader, while the plaintiffs find its lack objectionable. These postures lead
the Court to the conclusion that this argument is not compelling in either direction. The lack of specific third-party
practice will not concern the Court if it does not concern Union Carbide.

[9] Discovery was ably managed by Magistrate Michael H. Dolinger, of the Southern District of New York.

[10] The seven operating units included Carbon Monoxide, MIC/Phosgene, Carbamoylation, Alpha Naphthol, Aldicarb,
Utilities and Formulations.

[11] Mr. Woomer states that a post-accident technical team sought to interview these 193 employees. According to Mr.
Woomer, the Indian CBI, which had stepped into the plant following the tragedy, advised the technical team that
interviews could be conducted only of the General Works Manager and MIC Production Manager, neither of whom was
present at the time of the leak. (Woomer Aff. at 57-58).

[12] The seven functional units were Maintenance, Quality Control, Stores, Purchasing, Safety/Medical, Industrial
Relations and Works Office. (Woomer Aff. at 6).

[13] Mr. Bud Holman, counsel for Union Carbide, states in his second affidavit that over 36,000 of the 78,000 pages of
documents seized by the CBI represent plant operation records. (Holman Aff. # 2 at 5). He asserts that 1,700 pages deal
with maintenance work performed in 1983 and 1984. (Holman Aff. # 2 at 8).

[14] The 1982 "Operational Safety Survey" was apparently fairly extensive. It was conducted by three United States
employees of Union Carbide, and led to a report which discussed "major" concerns and possibility of "serious personnel
exposure." (Memo in Opp. at 25). Mr. Woomer asserts, and plaintiffs do not refute, that this Survey was not intended to
"serve a policing function," but was performed at the specific request of UCIL. In addition, follow-up responsibility
"rested exclusively with UCIL plant management." (Woomer Aff. at 37-38).

Moreover, Union Carbide states that the Union of India, itself, conducted similar safety audits and made
recommendations. (Affidavit of Ranjit K. Dutta, Business Manager of Union Carbide Agricultural Products Company
("Dutta Aff.") at 58-64).

[15] Plaintiffs assert that Mr. Couvaras exemplifies Union Carbide's "international employee" whose mobility throughout
the Union Carbide affiliates causes "[a]ny notion of discrete corporate identities [to] blur[]." (Memo in Opp. at 18-19).

[16] As support, Mr. Brown points to the Union Carbide Corporate Policy Manual, Section 1.10 which states:

The "arms-length principle" is a central consideration in transfer and pricing of all technology transactions with affiliates.

"Arms length" is defined as:

 27

The principle whereby inter-company transactions between Union Carbide and its affiliates, or between affiliates, will
reflect the cost to unrelated parties of the same or similar technology under similar circumstances.

(Plaintiffs' Exhibit 3). Thus, Mr. Brown argues that Union Carbide related with UCIL much as it would have with an
unaffiliated, or even competing company.

[17] Humphreys and Glasgow was allegedly responsible for the following:

Among other things, developing final equipment and unit layouts and plot plans, including equipment layout drawings,
detailed piping arrangement drawings, layout of electrical equipment; the steel structure, including detail design and
working drawings for the buildings and foundation; mechanical equipment design including specification of all
proprietary and fabricated equipment; review and certification of vendor's drawings and documents, preparation of
orthographic piping drawings for all portions of the plant, preparation of isometric piping drawings, preparation of
preliminary and final bills of materials for pipes, valves, gaskets, instrument associated hardware, electrical conduit;
electrical engineering work, instrument engineering, including drawings on instrument hook ups, lists of instruments,
review of instrument specification and data sheets; definition of material and make calculation to size insulation,
preparation of insulation lists, preparation of material take off and inquiry specification packages, procurement
assistance including assisting in evaluation of bids and selection of vendors, inspection of certain equipment and
materials to ensure proper workmanship and compliance with specifications and codes, and coordinating where Indian
law required inspection or certification by governmental inspections; preparation of a project schedule, project reports
and costs control reports at least once per month, construction supervision including supervision of mechanical testing
of installed equipment, assistance in commissioning.

(Dutta Aff. at 19-20).

[18] Mr. Couvaras, whom plaintiffs assert was a "key engineer" for the project, and enjoyed mobility between Union
Carbide and UCIL, is described by Mr. Dutta as primarily a UCIL employee. The "international employee" status he carried
is explained as a pension accounting mechanism. (Dutta Aff. at 27).

[19] Mr. Dutta asserts that Mr. Munoz was a paid consultant to a member of Plaintiffs' Executive Committee at the time
the affidavit was made. No documentary proof of this assertion has been submitted. (Dutta Aff. at 31; Holman Aff. # 2 at
18). Moreover, two affidavits submitted on behalf of defendant state that Mr. Munoz was removed from his position as
Union Carbide Corporation Division President in 1978, and is "extremely bitter as a result of the removal." (Dutta Aff. at
31; Holman Aff. # 2 at 18).

[20] Union Carbide asserts throughout its briefs and affidavits that evidence relevant to the question of damages is
located in India, as well. Certainly the victims themselves, and, for the most part, their medical records, are found in or
near Bhopal. However, as plaintiffs argue, a "head count" of witnesses is not dispositive of a forum non
conveniens motion. (Memo in Opp. at 74-79). Not all of the victims would need to be transported to the United States to
describe their injuries. The Bhopal "scheme" provides a mechanism for evaluating each individual's claim. Only
representative plaintiffs need testify as to damages. This Court would not countenance the impractical and time-
consuming process of calling each of the approximately 200,000 victims at a trial in this country. Evidence on damages,
as well as liability, is found in India, but not to the overwhelming extent contended by defendant. Moreover, the Court is
concerned with the policy effect of allowing the number of foreign victims to affect directly the forum non
conveniens determination. If carried to the extreme, this "head count" doctrine would mean that the more people hurt,
the less likely a suit in this country would be.
 28

[21] Indian federal and municipal officials also allegedly conducted on-site inspections resulting in approvals for portions
of the construction, including approvals for the flare tower, MIC layout and storage, unit refrigeration and MIC/Phosgene
structure. (Dutta Aff. at 46-47; Exs. 102-104).

[22] One such regular inspection appears to have taken place approximately two weeks before the MIC disaster. (Dutta
Aff. at 56; Ex. 116).

[23] Only a small number of plaintiffs in the Bhopal litigation are United States citizens. Of the 200,000 plaintiffs,
approximately nine are American. They have filed the complaints numbered 85 Civ. 0447, 85 Civ. 1096 and 85 Civ. 2098.
This is of relative insignificance on this motion to dismiss. "The federal courts have not felt constrained to retain
jurisdiction over predominantly foreign cases involving American plaintiffs where an examination of the Gilbert factors
demonstrated that the action is more appropriately brought in a foreign forum.... [T]he presence of a handful of
American plaintiffs does not preclude such dismissal." Nai-Chao v. Boeing Co., 555 F. Supp. 9, 21 (N.D.Cal. 1982), aff'd
sub. nom., Cheng v. Boeing Co., 708 F.2d 1406 (9th Cir.1983).

[24] In any event, plaintiffs' "deterrence" and "blackmail" arguments presuppose that Union Carbide would be held more
accountable by an American than by an Indian tribunal. Certainly, there is a real possibility of a substantial Indian
judgment against defendant, which would serve an identical deterrent function, and prevent a rush of multinationals to
foreign locations.

[25] While the accident is more than a "local controversy," given the interests of the Indian populace, it is certainly a
national controversy which should be "decided at home." Gilbert at 508-09. No doubt Indian citizens, many of whom
barely are acquainted with their American lawyers, will find the case more accessible if it is tried "in their view" in India.

[26] Upon a cursory review of the individual complaints comprising this action, the Court notes that suits were brought in
California, Connecticut, the District of Columbia, Florida, Illinois, Louisiana, Maryland, New Jersey, New York,
Pennsylvania, Tennessee, Texas and West Virginia, at a minimum.
 29

BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners, vs. 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:

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 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:

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]
 30

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:

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. vs. Gilbert[21]and Piper Aircraft Co. vs. Reyno,[22] to wit:

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:

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;
 31

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:

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 NAVIGATOS 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, RJ., and (h) EDUARDO KATIPUNAN LITONJUA.
 32

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:

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. xxx 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
 33

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. vs. 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.

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]

xxx 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.

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 thedefendant, 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. vs. Court of Appeals,[45] this Court held that xxx [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
 34

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 vs. 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?

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:

xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, 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.

SO ORDERED.
 35

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

DECISION

PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a
meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa,
Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central Bank-appointed conservator of
Producers Bank (now First Philippine International Bank) repudiate such apparent authority after said contract has been
deemed perfected? During the pendency of a suit for specific performance, does the filing of a derivative suit by
the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale
violate the ban against forum-shopping?

Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari
under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of
Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for
reconsideration. The dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs
3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed
against defendant bank. In all other aspects, said decision is hereby AFFIRMED.

All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to
legally refer to the plaintiff-appellee Carlos C. Ejercito.

Costs against appellant bank.

The dispositive portion of the trial courts[2] decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as
follows:

1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta.
Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-
106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;

2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the
amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6)
parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T. Nos. T-106932 to T-106937,
inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs;

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P
200,000.00 each in moral damages;

4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary damages;
 36

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of
attorneys fees;

6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of
P20,000.00;

With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due
course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply
memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After
carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the
writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a
banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera
(petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head Manager of the Property
Management Department of the petitioner Bank.

Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-
appellees Demetrio Demetria and Jose Janolo.

Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this
petition.

The Facts

The facts of this case are summarized in the respondent Courts Decision,[3] as follows:

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land
with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer Certificates of Title Nos.
T-106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had
them mortgaged with the bank as collateral fora loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo,
wanted to purchase the property and thus initiated negotiations for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel, Jose Fajardo,
met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The
meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting,
plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter
dated August 30, 1987 (Exh. B), as follows:

XXX

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder
quoted (Exh. C):

XXX
 37

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I would like to
amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.

Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting on September
28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the
BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through
Rivera, the following letter (Exh. E):

XXX

(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel,
made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale
(Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex 4 of
defendants answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the
authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5
Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the
non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera
and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a
perfected contract of sale. The defendants took the position that there was no such perfected sale because the
defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a
motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding shares of stock, he had a
substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for
reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner Rivera and conservator Encarnacion
appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not
appeal the denial of his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and
Janolo, in view of the assignment of the latters rights in the matter in litigation to said private respondent.

On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the
Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case
No. 92-1606, against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as unenforceable
and to stop Ejercito from enforcing or implementing the sale.[4] In his answer, Janolo argued that the Second Case was
barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in
the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. Private respondent
opposed this motion on the ground, among others, that plaintiffs act of forum shopping justifies the dismissal of both
cases, with prejudice.[5] Private respondent, in his memorandum, averred that this motion is still pending in the Makati
RTC.

In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:

 38

I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of
Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of
previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer
be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by
respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency
and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke
the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No.
28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore commenced any other action
or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b)
to the best of his knowledge, no such action or proceeding is pending in said courts or agencies. A violation of the said
circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure,
petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating for the record(,) the pendency of Civil
Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders
of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss
Without Prejudice.[9]

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum
shopping because the instant petition pending before this Court involves identical parties or interests represented, rights
asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second
 39

Case. In fact, the issues in the two cases are so intertwined that a judgment or resolution in either case will constitute res
judicata in the other.[10]

On the other hand, petitioners explain[11] that there is no forum-shopping because:

1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the
Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the plaintiff;
2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition
identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal question for the courts to
decide;
4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law,[12] where non-resident litigants are
given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more
friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient
or available forum and the parties are not precluded from seeking remedies elsewhere.
In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have his action tried in
a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. Hence, according
to Words and Phrases,[14] a litigant is open to the charge of forum shopping whenever he chooses a forum with slight
connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their
differences without imposing undue expense and vexatious situations on the courts.

In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it was
originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of
Court, for example, allow a plaintiff to commence personal actions where the defendant or any of the defendants resides
or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Rule 4, Sec. 2 [b]).
As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the
criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may
sue on culpa contractual, culpa aquiliana or culpa criminal - each remedy being available independently of the others -
although he cannot recover more than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action.
This was the original concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies simultaneously.
This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion
enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to some of the parties to the
action.

Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And this
necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice.
[15]
 40

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving
problems has been abused and misused to assure scheming litigants of dubious reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated
Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines issued on January
11, 1983 and had struck down in several cases[16] the inveterate use of this insidious malpractice. Forum-shopping as
the filing of repetitious suits in different courts has been condemned by Justice Andres R. Narvasa (now Chief Justice) in
Minister of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., as a reprehensible manipulation of court processes
and proceedings x x x.[17] When does forum-shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion
(other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but
also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this
case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a
favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no
jurisdiction [18]

The test for determining whether a party violated the rule against forum-shopping has been laid down in the 1986 case
of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that is, forum-shopping exists where the elements of litis
pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such
parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under
consideration: all the requisites, in fine, of auter action pendant.

xxx xxx xxx

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

Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom
another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still
pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by
the other party as a ground to ask for summary dismissal of the two[20] (or more) complaints or petitions, and for the
imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.

Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there
exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.
 41

Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer
(herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged
perfected sale of real estate. On the other hand, the complaint[21] in the Second Case seeks to declare such purported
sale involving the same real property as unenforceable as against the Bank, which is the petitioner herein. In other
words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the
Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though
worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property
to respondent. In Danville Maritime, Inc. vs. Commission on Audit,[22] this Court ruled that the filing by a party of two
apparently different actions, but with the same objective, constituted forum shopping:

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein -
PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988
and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a
rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to comply
with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in
the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, the approval of the
sale of vessel in favor of petitioner, and to overturn the letter-directive of the COA of October 10, 1988 disapproving the
sale. (italics supplied)

In an earlier case,[23] but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court
despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions
unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners claim of
absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve certain
acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court, the
validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously
rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans,
obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention
of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place
anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not become functus
oflcio. It remained an effective vehicle for obtention of relief; and petitioners remedy in the premises was plain and
patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and
seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not the institution of
another action in another forum based on essentially the same facts. The adoption of this latter recourse renders the
petitioners amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible.

In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs
in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and
entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in
controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract
of sale; and
 42

Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a derivative suit. In
the caption itself, petitioners claim to have brought suit for and in behalf of the Producers Bank of the Philippines.
[24] Indeed, this is the very essence of a derivative suit:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in
order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to
be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with
the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; italics supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought
to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but
by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the
majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether
they sued derivatively or directly, there is undeniably an identity of interests/entity represented.

Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from
its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of perpetrating a fraud
or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and
isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration
merely as an aggregation of individuals.[25]

In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the instant case, and
declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition
against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative
suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not
been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it.
To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the
stringent rules against forum shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity
of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case while it was the
plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional Trial Court, Branch 63,
Makati, etc. et al.,[27] where the Court held:

The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against
the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of action, specific
denials, special and affirmative defenses or even counterclaims. Thus, Velhagens and Kings motion to dismiss Civil Case
No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. (italics supplied)

Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in
said case.

Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present
suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file any responsive
pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein. In
 43

the case before us however, petitioners filed a responsive pleading to the complaint - as a result of which, the issues
were joined.

Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the petitioners
became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second
Case.

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation
caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility
of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem:
a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a
possible decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a final
decision in one would constitute res judicata in the other.[28]

The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the
dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners present counsel
entered their appearance only during the proceedings in this Court, and the Petitions VERIFICATION/CERTIFICATION
contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91.
The lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly
Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with
court proceedings and processes. They are warned that a repetition of the same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but
also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a
perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court
stated:

There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets
consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It
is likewise beyond cavil that the bank intended to sell the property. As testified to by the Banks Deputy Conservator, Jose
Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to purchase the
property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property
Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as
well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30,
1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-
office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise
acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been
offered, I present it to the Committee. I provide the Committee with necessary information about the property such as
 44

original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time
the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy
which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also
the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale
and it is the Conservator that sign the deed of sale, sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and
talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the
bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which the
said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent in his
authority, Rivera is the officer from whom official information regarding the price, as determined by the Committee and
approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August
1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31, 1990, pp. 27-28):

Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority
to sell any property?

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

Q: Please answer the question.

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

Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose
Entereso as one of the members.

What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and
the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the plaintiffs made a formal
offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for
the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an aspect of the official
duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand,
and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering
further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no
other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks
counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by
the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion
by the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of the bank, and
market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Riveras letter
(Exh. E), the official and definitive price at which the bank was selling the property.

There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by
the Committee and that it was merely quoted to start negotiations regarding the price. As correctly characterized by the
 45

trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and
considering the gratuitous and self-serving character of these declarations, the banks submission on this point does not
inspire belief. Both Co and Entereso, as members of the Past Due Committee of the bank, claim that the offer of the
plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they seldom
attend the meetings of the Committee. It is important to note that negotiations on the price had started in early August
and the plaintiffs had already offered an amount as purchase price, having been made to understand by Rivera, the
official in charge of the negotiation, that the price will be submitted for approval by the bank and that the banks decision
will be relayed to plaintiffs. From the facts, the amount of P5.5 Million has a definite significance. It is the official bank
price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and negotiate the
sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now does, that
what Rivera states as the banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible
authority, that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an
apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as
against any one who has in good faith dealt with the corporation through such agent, he estopped from denying his
authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v.
Court of Appeals, G.R. No. 103957, June 14, 1993).[29]

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1) Consent of the
contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is
established.

There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta.
Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of Title
Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.

Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co)
may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in
substitution of Demetria and Janolo) to accept.[30] They disputed the factual basis of the respondent Courts findings
that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Courts findings of fact. Verily, in a petition under Rule 45 such as
this, errors of fact -if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial
court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by
itself a reversible error. in fact, such findings merit serious consideration by this Court, particularly where, as in this case,
said courts carefully and meticulously discussed their findings. This is basic.

Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of
Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was extinguished by the P4.25
million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the
respondent Court. They also delve into the contractual elements of consent and cause.

The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of apparent
authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals,[31] where it was held
that:

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent.
The agents apparent representation yields to the principals true representation and the contract is considered as entered
 46

into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate Court, 184
SCRA 166).

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417). A bank
holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the course of its business by an agent
acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his
authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit
(McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).

Application of these principles is especially necessary because banks have a fiduciary relationship with the public and
their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where
banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their
depositors.

From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to
act for the Bank in the matter of selling its acquired assets. This evidence includes the following:

(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the Property
Management Department of the Bank. By his own admission, Rivera was already the person in charge of the Banks
acquired assets (TSN, August 6, 1990, pp. 8-9);

(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting
between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3 million (TSN, April
26, 1990, pp. 16-17);

(c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11);

(e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for P4.25
million (TSN, July 30, 1990, p. 12);

(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January 16,
1990, p. 18);

(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the Banks offer of
P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and
officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-offer of P5.5 million (TSN, January
16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the Bank in
relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in
the Banks advertisements offering for sale the property in question (cf. Exhs. S and S-I).
 47

In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court, through Justice Jose A. R.
Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I.
in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers.

To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony which seek
to establish Riveras actual authority. These pieces of evidence, however, are inherently weak as they consist of Riveras
self-serving testimony and various inter-office memoranda that purport to show his limited actual authority, of which
private respondent cannot be charged with knowledge. In any event, since the issue is apparent authority, the existence
of which is borne out by the respondent Courts findings, the evidence of actual authority is immaterial insofar as the
liability of a corporation is concerned.[33]

Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once acted for
the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited authority. But the
Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Riveras actual
authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any acquired
assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation
of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.

Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September 17,
1987 extinguished the Banks offer of P5.5 million.[34] They disputed the respondent Courts finding that there was a
meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated September 30,
1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September 17, 1987), citing the late
Justice Paras,[35] Art. 1319 of the Civil Code[36] and related Supreme Court rulings starting with Beaumont vs. Prieto.
[37]

However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated
September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo
by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987 begins
with (p)ursuant to our discussion last 28 September 1987 x x x.

Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September
28, 1987 meeting was meant to have the offerors improve on their position of P5.5 million.[38] However, both the trial
court and the Court of Appeals found petitioners testimonial evidence not credible, and we find no basis for changing
this finding of fact.

Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private
respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987, Luis Co
and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be
lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during the September 28,
1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there
was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.

We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action, particularly the
latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12, 1988 or more than seven (7)
months after Janolos acceptance. Such delay, and the absence of any circumstance which might have justifiably
 48

prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-minute attempt
on the Banks part to get out of a binding contractual obligation.

Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners
that the written offer made on September 1, 1987 was carried through during the meeting of September 28, 1987. This
is the conclusion consistent with human experience, truth and good faith.

It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first time on
appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and
arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered
by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14,
1986, 145 SCRA 592).[40]

xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the
court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice
and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty &
Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029,
August 30, 1990).[41]

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due process.
But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat
that, on the basis of the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion
is simply that there was a perfected contract of sale.

The Third Issue: Is the Contract Enforceable?

The petition alleged:[42]

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September
1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract
produced thereby would be unenforceable by action - there being no note, memorandum or writing subscribed by the
Bank to evidence such contract. (Please see Article 1403[2], Civil Code.)

Upon the other hand, the respondent Court in its Decision (p. 14) stated:

x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price on
September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact
that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have
been entered into (case citations omitted). Stated simply, the banks letter of September 1, 1987, taken together with
plaintiffs letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale.

The respondent Court could have added that the written communications commenced not only from September 1,
1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda - since they include the names of the parties, the terms and conditions of the contract, the price and a
description of the property as the object of the contract.
 49

But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a new
offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the
failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence, petitioners
- by such utter failure to object - are deemed to have waived any defects of the contract under the statute of frauds,
pursuant to Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to
object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.

As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5
million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence binding on them
thus:

A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany him
and we were able to meet Luis Co at the Bank.
xxx xxx xxx
Q - Now, what transpired during this meeting with Luis Co of the Producers Bank?
A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q - What price?
A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is
the price they intends (sic) to have, sir.
Q - What do you mean?
A - That is the amount they want, sir.
Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras counter-offer of
5.5 million was the defendants bank (sic) final offer?
A - He said in a day or two, he will make final acceptance, sir.
Q - What is the response of Mr. Luis Co?
A - He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
----0----
Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A - We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be
reduced and he said that was already passed upon by the committee. What the bank expects which was contrary to what
Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million and we should indicate our position as
soon as possible.
Q - What was your response to the answer of Mr. Luis Co?
A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr.
Mercurio [Rivera] was with us at the time at his office.
Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q - By Mr. Co you are referring to?
A - Mr. Luis Co.
Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank?
A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the
bank which is P5.5 million.
 50

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

---- 0 ----
Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within
his power to reduce this amount. What can you say to that statement that the amount of P5.5 million was reached by
the Committee?
A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio
Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during
the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically contended that
the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank,
under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary
Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is in a state of
continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the
management of that institution, collect all monies and debts due said institution and exercise all powers necessary to
preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the
power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank
financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and
such other powers as the Monetary Board shall deem necessary.

In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract of sale
was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals. As already
stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for
the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process.[43]

In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected,
actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo Romey, never
objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of
Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex V,
petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a binding offer - and which
unarguably came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

XXX

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank,
it must be pointed out that such powers must be related to the (preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and extensive as
they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against
the non-impairment clause of the Constitution.[44] If the legislature itself cannot revoke an existing valid contract, how
can it delegate such non-existent powers to the conservator under Section 28-A of said law?
 51

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place
of a banks board of directors. What the said board cannot do - such as repudiating a contract validly entered into under
the doctrine of implied authority - the conservator cannot do either. Ineluctably, his power is not unilateral and he
cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such
contracts - as he has already done so in the instant case. A contrary understanding of the law would simply not be
permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become
solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings
which had one way or another come to be considered unfavorable to the Bank, yielding nothing to perfected contractual
rights nor vested interests of the third parties who had dealt with the Bank.

The Fifth Issue: Were There Reversible Errors of Fact?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of
Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation,[45] we
held:

x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the
Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the
Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited
to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive [Chan vs. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically
declared that it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction
being limited to reviewing errors of law that might have been committed by the lower court (Tiongco v. De la Merced,
G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA
865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596). Barring, therefore, a showing
that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or
contrast the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L-
16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]

Likewise, in Bernardo vs. Court of Appeals,[46] we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of evidence
and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme Court to analyze
or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing errors of law that may have
been committed by the lower court. The Supreme Court is not a trier of facts. x x x

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.:[47]

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings
 52

went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a
careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings
of fact made by the courts below.

In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc. vs. Hon.
Court of Appeals, et al.[48] is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this Court
to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (italics supplied)

Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which were not
only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the Banks counter-offer
price of P5.5 million had been determined by the past due committee and approved by conservator Romey, after Rivera
presented the same for discussion and (2) the meeting with Co was not to scale down the price and start negotiations
anew, but a meeting on the already determined price of P5.5 million. Hence, citing Philippine National Bank vs. Court of
Appeals,[49] petitioners are asking us to review and reverse such factual findings.

The first point was clearly passed upon by the Court of Appeals,[50] thus:

There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that
the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been
determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer
for discussion by the Committee x x x. Tersely put, under the established fact, the price of P5.5 Million was, as clearly
worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property. (p. 11, CA
Decision)

xxx xxx xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987
between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible
lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed upon by the
Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).

The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not credible and
at best equivocal, and considering the gratuitous and self-serving character of these declarations, the banks submissions
on this point do not inspire belief.

To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on
their behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence,[51] such
suppression gives rise to the presumption that his testimony would have been adverse, if produced.

The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient by both
the trial court and the respondent Court, and instead, it was respondents submissions that were believed and became
bases of the conclusions arrived at.
 53

In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and
correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing.
This we cannot do.

To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals.
[52] We have studied both the records and the CA Decision and we find no such exceptions in this case. On the contrary,
the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and
conclusions are reasonably based on evidence duly identified in the Decision. Indeed, the appellate court patiently
traversed and dissected the issues presented before it, lending credibility and dependability to its findings. The best that
can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to
petitioners claims, but were closer to the evidence as presented in the trial court by private respondent. But this alone is
no reason to reverse or ignore such factual findings, particularly where, as in this case, the trial court and the appellate
court were in common agreement thereon. Indeed, conclusions of fact of a trial judge - as affirmed by the Court of
Appeals - are conclusive upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind,
because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as
well as to examine the real evidence presented.

Epilogue

In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first time on
appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate contracts
entered into by the Banks officers] - which per se could justify the dismissal of the present case. We did not limit
ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of sale and its
enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts and
as a rule we are not required to look into the factual bases of respondent Courts decisions and resolutions, we did so just
the same, if only to find out whether there is reason to disturb any of its factual findings, for we are only too aware of
the depth, magnitude and vigor by which the parties, through their respective eloquent counsel, argued their positions
before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-
appointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x as many people
depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks overdraft with the Central
Bank had already reached P1.023 billion x x x and there were (other) offers to buy the subject properties for a substantial
amount of money.[53]

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its
eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts, non-impairment
of obligations and sanctions against forum-shopping, which must be upheld under the rule of law and blind justice.

This Court cannot just gloss over private respondents submission that, while the subject properties may currently
command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed upon of
P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more than P
3.5 million.[54] That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to
promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in land
values. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during
the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the
Court cannot stamp its imprimatur on such outrageous proposition.
 54

WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the
petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping
and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against petitioners.

RAYTHEON INTERNATIONAL, INC., petitioner,

vs.
STOCKTON W. ROUZIE, JR., respondent.

DECISION
 55

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 respondents money claims.5 Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondents 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 respondents 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.10Petitioner 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 petitioners 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
 56

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 petitioners 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 petitioners 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 petitioners 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 Resolution25 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
 57

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 law30 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.33The 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 Petitioners 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 courts 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:
 58

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.

In the matter Estate of Edward Randolph Hix, deceased.

A.W. FLUEMER, petitioner-appellant,
vs.
ANNIE COUSHING HIX, oppositor-appellee.

C.A. Sobral for appellant.

Harvey & O' Brien and Gibbs & McDonough for appellee.
 59

MALCOLM, J.:

The special administrator of the estate of Edward Randolph Hix appeals from a decision of Judge of First Instance Tuason
denying the probate of the document alleged to by the last will and testament of the deceased. Appellee is not
authorized to carry on this appeal. We think, however, that the appellant, who appears to have been the moving party in
these proceedings, was a "person interested in the allowance or disallowance of a will by a Court of First Instance," and
so should be permitted to appeal to the Supreme Court from the disallowance of the will (Code of Civil Procedure, sec.
781, as amended; Villanueva vs. De Leon [1925], 42 Phil., 780).

It is theory of the petitioner that the alleged will was executed in Elkins, West Virginia, on November 3, 1925, by Hix who
had his residence in that jurisdiction, and that the laws of West Verginia Code, Annotated, by Hogg, Charles E., vol. 2,
1914, p. 1690, and as certified to by the Director of the National Library. But this was far from a compliance with the law.
The laws of a foreign jurisdiction do not prove themselves in our courts. the courts of the Philippine Islands are not
authorized to take American Union. Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.)
Here the requirements of the law were not met. There was no was printed or published under the authority of the State
of West Virginia, as provided in section 300 of the Code of Civil Procedure. Nor was the extract from the law attested by
the certificate of the officer having charge of the original, under the sale of the State of West Virginia, as provided in
section 301 of the Code of Civil Procedure. No evidence was introduced to show that the extract from the laws of West
Virginia was in force at the time the alleged will was executed.

In addition, the due execution of the will was not established. The only evidence on this point is to be found in the
testimony of the petitioner. Aside from this, there was nothing to indicate that the will was acknowledged by the testator
in the presence of two competent witnesses, of that these witnesses subscribed the will in the presence of the testator
and of each other as the law of West Virginia seems to require. On the supposition that the witnesses to the will reside
without the Philippine Islands, it would then the duty of the petitioner to prove execution by some other means (Code of
Civil Procedure, sec. 633.)

It was also necessary for the petitioner to prove that the testator had his domicile in West Virginia and not establish this
fact consisted of the recitals in the CATHY will and the testimony of the petitioner. Also in beginning administration
proceedings orginally in the Philippine Islands, the petitioner violated his own theory by attempting to have the principal
administration in the Philippine Islands.

While the appeal pending submission in this court, the attorney for the appellant presented an unverified petition asking
the court to accept as part of the evidence the documents attached to the petition. One of these documents discloses
that a paper writing purporting to be the was presented for probate on June 8, 1929, to the clerk of Randolph Country,
State of West Virginia, in vacation, and was duly proven by the oaths of Dana Wamsley and Joseph L. MAdden, the
subscribing witnesses thereto , and ordered to be recorded and filed. It was shown by another document that, in
vacation, on June 8, 1929, the clerk of court of Randolph Country, West Virginia, appointed Claude W. Maxwell as
administrator, cum testamento annexo, of the estate of Edward Randolph Hix, deceased. In this connection, it is to be
noted that the application for the probate of the will in the Philippines was filed on February 20, 1929, while the
proceedings in West Virginia appear to have been initiated on June 8, 1929. These facts are strongly indicative of an
intention to make the Philippines the principal administration and West Virginia the ancillary administration. However
this may be, no attempt has been made to comply with Civil Procedure, for no hearing on the question of the allowance
of a will said to have been proved and allowed in West Virginia has been requested. There is no showing that the
deceased left any property at any place other than the Philippine Islands and no contention that he left any in West
Virginia.
 60

Reference has been made by the parties to a divorce purported to have been awarded Edward Randolph Hix from Annie
Cousins Hix on October 8, 1925, in the State of West specific pronouncements on the validity or validity of this alleged
divorce.

For all of the foregoing, the judgment appealed from will be affirmed, with the costs of this instance against the
appellant.

Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

G.R. No. L-12105 January 30, 1960

TESTATE ESTATE OF C. O. BOHANAN, deceased. PHILIPPINE TRUST CO., executor-appellee,

vs.
MAGDALENA C. BOHANAN, EDWARD C. BOHANAN, and MARY LYDIA BOHANAN, oppositors-appellants.

Jose D. Cortes for appellants.

Ohnick, Velilla and Balonkita for appellee.
 61

LABRADOR, J.:

Appeal against an order of the Court of First Instance of Manila, Hon. Ramon San Jose, presiding, dismissing the
objections filed by Magdalena C. Bohanan, Mary Bohanan and Edward Bohanan to the project of partition submitted by
the executor and approving the said project.

On April 24, 195 0, the Court of First Instance of Manila, Hon. Rafael Amparo, presiding, admitted to probate a last will
and testament of C. O. Bohanan, executed by him on April 23, 1944 in Manila. In the said order, the court made the
following findings:

According to the evidence of the opponents the testator was born in Nebraska and therefore a citizen of that state, or at
least a citizen of California where some of his properties are located. This contention in untenable. Notwithstanding the
long residence of the decedent in the Philippines, his stay here was merely temporary, and he continued and remained
to be a citizen of the United States and of the state of his pertinent residence to spend the rest of his days in that state.
His permanent residence or domicile in the United States depended upon his personal intent or desire, and he selected
Nevada as his homicide and therefore at the time of his death, he was a citizen of that state. Nobody can choose his
domicile or permanent residence for him. That is his exclusive personal right.

Wherefore, the court finds that the testator C. O. Bohanan was at the time of his death a citizen of the United States and
of the State of Nevada and declares that his will and testament, Exhibit A, is fully in accordance with the laws of the state
of Nevada and admits the same to probate. Accordingly, the Philippine Trust Company, named as the executor of the will,
is hereby appointed to such executor and upon the filing of a bond in the sum of P10,000.00, let letters testamentary be
issued and after taking the prescribed oath, it may enter upon the execution and performance of its trust. (pp. 26-27,
R.O.A.).

It does not appear that the order granting probate was ever questions on appeal. The executor filed a project of partition
dated January 24, 1956, making, in accordance with the provisions of the will, the following adjudications: (1) one-half of
the residuary estate, to the Farmers and Merchants National Bank of Los Angeles, California, U.S.A. in trust only for the
benefit of testator's grandson Edward George Bohanan, which consists of several mining companies; (2) the other half of
the residuary estate to the testator's brother, F.L. Bohanan, and his sister, Mrs. M. B. Galbraith, share and share alike. This
consist in the same amount of cash and of shares of mining stock similar to those given to testator's grandson; (3)
legacies of P6,000 each to his (testator) son, Edward Gilbert Bohana, and his daughter, Mary Lydia Bohanan, to be paid in
three yearly installments; (4) legacies to Clara Daen, in the amount of P10,000.00; Katherine Woodward, P2,000; Beulah
Fox, P4,000; and Elizabeth Hastings, P2,000;

It will be seen from the above that out of the total estate (after deducting administration expenses) of P211,639.33 in
cash, the testator gave his grandson P90,819.67 and one-half of all shares of stock of several mining companies and to
his brother and sister the same amount. To his children he gave a legacy of only P6,000 each, or a total of P12,000.

The wife Magadalena C. Bohanan and her two children question the validity of the testamentary provisions disposing of
the estate in the manner above indicated, claiming that they have been deprived of the legitimate that the laws of the
form concede to them.

The first question refers to the share that the wife of the testator, Magdalena C. Bohanan, should be entitled to received.
The will has not given her any share in the estate left by the testator. It is argued that it was error for the trial court to
have recognized the Reno divorce secured by the testator from his Filipino wife Magdalena C. Bohanan, and that said
divorce should be declared a nullity in this jurisdiction, citing the case of Querubin vs. Querubin, 87 Phil., 124, 47 Off.
 62

Gaz., (Sup, 12) 315, Cousins Hiz vs. Fluemer, 55 Phil., 852, Ramirez vs. Gmur, 42 Phil., 855 and Gorayeb vs. Hashim, 50
Phil., 22. The court below refused to recognize the claim of the widow on the ground that the laws of Nevada, of which
the deceased was a citizen, allow him to dispose of all of his properties without requiring him to leave any portion of his
estate to his wife. Section 9905 of Nevada Compiled Laws of 1925 provides:

Every person over the age of eighteen years, of sound mind, may, by last will, dispose of all his or her estate, real and
personal, the same being chargeable with the payment of the testator's debts.

Besides, the right of the former wife of the testator, Magdalena C. Bohanan, to a share in the testator's estafa had
already been passed upon adversely against her in an order dated June 19, 1955, (pp. 155-159, Vol II Records, Court of
First Instance), which had become final, as Magdalena C. Bohanan does not appear to have appealed therefrom to
question its validity. On December 16, 1953, the said former wife filed a motion to withdraw the sum of P20,000 from
the funds of the estate, chargeable against her share in the conjugal property, (See pp. 294-297, Vol. I, Record, Court of
First Instance), and the court in its said error found that there exists no community property owned by the decedent and
his former wife at the time the decree of divorce was issued. As already and Magdalena C. Bohanan may no longer
question the fact contained therein, i.e. that there was no community property acquired by the testator and Magdalena
C. Bohanan during their converture.

Moreover, the court below had found that the testator and Magdalena C. Bohanan were married on January 30, 1909,
and that divorce was granted to him on May 20, 1922; that sometime in 1925, Magdalena C. Bohanan married Carl
Aaron and this marriage was subsisting at the time of the death of the testator. Since no right to share in the inheritance
in favor of a divorced wife exists in the State of Nevada and since the court below had already found that there was no
conjugal property between the testator and Magdalena C. Bohanan, the latter can now have no longer claim to pay
portion of the estate left by the testator.

The most important issue is the claim of the testator's children, Edward and Mary Lydia, who had received legacies in the
amount of P6,000 each only, and, therefore, have not been given their shares in the estate which, in accordance with the
laws of the forum, should be two-thirds of the estate left by the testator. Is the failure old the testator to give his children
two-thirds of the estate left by him at the time of his death, in accordance with the laws of the forum valid?

The old Civil Code, which is applicable to this case because the testator died in 1944, expressly provides that successional
rights to personal property are to be earned by the national law of the person whose succession is in question. Says the
law on this point:

Nevertheless, legal and testamentary successions, in respect to the order of succession as well as to the extent of the
successional rights and the intrinsic validity of their provisions, shall be regulated by the national law of the person
whose succession is in question, whatever may be the nature of the property and the country in which it is found. (par. 2,
Art. 10, old Civil Code, which is the same as par. 2 Art. 16, new Civil Code.)

In the proceedings for the probate of the will, it was found out and it was decided that the testator was a citizen of the
State of Nevada because he had selected this as his domicile and his permanent residence. (See Decision dated April 24,
1950, supra). So the question at issue is whether the estementary dispositions, especially hose for the children which are
short of the legitime given them by the Civil Code of the Philippines, are valid. It is not disputed that the laws of Nevada
allow a testator to dispose of all his properties by will (Sec. 9905, Complied Nevada Laws of 1925, supra). It does not
appear that at time of the hearing of the project of partition, the above-quoted provision was introduced in evidence, as
it was the executor's duly to do. The law of Nevada, being a foreign law can only be proved in our courts in the form and
manner provided for by our Rules, which are as follows:
 63

SEC. 41. Proof of public or official record. An official record or an entry therein, when admissible for any purpose, may
be evidenced by an official publication thereof or by a copy tested by the officer having the legal custody of he record, or
by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the
custody. . . . (Rule 123).

We have, however, consulted the records of the case in the court below and we have found that during the hearing on
October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share, the foreign law,
especially Section 9905, Compiled Nevada Laws. was introduced in evidence by appellant's (herein) counsel as Exhibits
"2" (See pp. 77-79, VOL. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said laws presented by the
counsel for the executor and admitted by the Court as Exhibit "B" during the hearing of the case on January 23, 1950
before Judge Rafael Amparo (se Records, Court of First Instance, Vol. 1).

In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws of the
State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of Nevada,
especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of
such law having been offered at the hearing of the project of partition.

As in accordance with Article 10 of the old Civil Code, the validity of testamentary dispositions are to be governed by the
national law of the testator, and as it has been decided and it is not disputed that the national law of the testator is that
of the State of Nevada, already indicated above, which allows a testator to dispose of all his property according to his
will, as in the case at bar, the order of the court approving the project of partition made in accordance with the
testamentary provisions, must be, as it is hereby affirmed, with costs against appellants.

Paras, Bengzon, C.J., Padilla, Bautista Angelo and Endencia, JJ., concur.
Barrera, J., concurs in the result.

C APPROACHES TO CHOICE OF LAW

1. TRADITIONAL APPROACH

a. VESTED RIGHT THEORY

GRAY VS. GRAY

I. "If there is no ground of action in the sovereignty where the tort is alleged to have occurred, there is none
anywhere. . . . To ascertain the rights resulting from acts done or omitted, attention must be paid to the circumstances
 64

under which the events took place; and one of the governing circumstances is the law of the place which characterizes
the act. . . . In like manner, when a right is claimed upon acts occurring in another country, courts look to the law of that
country, not to extend the binding force of a foreign law beyond the territorial limits of the sovereignty to which it
belongs, but to ascertain whether the right claimed exists or not. It is not the foreign law, but the rights acquired under
it, which are enforced by the courts of another country; and this is true whether the question be one of contract, tort, or
status." MacDonald v. Railway,71 N.H. 448, 450, 451.

"If there is a conflict between the lex loci and the lex fori, the former governs in torts the same as in contracts, in respect
to the legal effect and incidents of acts. . . . Therefore, whatever would be a defence to this action if it had been brought
in the state of Maine is a defence here, although it would not be if the cause of action had arisen in this state." Beacham
v. Portsmouth Bridge, 68 N.H. 382.

For more than a hundred years this theory of the law has been followed in this state, whenever there has been occasion
to apply it, or any part of it. Wilson v. Rich, 5 N.H. 455; French v. Hall, 9 N.H. 137; Henry v. Sargeant, 13 N.H. 321; Laird v.
Railroad, 62 N.H. 254; Leazotte v. Railroad, 70 N.H. 5; Kimball v. Kimball, 75 N.H. 291; Young v. Company,76 N.H. 582; Hill
v. Railroad, 77 N.H. 151; Stinson v. Railroad,81 N.H. 473; Marshall v. Railroad, 81 N.H. 548; Lee v. Chamberlin,84 N.H. 182;
Precourt v. Driscoll, 85 N.H. 280; Small v. Railroad,85 N.H. 330; Richards v. Richards, 86 N.H. 273; Blanchette v. Sargent,
ante, 15.

It has the final approval of the American Law Institute, Restatement, Conflict of Laws, s. 382 et seq. It is supported by all
our eminent text writers upon the subject. Story, Conflict of Laws, s. 558; Dicey, Conflict of Laws, 21; Beale, Conflict of
Laws, 112; Goodrich, Conflict of Laws, 189; Wharton, Conflict of Laws, s. 478 b; Minor, Conflict of Laws, s. 194. The
American decisions are almost uniformly to the same effect. They are collected in 12 C. J. 452, and cross references. In
three recent cases the precise question here involved has been decided adversely to the plaintiff. Buckeye v. Buckeye,
203 Wis. 248; Dawson v. Dawson, 224 Ala. 13; Howard v. Howard, 200 N.C. 574. *Page 84

Against this array of authority it is strenuously argued that the decided cases are distinguishable; that much which has
been said is dicta; that the theory is contrary to the English law, unsound in principle, unworkable in many situations and
criticized by a group of present day writers.

It is true that none of our decisions involve the precise facts here presented, but several of them are indistinguishable in
principle. In Beacham v. Portsmouth Bridge, 68 N.H. 382, the defendant was a wrongdoer, and by New Hampshire law
the plaintiff was free from contributory fault. But since by Maine law his driving contrary to the Sunday law barred a
recovery, he had no remedy here for an accident happening there.

In Lee v. Chamberlin, 84 N.H. 182, Richards v. Richards, 86 N.H. 273 and Blanchette v. Sargent, ante, 15 the defendants
were held not to be accountable for ordinary negligence towards guest passengers, although they would be by the law of
this state. The different law as to the incidents attaching to their status in Massachusetts and Vermont was held to
determine the rights of the parties as to events occurring in those jurisdictions.

In Precourt v. Driscoll, 85 N.H. 280, the plaintiff was called upon to prove her own freedom from fault, in accordance with
the law of Vermont, although by New Hampshire law she would have made a case by merely showing the defendant's
negligence.

It is sought to distinguish the present case upon the ground that the act complained of was a delict, in the sense that it
was not made innocent by Maine law; and the only reason a recovery could not be had in Maine is the spousal relation
 65

of the parties. As the parties are residents of New Hampshire, where spousal incapacity to sue has been abolished, it is
argued that the wife's complaint for acts done in Maine may be brought into this state and suit upon it maintained here.

The argument fails to distinguish between status and the incidents which local law attaches to the status. The parties are
husband and wife. That status they took with them into Maine. But the incidents of that status are those prescribed by
the law of the place where transactions take place. As before pointed out, this rule has frequently been applied in tort
actions where other relations were involved.

The guest passenger in an automobile remains such after crossing the state line into Massachusetts. But his recovery
here for injuries caused by his host's ordinary negligence depends upon which side of the state line the accident
occurred. If it happened in Massachusetts, *Page 85 there could be no recovery, even though the parties are residents
here and the suit is in this jurisdiction. Lee v. Chamberlin, supra; Richards v. Richards, supra; Blanchette v. Sargent, supra.

Every argument urged in favor of this plaintiff is applicable to these decided cases. The defendant's act is a delict by the
lex loci. It would have been actionable if committed here; and, as to persons in general, it is actionable there. But
because of the particular relation of the parties, the law there is that there is no cause of action in the special instance.
The plaintiff fails here, as those plaintiffs failed, because there is no cause of action at the place where the acts
complained of were done.

It should be observed that much of the plaintiff's argument is based upon the assertion that inability to recover in Maine
is merely because suits between husband and wife are forbidden. Hence it is urged that recovery may be had by resort to
a jurisdiction where such suits are allowed. But an examination of the Maine law shows that the rule is much broader.
The theory adopted there is not merely that there is a prohibition of suit, but that the acts complained of do not give rise
to any cause of action. There has been no breach of legal duty.

A suit for false imprisonment during coverture was brought by a divorced wife against her former husband. The court
said: "The theory upon which the present action is sought to be maintained is, that coverture merely suspends and does
not destroy the remedy of the wife against her husband. But the error in the proposition is the supposition that a cause
of action or a right of action ever exists in such a case. There is not only no civil remedy but there is no civil right, during
coverture, to be redressed at any time. There is, therefore, nothing to be suspended. Divorce cannot make that a cause
of action which was not a cause of action before divorce. The legal character of an act of violence by husband upon wife
and of the consequences that flow from it, is fixed by the condition of the parties at the time the act is done. If there be
no cause of action at the time, there never can be any." Abbott v. Abbott, 67 Me. 304, 306, cited with approval in
Sacknoff v. Sacknoff, 131 Me. 280. In the latter case a wife was denied recovery from the employer of her husband for
injuries caused by the negligence of that employee.

II. The claim that the American rule is opposed to the practice in England is well founded. But the English law upon the
subject is by no means clearly defined. All that is here claimed for it is that in a suit for a foreign tort recovery may be had
according to English *Page 86 law, unless the lex loci has made the act complained of innocent. This seems to be a
splitting of the rule of accountability. The foreign law is noted and applied, in so far as treating the act as innocent is
concerned; but if that obstacle is passed, the English law is then used, or may be, to supplement the foreign and give a
cause of action. This theory never attained any recognition in this country. "No case in this country has been found
where recovery in tort has been allowed for what was not the basis of an action by the lex loci delicti." Goodrich, Conflict
of Laws, 190.
 66

III. Much objection has been made, both by some recent writers and in argument here, against any theory of vested right
or obligatio. If such theory were based upon the idea that a sovereignty is under legal compulsion to recognize the
foreign cause of action, there might be force in the argument. While the proposition may sometimes have been stated in
that extreme form, the common theory is that such recognition has resulted from the idea that it was the just and politic
course to follow. It has been developed under the impulses of neighborliness and orderliness. It has become an accepted
rule precisely as liability for negligence, once unknown, became a part of the common law.

Wrong theories for the rule may have been advanced. But the destruction of such men of straw does not affect the
validity of the line of procedure they were supposed to defend. It stands upon its own intrinsic merits. No one denies
that the parties may have vested rights, or obligations, in the jurisdiction where the transaction occurred. But because
another sovereignty adopts the rule that it will enforce the right or deny recovery as the event would be according to the
lex loci, it by no means follows that it is the law of the forum that such course is obligatory upon such sovereignty.

In reaching the conclusions stated in Beacham v. Portsmouth Bridge,68 N.H. 382, it was not deemed essential to enter
into a discussion of the territoriality of law, of the concept of it spatially, or of the claims of parties as vested rights,
accrued in a foreign jurisdiction. The situation was a practical one. The problem was "one of judicial expediency"
(Saloshin v. Houle, 85 N.H. 126, 130). Forty odd separate jurisdictions had given rise to pressing questions as to how
rights and wrongs originating in one should be dealt with in another. A few simple ideas were sufficient to indicate the
course to be taken. Local conduct should be governed by local law. Rules of conduct have no force to regulate acts done
outside the jurisdiction which made the rules, save as their operation is enforced by control over parties found within the
jurisdiction. In the great *Page 87 majority of cases complaints of conduct are adjusted in the jurisdiction where the
conduct took place. It is desirable that the remedy be the same, wherever the action is brought.

IV. It is contended that there is unpardonable inconsistency in enforcing foreign rights, whether of prosecution or
defence, and at the same time declaring that the foreign law is not in force here. The ground has been gone over many
times. The local law is that the foreign rights will be enforced. What those rights are depends upon the facts, and a part
of the facts consists in the law under which the transactions took place.

But if it is still insisted that a proper designation of the process is that we thus enforce foreign law (Saloshin v. Houle, 85
N.H. 126), it does not affect the soundness of the procedure. We enforce the foreign law because it is our law that the
foreign law shall govern the transactions in question. "For the purposes of the case the foreign law becomes the local
law." Saloshin v. Houle, supra, 130. It has been concluded that it shall so govern for the reasons before stated. This is not
importing foreign law. It is only giving to it the legitimate effect upon transactions occurring where it is in force. The
logical alternative is not found in the application of local law to a foreign transaction, but in a refusal to deal with that
transaction at all. If it is to be justiciable here, it should be upon the basis of what it is there.

The other view, that to some indefinite degree our law should govern the foreign transaction, would export our law into
foreign territory. The reasonable conclusion which has been reached is that there should be neither export nor import,
that, generally speaking, the law is territorial, conceived of spatially as governing within the jurisdiction, and creating
there rights and obligations which will be respected and enforced elsewhere. Judge Cardozo sums the matter up in a
sentence. "The plaintiff owns something and we help him to get it." Louks v. Company,224 N.Y. 99, 110.

V. The critics of the American rule affect to find much inconsistency in the suggested refusal (Goodrich, Conflict of Laws,
24; Am. Law Inst., Restat., Conflict of Laws, s. 7) to follow the lex loci as to the applicability of foreign law to local
transactions. The proposition advanced here is that if by the lex loci the plaintiff could recover there if he would have
that right by the law of his domicil, though not if domesticated, he should recover in other jurisdictions, if they profess to
apply the lex loci. This is upon the theory that the whole or none of the lex loci should be applied. *Page 88
 67

It being the rule in some jurisdictions that in a suit by a non-resident upon a cause arising locally his capacity to sue will
be determined by looking to the law of his domicil rather than to the local law, it is urged that this feature (called the
doctrine of renvoi) should be treated the same as the rest of the lex loci. If that law looks beyond local limitations to
broader or otherwise different rules of the party's domicil, it is argued that the same course should be followed by the
court in another jurisdiction when called upon to adjudicate disputes which arose under such circumstances. That is, in
determining the applicability of foreign law, the court should be governed by that foreign law as to the applicability of
foreign law. This idea is urged as calling for the recognition of renvoi under such circumstances. It has not as yet met with
judicial approval.

We do not understand it is claimed that the doctrine of renvoi ought to be adopted. One of the authors upon whose
reasoning the plaintiff relies says: "The renvoi doctrine is, therefore, no part of the Conflict of Laws of the United States.
Its introduction into our law would be most unfortunate on account of the uncertainty and confusion to which it would
give rise in the administration of justice and its demoralizing effect upon the future development of the Conflict of Laws."
The Renvoi Theory (Lorenzen), 10 Col. Law Rev. 344. It is advanced in argument here as a feature of existing law, in some
foreign jurisdictions, and its recognition where existing is urged as a logical part of the vested right theory, and as
showing that, thus encumbered, that theory should be rejected. It is unnecessary to determine the validity of the
argument. If its soundness were assumed, and recognition of renvoi should be treated as a part of our rule applying the
lex loci, there would be two sufficient answers here. The plea demurred to states "that under the laws of the State of
Maine, the plaintiff being the wife of said defendant is barred from maintaining this action." This leaves no room for
speculation upon the matter. Beyond this, it is conceded in the plaintiff's argument that there is no decision in Maine
bearing upon the doctrine of renvoi. Nor is there any claim that it is a part of a generally prevailing common-law
doctrine. If the matter were open for consideration, the plaintiff would fail for lack of proof that the doctrine prevails in
Maine.

But it will be said that these conclusions do not meet the whole issue. The argument that consideration of renvoi should
be a part of any theory of applying the lex loci, and that the theory thus embarrassed is unworkable, has not been
answered. The conclusion sought to be drawn from these propositions is that they show that *Page 89 the whole theory
of applying the lex loci is unsound and should therefore be abandoned, and actions for foreign torts should be decided
according to local law.

One answer to this is that the rule that the lex loci shall apply is so firmly established that it should be followed, unless
very grave defects therein call for reform. We see no such defects. Whether it should include renvoi or not is a matter to
be decided when a case arises which presents that question. In the instant case there is no occasion to go further than to
inquire whether the obstacle proposed is insuperable. If it does not appear to be so, we need not be apprehensive that
adherence to the present line of procedure will unduly embarrass the court of the future when called upon to decide the
propounded problem.

It is undoubtedly true that following the doctrine of renvoi to a logical extreme can, in some situations, result in an
endless reference back and forth. The dilemma thus presented is something of an answer to the theorists who justify the
application of the lex loci upon the idea of a vested right. The writers relied upon by the plaintiff have used it largely for
this limited purpose. They recognize the desirability of a general application of the lex loci in actions for torts. Their
quarrel has been with the theory of those who would account for such procedure upon the basis of a vested right or
obligatio.
 68

Once the doctrine of obligatio is disregarded, and recognition of the lex loci is put upon its true foundation, there is no
difficulty. The lex loci is applied because this is deemed to be the sensible course to pursue. When a point is reached
where further application is futile and ridiculous the process is cut short.

No rule or set of rules has yet been devised which will make the conflict of laws a logical whole. There are places where
logic has to give way to evident facts. In these places horse sense has prevailed over the deductions of the schoolmen. It
should continue to do so.

Whether, upon the issue of applying foreign law we should follow our own views entirely, or adopt those expressed in
the lex loci which are pertinent, is, like most of the questions involved in this case, a matter of what is sound policy. That
problem will no doubt be solved in the future, and some definite rules will be evolved, as there have been already on the
main issue of following the lex loci.

As before stated, there is no occasion here to determine whether we should apply a Maine doctrine of renvoi, since
there is no evidence that such a doctrine exists.

VI. The novel complaint is made that the foregoing conclusions *Page 90 upon the application of the lex loci set up fixed
rules. The proposal is that instead thereof the whole matter be left to the discretion of the court to apply either the
foreign or the domestic law to the individual case as "reason, justice and expediency" require. That might well be taken
as the guide for determining what should be done in the first stages of the development of the law. But as the law
progresses definite rules are evolved in the course of the frequent application of those tests. That is the situation here. It
has become settled that reason, justice and expediency require that causes of action for foreign torts be dealt with as
hereinbefore indicated.

Exception overruled.

All concurred.

ALABAMA VS. CAROLL

Brief Fact Summary.

Carroll (Plaintiff) worked as a railroad brakeman, and was injured in Mississippi due to the failure of other employees to
inspect the brakes in Alabama.

Synopsis of Rule of Law.

Where a negligent act is committed in one state, but causes injury in a different state, an action seeking damages for
injuries resulting from the act may be brought only in the state where the result occurred, and not where the act was
committed.
 69

Facts.
Carroll (Plaintiff), a resident of Alabama, was injured in Mississippi due to a break in a defective railroad car link. The
Railroads (Defendant) employees had been negligent in their duty to inspect the links in Alabama. Plaintiff sued the
Defendant in Alabama under a state statute that authorized recovery. Mississippi would have denied recovery as it had
no similar statute.

Issue.
May recovery be obtained for a tortious act in the state where the breach of duty occurred, but not the injury?

Held.
(McClellan, J.) No. The general rule is that recovery cannot be made in one state for the injuries to the person sustained
in a different state unless the infliction of the injuries is actionable under the law of the state where the injuries were
received. In this case, up to the time the train passed from Alabama, no injury had resulted. The Alabama statute has no
efficiency beyond state lines. Only Mississippi could apply proper jurisdiction over the claim. There may have been a
different result if Carroll had been injured in Alabama but suffered in Mississippi. As for an argument that the Railroad
(Defendant) was under a contractual duty to Carroll (Plaintiff), which arose in Alabama, the Alabama law will govern only
occurrences of the employment relationship and not with any specific contractual obligations. Reversed and remanded.

Dissent.
Under the First Restatement, where a tort is involved the choice of law focuses on the situs of the wrongthat is, where
the last incidence required to make the defendant liable took place. This will usually be the place of plaintiffs injury.

Home Insurance Co. v. Dick, 281 U.S. 397 (1930)

A contract of fire insurance issued by a Mexican company, made and to be performed in Mexico, and covered in part by
reinsurance effected there or in New York with New York companies licensed to do business in Texas, was assigned by the
insured to a citizen of Texas who was present in Mexico when the policy issued and continued to reside there until after a
loss had occurred. He then returned to Texas and sued on the policy in a Texas Court naming the Mexican company,
which was never present in Texas and did not appear, as principal defendant, and the two New York companies, because
of their reinsurance liability, as garnishees. The policy stipulated that no suit should be brought under it unless within
one year of the loss, but a defense based on this was overruled by the Texas Supreme Court, and recovery against the
 70

garnishees affirmed, by applying a Texas statute which forbade any agreement limiting the time for suit to a shorter
period than two years

Page 281 U. S. 398

and declared that no agreement for such shorter limitation should ever be valid in that state.

Held:

1. The objection that, as applied to contracts made and to be performed outside of Texas, the statute violates the federal
Constitution, raises federal questions of substance, and the existence of the federal claim is not disproved by saying that
the statute, or the one-year provision in the policy, relates to the remedy, and not to the substance. P. 281 U. S. 405.

2. That the federal questions were not raised in the trial court is immaterial, since the Court of Civil Appeals and the
supreme court of the state considered them as properly raised in the appellate proceedings and passed on them
adversely to the federal claim. P. 281 U. S. 407.

3. The case is properly here on appeal, and petition for certiorari is therefore denied. Id.

4. The statute as construed and applied deprives the garnishees of property without due process of law, since the state
was without power, under the circumstances, to affect the terms of the insurance contract by imposing a greater
obligation than that agreed upon and to seize property in payment of the imposed obligation. Id.

5. When the parties to a contract have expressly agreed upon a time limit on their obligation, a statute which invalidates
the agreement and directs enforcement of the contract after that time has expired increases their obligation and
imposes a burden not contracted for. P. 281 U. S. 408.

6. The statute, as here involved, is not one dealing with remedies and procedure merely; it purports to create rights and
obligations. P. 281 U. S. 409.

7. Assuming that a state may properly refuse to recognize foreign rights that violate its declared policy, or restrict the
conduct of persons within its limits, this does not mean that it may abrogate the rights of parties beyond its borders
having no relation to anything done or to be done within them. P. 281 U. S. 410.

15 S.W.2d 1028 reversed.

Appeal from a judgment of the Supreme Court of Texas affirming a judgment of the Court of Civil Appeals, 8 S.W. 2d 354,
which affirmed recoveries against the appellants in garnishment proceedings ancillary to an action on a fire insurance
policy.

ALASKA PACKERS ASSOCIATION, Petitioner, v. INDUSTRIAL ACCIDENT COMMISSION and JUAN PALMA, Respondents.

This is a proceeding to review an award of compensation made by the Industrial Accident Commission in favor of Juan
Palma against the Alaska Packers Association, his employer.

On May 13, 1932, Juan Palma, a nonresident alien, entered into a contract of employment on board the steamer
"Chirikof" in the harbor of San Francisco, with the Quong Ham Wah Co., agent for the petitioner, the Alaska Packers
Association, by which he agreed to work for the petitioner during the salmon canning season at or about Kvichak in the
territory of Alaska. The Alaska Packers Association agreed to transport Palma to Alaska and back to San Francisco at the
 71

close of the season. He was to be paid on his return to San Francisco, at a monthly rate, less any advances made. Section
11 of the contract, signed by Palma, and some fifty other workers, on board the "Chirikof," reads as follows:

"Section 11. As the only labor contemplated by this contract is to be performed in the Territory of Alaska, and as the
Contractor has elected to be bound by the provisions [1 Cal.2d 253] of the Alaska Workmen's Compensation Act, Chapter
25 of the laws of Alaska, 1929, pages 46 to 49 and amendments thereto, the parties of the second part hereby agree, as
an incident of this contract of employment, to accept and be bound by the provisions of the said Workmen's
Compensation Act of Alaska for any and all injuries arising out of and in the course of their employment, and further
agree to accept as their exclusive remedy for any and all industrial injuries, the provisions of the said Workmen's
Compensation Act of Alaska."

Palma was treated on two occasions and was finally operated on in petitioner's hospital in Kvichak, having left work on
June 3, 1932. He presented no claim for compensation in Alaska, but received his regular wages until August 11th. Upon
his return to San Francisco, and on August 18, 1932, he made application to the California Industrial Accident
Commission for an adjustment of his claim on the ground that his disability had resulted from an injury arising out of and
in the course of the employment and had been caused by an empty box falling against his stomach.

Petitioner filed an answer to the application, admitting the employment, but denying that the applicant sustained an
injury arising out of the employment and setting up that both the applicant and the petitioner were subject, at the time
of the alleged injury, to the Workmen's Compensation Act of Alaska, chapter 98 of the Session Laws of Alaska, 1923, and
chapter 25 of the Session Laws of Alaska, 1929, and acts amendatory thereof; and further, that petitioner was qualified
to do business in Alaska, had filed in the office of the clerk of the District Court, Third Judicial Division, at Valdez, Alaska,
its articles of incorporation and other papers qualifying it to do business in Alaska, and that it maintained, as required by
law, its resident agent for the purpose of receiving service of papers in the third judicial division; that the District Court in
that division was the only proper tribunal for the settlement of Palma's claim by reason of the Alaska act and the
contract of employment, section 11 of which is set out above; and that the California Commission was without
jurisdiction. These allegations are supported by an affidavit of the United States commissioner of the Kaknek-Kvichak
precinct that neither the applicant [1 Cal.2d 254] nor the Alaska Packers Association had filed a notice of rejection of the
terms of the Alaska Workmen's Compensation Act in accordance with the provisions thereof and that on May 26, 1932,
and ever since the Alaska Packers Association and all their employees had been subject thereto, and by an affidavit of the
clerk of the District Court of the Third Judicial Division that the Alaska Packers Association had qualified to do business in
the territory of Alaska by filing the necessary papers and maintained a resident agent for service in that division.

While the petitioner questions the sufficiency of the evidence to support the finding that the injury arose out of the
employment, the main attack is directed toward the jurisdiction of the Industrial Accident Commission to entertain this
proceeding for compensation under the California Workmen's Compensation Act. The respondent commission cites in
support of its claim of jurisdiction sections 27(a) and 58 of the California act, which provide as follows:

Section 27(a). "No contract, rule or regulation shall exempt the employer from liability for the compensation fixed by this
act. ..."

Section 58. "The commission shall have jurisdiction over all controversies arising out of injuries suffered without the
territorial limits of this state in those cases where the injured employee is a resident of this state at the time of the injury
and the contract of hire was made in this state, and any such employee or his dependents shall be entitled to the
compensation or death benefits provided by this act."
 72

Petitioner urges that this injury is within the exclusive territorial jurisdiction of Alaska and hence not within the territorial
jurisdiction of California; and, second, that section 58 of the California act, above quoted, is unconstitutional for the
reason that it denies full faith and credit to the Alaska statute, trespasses upon the exclusive power of Congress to make
laws regulating the employer-employee relationship in the territory of Alaska, and constitutes a denial of due process
and equal protection of the law under amendment XIV of the federal Constitution, inasmuch as it is an unreasonable
regulation of the right to make private contracts of employment and an attempt to regulate a relation or status existing
beyond the territorial limits of the state. The problem can be narrowed to some extent. [1] [1 Cal.2d 255] In the first
place, the California commission cannot apply and administer the Alaska act. Section 25 of chapter 25 of the Session
Laws of Alaska, 1929, provides that "No action for the recovery of compensation hereunder shall be brought in any court
holden outside of the judicial division in which the injury occurred, out of which the right to compensation arises, except
in cases where service cannot be had on the employer in the judicial division where the injury occurred. No action for
the recovery of compensation hereunder shall in any case be brought outside of the Territory of Alaska, except in cases
where it is not possible to obtain service of summons upon the defendant in said Territory, and in all such cases the
plaintiff must plead and prove his inability to obtain service of summons upon the defendant within the Territory of
Alaska." In the second place, if California has not attempted an extraterritorial regulation of the incidents of
employment, petitioner's argument relative to invasion of the exclusive jurisdiction of the federal government to
regulate employment in Alaska must fail; nor is there any denial of due process and equal protection by reason of
extraterritoriality.

[2] It is fundamental and has been well said that: "In general our law is territorial and not personal. This does not mean
that rights and duties can be enforced only in the territory of the jurisdiction which created them; it does mean that such
law does not ordinarily purport to create rights and impose duties by reason of acts, to which legal consequences may be
annexed, occurring beyond the geographical confines of its territory." (See Angell, Recovery Under Workmen's
Compensation Acts for Injury Abroad, 31 Harv. L. Rev. 619.) However, the California act does purport to establish
compensation for injuries received abroad in a certain class of cases where (the other general requirements of
compensation of course being present): (1) the injured employee is a resident of this state at the time of injury, and (2)
the contract of hire was made in this state. The first condition has been nullified by the decision in Quong Ham Wah Co.
v. Industrial Acc. Com., 184 Cal. 26 [192 P. 1021, 12 A.L.R. 1190] (certiorari denied by the United States Supreme
Court, 255 U.S. 445 [41 S.Ct. 373, 65 L.Ed. 723]), which held that the federal Constitution extended the benefits of the act
to nonresidents also. [1 Cal.2d 256] The second condition remains and squarely presents the question whether the
making of the contract of employment in this state is a satisfactory and sufficient basis for the creation by the California
legislature of the right of compensation for an injury received beyond its borders, even though the services contracted
for were to be performed wholly outside the state, a consideration apparently not urged upon the court in the Quong
Ham Wah Co. case.

Where the duty to pay compensation is contractual, as under the optional acts, the rights of the injured party, wherever
the injury is received, may, according to recognized principles, be controlled by the law of the place of contract. [3]
However, the California act is compulsory and it is now settled that the right to, and the liability for, compensation
established by it are not founded upon contract but are statutory rights and duties arising from the employer-employee
relationship and are imposed by the law as incidents to that status. (North Alaska Salmon Co. v. Pillsbury, 174 Cal. 1 [162
P. 93, L.R.A. 1917E, 642]; Quong Ham Wah Co. v. Industrial Acc. Com., supra, 31 Harv. L. Rev. 619.) Consequently a
decision upholding the so-called extraterritorial effect of our act cannot be placed upon this ground.

In Post v. Burger & Gohlke, 216 N.Y. 544 [111 N.E. 351, Ann. Cas. 1916B, 158], this extraterritorial effect was given the
New York act on the basis of the fiction of a "constructive contract", on the theory that the legislature had the power "to
compel a contract between employer and employee that is extraterritorial in effect". This case is cited in Quong Ham
 73

Wah Co. v. Industrial Acc. Com., supra, which described the liability as not the mere regulation of a status or imposition
of a tort liability but as "quasi ex contractu", and sustained an award under section 58 of the act for an injury received
outside the state on the ground that the statute assumed to extend its effect "only to those cases where the contract of
hire was made in this state", and that consequently it is "not an attempt to create an obligation merely as an incident to
a status but is, in form and substance, a genuine regulation of contracts subject to the sovereignty of the state". The
court further said: "The contract creates a relationship under the sanction of the law and the same law attaches as an
incident thereto an [1 Cal.2d 257] obligation to compensate for injuries sustained abroad amounting to a sort of
compulsory insurance. The legislature may lawfully impose that right and duty upon those operating under a contract
subject to the legislative power, and no principle of law is defeated by attaching to such contracts the same duties and
rights as incidents to acts abroad that are lawfully imposed as incidents to the same acts occurring within the
geographical limits of the state."

While there is much apparent conflict on this question in the various jurisdictions of the country, most of the cases turn
upon the construction of the particular statute involved and the legislative intent as shown by its provisions. Though not
controlling, in view of the legislature's express declaration that our statute shall apply to injuries received abroad where
the contract of hire is made within the state, these cases are instructive of the social policy behind such declaration and
of the principles upon which it may be sustained. Where the statute is elective the contractual theory has been applied
and, where the statute is compulsory, as well as in some cases where the elective feature of the optional act has not
been particularly relied upon, the basis of the power to impose such an incident upon the employer-employee
relationship seems to be jurisdiction of that status at the time of its creation. Although there are many cases holding that
particular compensation statutes were not intended to cover injuries received abroad, none has been cited or discovered
which holds an express legislative declaration of that policy to be ineffective. (See note, 3 A.L.R. 1351 [collecting and
discussing cases] and supplemental notes in 18 A.L.R. 292; 28 A.L.R. 1345; 35 A.L.R. 1414; 45 A.L.R. 1234; 59 A.L.R. 735;
82 A.L.R. 709; also 31 Harv. L. Rev. 619, supra, and 37 Harv. L. Rev. 375.) [4] We are of the opinion that the creation of the
status under the laws of this state is a sufficient jurisdictional basis for the regulation of that relationship within this state
and the creation of incidents thereto which will be recognized within this state, even though the relation was entered
into for purposes connected solely with the rendition of services in another state. If this were not so there could be no
compensation for an injury arising out of and in course of the employment but occurring before the jurisdiction in which
the services were to be performed had been entered, or where [1 Cal.2d 258] that jurisdiction had no compensation
statute. This would seriously interfere with the policy of the act, which is to charge to the industry those losses which it
should rightfully bear, and to provide for the employee injured in the advancement of the interests of that industry, a
certain and prompt recovery commensurate with his loss and, in so doing, lessen the burden of society to care for those
whom industry has deprived, either temporarily or permanently, of the ability to care for themselves. [5] Having a social
interest in the existence within its borders of the employer-employee relationship, the state may, under its police power,
impose reasonable regulations upon its creation in the state. That the imposition of such conditions is in line with the
present-day policy in compensation legislation cannot be doubted. Similar provisions have been upheld and enforced in
Falvey v. Sprague Meter Co., 111 Conn. 693 [151 Atl. 182], Roberts v. I. X. L. Glass Corp., 259 Mich. 644 [244 N.W. 188],
Pederzoli's Case, 269 Mass. 550 [169 N.E. 427], McLaughlin's Case, 274 Mass. 217 [174 N.E. 338], and Migue's Case, 281
Mass. 373 [183 N.E. 847], even though the services were to be performed entirely in another state. It is true that these
acts have elective features, but in the Massachusetts cases the decisions were not placed upon that ground but upon the
legislative intent to cover such situations, the constitutionality of the provision not being discussed although the
question was raised. We consider this a reasonable regulation having a direct relation to the protection of the public,
especially under the facts of the present case, since the employment was to both commence and terminate in this state.
Palma was, under the contract of employment, to be transported from San Francisco to Alaska and back, and was to be
paid off on his return to San Francisco.
 74

Additional points made by the petitioner are that on conflict of laws principles, the Alaska act should govern the
determination of Palma's claim, and that the failure of the commission to recognize the Alaska act, when pleaded as a
defense to this application, was a denial of the full faith and credit to which it was entitled under the federal
Constitution.

It should, first, be observed that in Quong Ham Wah Co. v. Industrial Acc. Com., supra, the court was primarily concerned
[1 Cal.2d 259] in determining the validity of section 58 with reference to article IV, section 2, of the federal Constitution,
and the first clause of section 58, which extended the benefits of the act in connection with injuries abroad only to
residents of this state. The consideration of the nature of the "extraterritorial" effect to be given the act and the
language quoted above was in answer to the argument that the obligation placed on the employer was one which could
only be imposed by the law of the place of injury or of the place of the servant's domicile, and hence that the
qualification of residence was a jurisdictional limitation and not discriminatory. It does not appear that the law of the
place of injury was set up as a defense or that the questions thus presented were urged upon the court in that case.

[6] This phase of the problem is essentially one in conflict of laws. The jurisdiction of both Alaska and California may be
sustained, the one upon the basis of control of the status at the time of the injury, the other upon the basis of control at
its inception. (See American Law Institute, Restatement of Conflict of Laws, Proposed Final Draft No. 4, secs. 434 and
436.) We have been referred to many decisions of state courts, principally later New York decisions modifying Post v.
Burger & Gohlke, supra, which apply the rule that where the contract is for services to be performed exclusively abroad
and the injury is received there, the law of the place of injury will be applied. (Cameron v. Ellis Const. Co., 252 N.Y. 394
[169 N.E. 622]. See, also, MacKesson-Fuller-Morrison Co. v. Industrial Com., 212 Wis. 507 [250 N.W. 396], and discussion
of cases in the notes above cited). But for the most part these cases, as already indicated, deal with the construction of
various acts as intending or not intending a recovery of compensation for injury received abroad where the contract,
made in the state of the forum, contemplated an exclusively foreign employment. In American Liability Ins. Co. v.
McCaffrey, 37 Fed.2d 870, the court applied the rule that a contract made in one state, to be wholly performed in
another, is governed by the law of the state where the performance is to be held. In Ford, Bacon & Davis v. Volentine, 64
Fed.2d 800, which did not decide the question, the problem is stated with regard to optional laws: "Under elective laws
the obligation [1 Cal.2d 260] to make compensation exists because the parties to the employment have expressly or
impliedly agreed to it, surrendering their rights to other adjustment for injuries. Where, as in this case, the entire
performance of the employment is to be in another state, a serious question may exist whether the parties did not really
contract with reference to the law of that other state, which ought accordingly to enter into the contract rather than the
law of the place of its making. ... Many courts, however, disregarding the place where the services are to be rendered,
have considered that an elective compensation act of the place of contract follows the employee wherever he renders
service under the contract, and is to be enforced in suits for injuries in other states unless that compensation act itself
provides against its applying beyond its own state, or unless the public policy of the forum or a lack of necessary
machinery prevents its enforcement."

Our act being compulsory, neither line of reasoning can be applied. The parties cannot be said to have contracted with
reference to the law of either jurisdiction other than as the laws of this state enter into and are a part of every contract
made here, and, as by going into another jurisdiction to perform services under a contract of hire, they submit
themselves to its laws. [7] The attempted selection of the Alaska act as the governing law in section 11 of the contract is
not available to the petitioner. A contract attempting to avoid the liability imposed by the California act is invalid. (Sec.
27[a] of the Workmen's Compensation, Insurance and Safety Act of 1917; San Francisco-Oakland Terminal Rys. v.
Industrial Acc. Com., 180 Cal. 121, 127 [179 P. 386]; Hines v. Industrial Acc. Com., 182 Cal. 359 [188 P. 277].)
 75

Petitioner cites as particularly applicable the following comment following section 434 of the Proposed Final Draft No. 3
of the Restatement of Conflict of Laws, American Law Institute: "The case of employment through an employment
agency in one state where the entire business is carried on in another state, and the applicant is merely sent to the
principal office to report, is specially treated. In such a case the relation is regarded as established not by the action of
the agency, but by the workman reporting for work at the principal office of the business, the transaction [1 Cal.2d 261]
at the employment office not being regarded as definitive hiring. In that case the compensation act of the state where
the workman reported for duty governs liability for injuries." The Restatement on Conflict of Laws has not reached its
final form. The foregoing comment on section 434 does not reflect the general rule, but rather an exception to or
modification of the general rule announced or suggested for approval by the institute in section 434 of the latest
Proposed Draft No. 4, published March 22, 1934, as follows:

"Compensation Under Act of State of Employment. "A workman who enters into a contract of employment in a state in
which a Workmen's Compensation Act is in force can recover compensation under the Act in that state for bodily harm
arising out of and in the course of employment, although the harm was suffered in another state, unless the Act provides
in specific words or is so interpreted as to apply only to bodily harm occurring within the state."

Section 58 of the California act is in accord with the foregoing proposed final draft, and, whether it be in the exact form
to be finally adopted, undoubtedly it reflects the final trend of the law on the subject. If the proposed final draft should
have any bearing on the present case, the general rule as suggested, and not a comment noting an exception or
modification of the general rule, would be the more persuasive.

[8] Furthermore, in the light of the foregoing "comment" we regard the employment agreement pursuant to which the
applicant went aboard the "Chirikof" and was transported to Alaska, as "definitive". The parties both signed the contract.
It apparently contained all the important conditions of the employment. The transportation and the payment of wages,
which were both important incidents of the contract of hire, were not to be performed in Alaska. Moreover, whatever
may be the correct rule in conflict of laws to be applied in the ordinary case of a contract of employment made in this
state, to be performed exclusively in another jurisdiction, such contracts as the present one, which hire itinerant labor in
large groups to be transported out of the state for seasonal work and returned to this state at the end of the season,
constitute a special class of employment contracts in which the state of hiring [1 Cal.2d 262] has an interest at least as
substantial as that of the state in which the temporary and seasonal work is to be performed. The laborer injured in the
course of such employment is, by the terms of his contract of hire, to be returned to that state to become a charge upon
it if he cannot obtain compensation or take care of himself. To leave the applicant to his remedy in Alaska in such a case
would create a great hardship. In this class of employment the employer exercises great control over the presence of the
applicant in either jurisdiction. Should he stay to prosecute his claim in the jurisdiction of the injury it is quite likely that
he would lose his return transportation.

[9] We come now to the question of the recognition to be accorded the Alaska act. The United States Supreme Court has
held in a case where the contract of employment was made in Vermont, the principal employment was located there
and the Vermont statute was elective and clearly exclusive (i. e., precluded, without the necessity of construction, any
recovery under the law of another state); that it was a denial of full faith and credit for the New Hampshire court to
refuse to allow the Vermont act to be set up as a defense to an action in New Hampshire, where the employee was
working temporarily at the time of his injury. (Bradford Electric Light Co. v. Clapper, 268 U.S. 145 [52 S.Ct. 571, 76 L.Ed.
1026, 82 A.L.R. 696].) In Ohio v. Chattanooga Boiler & Tank Co., 289 U.S. 439 [53 S.Ct. 663, 77 L.Ed. 1307], it was held that
it was not a denial of full faith and credit to apply the compulsory law of the state of injury where the contract, made in
Tennessee, provided that the workmen should also serve in other states and the Tennessee act had been interpreted by
the Tennessee courts as not precluding recovery in another state. The conclusion reached herein is not inconsistent with
 76

those cases which have left open the question of what law is applicable where the state of injury is the state where the
major incidents of the employment are located although the contract is made elsewhere. Nor do we here attempt to
decide that question except in the special class of cases now before us. In addition, we may add that it is not ordinarily a
denial of full faith and credit to refuse to apply the law of another jurisdiction on conflicts principles. (See note 46, Harv.
L. [1 Cal.2d 263] Rev. 291.) A fortiori if it cannot by its own terms be administered by the forum in which it is pleaded.

[10] Since we have concluded it was not error for the California Industrial Accident Commission to entertain this
proceeding, it becomes necessary to consider the claim that there is not sufficient evidence to sustain the findings of the
commission that the injury arose out of the employment. The company doctor, who was the only one to examine the
applicant before the operation, or to make a thorough examination at any time, testified that in his opinion the disability
was not caused by an injury but was due to natural causes. Doctor Quinn, on the basis of whose testimony the award
was made, examined the patient upon his return to San Francisco and gave his opinion, basing his conclusion "on the
reports rendered by the attending physicians", that the condition was of traumatic origin. The rule invoked by petitioner
is that of Winthrop v. Industrial Acc. Com., 213 Cal. 351 [2 PaCal.2d 142], and Nielsen v. Industrial Acc. Com., 125 Cal.App.
210 [13 PaCal.2d 517], to the effect that "there was no true conflict in the evidence where that on one side consists of
opinions based on facts not shown by the record to exist, while that on the other side was based upon facts actually
shown to exist or rested on the testimony of physicians who had actually treated and examined the patient". In the
Nielsen case the discredited evidence "rested solely in the opinions of physicians who had not treated, examined or seen
the patient, but who based their opinions upon a statement of the case which in numerous particulars was not a full and
complete statement".

Doctor Quinn's opinion is introduced by the following words: "Discussion of the case: Owing to this man's ignorance it is
impossible to obtain any accurate idea of the condition for which he was operated upon, and it is necessary for me to
base my conclusion on the reports rendered by the attending physicians." This brings the case within the rule of
McNamara v. Industrial Acc. Com., 130 Cal.App. 284, 289 [20 PaCal.2d 53]: "The conclusions of the latter witness were
based on the facts testified to by Dr. Tiffany and on an extended history of the case. It thus appears that the two experts
took into consideration the same facts, but reached different conclusions." [1 Cal.2d 264]

On the second appeal of the Nielsen case it was said by this court, speaking of the Winthrop case: "There was no intent
to hold, and it was not decided, that the opinion of experts who had no personal knowledge of the facts may not raise a
conflict with the testimony and opinion of those whose conclusions are drawn from a personal examination of the
injured employee. The opinion of experts based on hypothetical statements of the facts in the record is competent
evidence. The weight of such evidence is for the commission's determination." (Nielsen v. Industrial Acc. Com., 220 Cal.
118 [29 PaCal.2d 852].)

The award is affirmed.

Auten v. Auten, 281 App. Div. 740, reversed.

APPEAL from a judgment, entered December 1, 1953, upon an order of the Appellate Division of the Supreme Court in
the first judicial department, which (1) affirmed an order of the Supreme Court at Special Term (SCHREIBER, J.),
entered in New York County, granting a motion by defendant for summary judgment dismissing the complaint and (2)
granted leave to serve an amended complaint. (See 306 N.Y. 752.)

HEADNOTES: Conflict of laws - husband and wife - repudiation of separation agreement - (1) wife and husband entered
into separation agreement in New York providing that husband pay stated amount monthly for support of wife and
children, that neither should sue in any action relating to separation, and that wife should not sue in any jurisdiction by
 77

reason of prior Mexican divorce; thereafter wife sued for separation in England; action herein by wife to recover arrears
due her under agreement; husband's motion for summary judgment based on defense that wife's separation action in
England operated as repudiation of agreement, [***2] denied; law of England applicable and thereunder issue exists as
to effect of commencement of separation action on separation agreement - (2) under "grouping of contacts" theory of
conflict of laws, English law would be applied - (3) parties could not have expected that law other than English law would
be applied - (4) moreover, under rule that matters of performance and breach are governed by law of place of
performance, English law would control - (5) husband's contention that wife's commencement of English action
amounted to breach of her covenant not to sue also governed by English law.

1. Defendant husband, who had procured a Mexican divorce, and plaintiff wife entered into a separation agreement in
1933 in New York providing that the husband pay a stated amount monthly to a New York trustee for the account of his
wife, for the support of herself and their children; that neither should sue "in any action relating to their separation", and
that the wife should not "cause any complaint to be lodged against * * * [the husband], in any jurisdiction, by reason of
the said alleged divorce". Immediately after the signing of the agreement, the wife returned to England, where she
[***3] has since lived with the children. In 1934, the wife filed a petition for separation in an English court, but the
action never proceeded to trial. In 1947, the wife brought the present action to recover arrears allegedly due her under
the agreement. Since the law of England must be applied, and since, at the least, an issue exists whether the courts of
that country treat the commencement of a separation action as a repudiation of an earlier-made separation agreement,
the husband's motion for summary judgment, based on his defense of an alleged repudiation by the wife of the
separation agreement, should not have been granted.

2. The "center of gravity" or "grouping of contacts" theory of the conflict of laws emphasizes the law of the place which
has the most significant contacts with the matter in dispute. Examination of the respective contacts with New York and
England indicates that the English law should be applied to determine the effect to be given the wife's institution of the
separation suit in England. The parties were married in England, had children there and lived there as a family for
fourteen years. The husband allegedly had willfully deserted and abandoned the [***4] wife and children in England,
and was in this country on a temporary visa when the agreement was signed. The sole purpose of the wife's trip to New
York was to arrange for defendant to agree to support his family, and she returned to England immediately after the
agreement was executed. The agreement, effecting a separation between British subjects, was drawn with an
understanding that the wife and children would live in England. The only relation of this state with the matter is that it is
the place where the agreement was made and where the trustee had his office.

3. The parties could not have expected or believed that any law other than that of England would govern the effect of
the wife's institution of a separation action.

4. If the rule that matters of performance and breach are governed by the law of the place of performance should be
applied, the law of England would still control.

5. The husband's contention that plaintiff's commencement of the English action amounted to a material breach of his
wife's covenant not to sue, barring recovery on the agreement, is also governed by English law.

COUNSEL: Michael Alexander, Bernard B. Smith and Leonard H. Steibel [***5] for appellant. I. The effect of the English
separation action upon the separation agreement must be determined in accordance with the rule of law applied by the
English courts. ( Rennie v. Rennie, 287 N.Y. 86; Lynde v. Lynde, 41 App. Div. 280, 162 N.Y. 405, 181 U.S. 183; Swift &
 78

Co. v. Bankers Trust Co., 280 N.Y. 135; Myles v. Cuba R.R. Co., 182 Misc. 169; Lann v. United States Steel Works Corp., 166
Misc. 465; Matter of Palmer, 192 Misc. 385, 275 App. Div. 792;Graham v. First Nat. Bank of Norfolk, 84 N.Y.
393; Hutchinson v. Ross, 262 N.Y. 381.) II. Even assuming, arguendo, that the effect of the English separation action upon
the separation agreement must be determined in accordance with the rule of law applied by the courts of New York, the
judgment of the Appellate Division affirming Special Term cannot be sustained. ( Woods v. Bard, 285 N.Y. 11; Krell v. Krell,
192 Misc. 1; Clark v. Kirby, 243 N.Y. 295; Dimick v. Dimick, 230 App. Div. 99; Van Horn v. Van Horn, 196 App. Div.
472; Chamberlain v. Cuming, 37 Misc. 815; Estin v. Estin, 296 N.Y. 308, 334 U.S. 541; [***6] Gifford v. Corrigan, 117 N.Y.
257; Rosmarin v. Rosmarin, 238 App. Div. 798; De Brauwere v. De Brauwere, 203 N.Y. 460; Patino v. Patino, 195 Misc. 887,
278 App. Div. 756, 278 App. Div. 921.)

Saul Hammer for respondent. I. The separation agreement sued upon is governed by the law of the State of New York.
( Bitterman v. Schulman, 265 App. Div. 486; Stumpf v. Hallahan, 101 App. Div. 383, 185 N.Y. 550; Vander Horst v. Kittredge,
229 App. Div. 126; Aronson v. Carobine, 129 Misc. 800; Rennie v. Rennie, 287 N.Y. 86.) II. The law of the contract also
governs the interpretation and legal effect of any acts urged as a defense or discharge of the agreement. ( Benton v. Safe
Deposit Bank, 255 N.Y. 260; Pritchard v. Norton, 106 U.S. 124.) III. The law of domicile does not govern. ( Vander
Horst v. Kittredge, 229 App. Div. 126; Graham v. First Nat. Bank of Norfolk, 84 N.Y. 393; Hutchinson v. Ross, 262 N.Y. 381.)
IV. Appellant repudiated the agreement sued upon by instituting suit against respondent for judicial separation.
( O'Brien v. O'Brien, 252 App. Div. 427; [***7] Hettich v. Hettich, 278 App. Div. 518; Woods v. Bard, 285 N.Y.
11; Krell v. Krell, 192 Misc. 1; Schmelzel v. Schmelzel, 287 N.Y. 21; Dimick v. Dimick, 230 App. Div. 99; Van Horn v. Van
Horn, 196 App. Div. 472.) V. In any event, appellant's breach of the covenants of the agreement barred any subsequent
recovery thereunder. ( Duryea v. Bliven, 122 N.Y. 567; Haskell v. Haskell, 207 App. Div. 723; Muth v. Wuest, 76 App. Div.
332; Matter of Noel, 173 Misc. 844; Cole v. Addison, 153 Ore. 688; Harwood v. Harwood, 182 Misc. 130; Roth v. Roth, 77
Misc. 673; Schmidt v. Schmidt, 74 Misc. 423.) VI. No rights survive to appellant after her repudiation of the separation
agreement.

OPINIONBY: FULD

OPINION: [*158] [**100] FULD, J. In this action to recover installments allegedly due for support and maintenance
under a separation agreement executed in this state in 1933, the wife's complaint has been dismissed, on motion for
summary judgment, upon the ground that her institution of an action for separation in England constituted a repudiation
and a rescission of the agreement under New [***8] York law. Determination of the appeal, involving as it does a
question of conflict of laws, requires examination of the facts disclosed by the papers before us.

Married in England in 1917, Mr. and Mrs. Auten continued to live there with their two children until 1931. In that year,
according to plaintiff, defendant deserted her, came to this country and, in the following year, obtained a Mexican
divorce and proceeded to "marry" another woman. Unable to come to terms with the ocean between them, plaintiff
made a trip to New York City to see and talk to defendant about adjustment of their differences. The outcome was the
separation agreement of June, 1933, upon which the present action is predicated. It obligated the husband to pay to a
trustee, for the "account of" the wife, who was to return to England, the sum of 50 a month for the support of herself
and the children. In addition, the agreement provided that the parties were to continue to live separate and apart, that
neither should sue "in any action relating to their separation" and that the wife should not "cause any complaint to be
lodged against * * * [the husband], in any jurisdiction, by reason of the said alleged [***9] divorce or remarriage".

Immediately after the agreement was signed, plaintiff returned to England, where she has since lived with her children,
 79

and it is alleged by her - but disputed by defendant - that the latter is also domiciled in that country. Be that as it may,
defendant failed to live up to his agreement, making but a few payments under it, with the result that plaintiff was left
more or less destitute in England with the children. About a year after the agreement had been executed, in August of
1934, plaintiff filed a petition for separation in an English court, charging defendant with adultery. Defendant was served
in New York with process in that suit on December 4, 1936, and, in July, 1938, an order was entered requiring defendant
to pay alimony pendente lite. This English action - which, we are told [*159] never proceeded to trial - was instituted
upon advice of English counsel that it "was the only method" by which she "could collect money" from defendant; it was
done, plaintiff expressly declares, to "enable" her "to enforce" the separation agreement, and not with any thought or
intention of repudiating it.

The years passed, and in 1947, having realized [***10] nothing as a result of the English action and little by reason of
the New York separation agreement, plaintiff brought the present suit to recover the sum of $26,564, which represents
the amount allegedly due her, under the agreement, from January 1, 1935 to September 1, 1947.

[**101] In his answer, defendant admitted making the agreement, but, by way of a separate defense - one of several -
claimed that plaintiff's institution of the separation suit in England operated as a repudiation of the agreement and
effected a forfeiture of her right to any payments under it. Following a motion by the wife for summary judgment and a
cross motion by the husband for like relief, the court at Special Term granted the husband's cross motion and dismissed
the complaint. The Appellate Division affirmed, with leave to the wife, however, to serve an amended complaint,
asserting any cause of action which accrued prior to the date of the commencement of the English suit. The ensuing
judgment, dismissing all of the wife's claims which accrued subsequent to that date, is a final judgment of modification,
and the wife's appeal therefrom is properly before us as of right. (306 N.Y. 752; see, also, [***11] Cohen and Karger,
Powers of the New York Court of Appeals, pp. 88-91, 222-223.)

Both of the courts below, concluding that New York law was to be applied, held that under such law plaintiff's
commencement of the English action and the award of temporary alimony constituted a rescission and repudiation of
the separation agreement, requiring dismissal of the complaint. Whether that is the law of this state, or whether
something more must be shown to effect a repudiation of the agreement (cf. Hettich v. Hettich, 304 N.Y. 8, 13-
14; Woods v. Bard, 285 N.Y. 11; Butler v. Butler, 206 App. Div. 214), need not detain us, since in our view it is the law of
England, not that of New York, which is here controlling.

Choosing the law to be applied to a contractual transaction with elements in different jurisdictions is a matter not free
from [*160] difficulty. The New York decisions evidence a number of different approaches to the question. (See,
e.g., Jones v. Metropolitan Life Ins. Co., 158 Misc. 466.)

Most of the cases rely upon the generally accepted rules that "All matters bearing upon the execution, the interpretation
and the validity of contracts [***12] * * * are determined by the law of the place where the contract is made", while
"All matters connected with its performance * * * are regulated by the law of the place where the contract, by its terms,
is to be performed." ( Swift & Co. v. Bankers Trust Co., 280 N.Y. 135, 141; Union Nat. Bank v. Chapman, 169 N.Y. 538, 543;
see, also, Zwirn v. Galento, 288 N.Y. 428; United States Mtge. & Trust Co. v. Ruggles, 258 N.Y. 32, 38; Restatement, Conflict
of Laws, 332, 358; Goodrich on Conflict of Laws [2d ed., 1938], p. 293.) What constitutes a breach of the contract and
what circumstances excuse a breach are considered matters of performance, governable, within this rule, by the law of
the place of performance. (See Richard v. American Union Bank, 241 N.Y. 163, 166-167; Restatement, Conflict of Laws,
370; Goodrich, op. cit., p. 293.)
 80

Many cases appear to treat these rules as conclusive. Others consider controlling the intention of the parties and treat
the general rules merely as presumptions or guideposts, to be considered along with all the other circumstances.
(See Wilson v. Lewiston Mill Co., 150 N.Y. 314, 322-323; Stumpf [***13] v. Hallahan, 101 App. Div. 383, 386, affd. 185
N.Y. 550;Grand v. Livingston, 4 App. Div. 589, affd. 158 N.Y. 688.) And still other decisions, including the most recent one
in this court, have resorted to a method - first employed to rationalize the results achieved by the courts in decided cases
(see Barber Co. v. Hughes, 223 Ind. 570, 586) - which has come to be called the "center of gravity" or the "grouping of
contacts" theory of the conflict of laws. Under this theory, the courts, instead of regarding as conclusive [**102] the
parties' intention or the place of making or performance, lay emphasis rather upon the law of the place "which has the
most significant contacts with the matter in dispute". ( Rubin v. Irving Trust Co., 305 N.Y. 288, 305; see,
also, Jones v. Metropolitan Life Ins. Co., supra, 158 Misc. 466, 469-470; Jansson v. Swedish American Line, 185 F. 2d 212;
[*161] Barber Co. v. Hughes, supra, 223 Ind. 570; Boissevain v. Weil, [1949] 1 K.B. 482, 490-492; Cook, "Contracts" and
the Conflict of Laws: "Intention" of the Parties, 32 Ill. L. Rev. 899, 918-919; Harper, Policy Bases of the Conflict of [***14]
Laws: Reflections on Rereading Professor Lorenzen's Essays, 56 Yale L.J. 1155, 1163-1168; Note, Choice of Law Problems
in Direct Actions Against Indemnification Insurers, 3 Utah L. Rev. 490, 498-499.)

Although this "grouping of contacts" theory may, perhaps, afford less certainty and predictability than the rigid general
rules (see Note, op. cit., 3 Utah L. Rev. 490, 498), the merit of its approach is that it gives to the place "having the most
interest in the problem" paramount control over the legal issues arising out of a particular factual context, thus allowing
the forum to apply the policy of the jurisdiction "most intimately concerned with the outcome of [the] particular
litigation" (3 Utah L. Rev., pp. 498-499). Moreover, by stressing the significant contacts, it enables the court, not only to
reflect the relative interests of the several jurisdictions involved (see Vanston Committee v. Green, 329 U.S. 156, 161-
162), but also to give effect to the probable intention of the parties and consideration to "whether one rule or the other
produces the best practical result". ( Swift & Co. v. Bankers Trust Co., supra, 280 N.Y. 135, 141; see Vanston
Committee [***15] v. Green, supra, 329 U.S. 156, 161-162.)

Turning to the case before us, examination of the respective contacts with New York and England compels the conclusion
that it is English law which must be applied to determine the impact and effect to be given the wife's institution of the
separation suit n1. It hardly needs stating that it is England which has all the truly significant contacts, while this state's
sole nexus with the matter in dispute - entirely fortuitous, at that - is that it is the place where the agreement was made
and where the trustee, to whom the moneys were in the first [*162] instance to be paid, had his office. The agreement
effected a separation between British subjects, who had been married in England, had children there and lived there as a
family for fourteen years. It involved a husband who, according to the papers before us, had willfully deserted and
abandoned his wife and children in England and was in the United States, when the agreement was signed, merely on a
temporary visa. And it concerned an English wife who came to this country at that time because it was the only way she
could see her husband to discuss their differences. The sole [***16] purpose of her trip to New York was to get
defendant to agree to the support of his family, and she returned to England immediately after the agreement was
executed. While the moneys were to be paid through the medium of a New York trustee, such payments were "for
account of" the wife and children, who, it was thoroughly understood, were to live in England. The agreement is instinct
with that understanding; not only does it speak in terms of English currency in providing for payments to the wife, not
only does it recite that the first payment be made to her "immediately before sailing for England", but it specifies that
the husband may visit the children "if he should go to England".

n1. Our decision in Rennie v. Rennie (287 N.Y. 86) casts no light on the problem. The court did not there consider whether
 81

it is the law of the place where the separation agreement was made or of the jurisdiction where the separation suit or
other judicial proceeding was brought which determines the effect that such action may have upon the agreement.

[**103] In short, then, the agreement determined and fixed the marital responsibilities of an English husband and
father and provided [***17] for the support and maintenance of the allegedly abandoned wife and children who were
to remain in England. It merely substituted the arrangements arrived at by voluntary agreement of the parties for the
duties and responsibilities of support that would otherwise attach by English law. There is no question that England has
the greatest concern in prescribing and governing those obligations, and in securing to the wife and children essential
support and maintenance. And the paramount interest of that country is not affected by the fact that the parties
separate and provide for such support by a voluntary agreement. It is still England, as the jurisdiction of marital domicile
and the place where the wife and children were to be, that has the greatest concern in defining and regulating the rights
and duties existing under that agreement, and, specifically, in determining the circumstances that effect a termination or
repudiation of the agreement.

[*163] Nor could the parties have expected or believed that any law other than England's would govern the effect of
the wife's institution of a separation action. It is most unlikely that the wife could have intended to subject her [***18]
rights under English law to the law of a jurisdiction several thousand miles distant, with which she had not the slightest
familiarity. On the contrary, since it was known that she was returning to England to live, both parties necessarily realized
that any action which she took, whether in accordance with the agreement or in violation of it, would have to occur in
England. If any thought was given to the matter at all, it was that the law of the place where she and the children would
be should determine the effect of acts performed by her.

It is, perhaps, not inappropriate to note that, even if we were not to place our emphasis on the law of the place with the
most significant contacts, but were instead simply to apply the rule that matters of performance and breach are
governed by the law of the place of performance, the same result would follow. Whether or not there was a repudiation,
essentially a form of breach (see Restatement, Contracts, 318; 4 Corbin on Contracts [1951], 954, pp. 829-834), is also
to be determined by the law of the place of performance (cf. Wester v. Casein Co. of America, 206 N.Y. 506; Restatement,
Conflict of Laws, 370, Caveat [***19] ), and that place, so far as the wife's performance is concerned, is England.
Whatever she had to do under the agreement - "live separate and apart from" her husband, "maintain, educate and
support" the children and refrain from bringing "any action relating to [the] separation" - was to be done in England.
True, the husband's payments were to be made to a New York trustee for forwarding to plaintiff in England, but that is of
no consequence in this case. It might be, if the question before us involved the manner or effect of payment to the
trustee, but that is not the problem; we are here concerned only with the effect of the wife's performance.
(Cf. Zwirn v. Galento, supra, 288 N.Y. 428, 433.)

Since, then, the law of England must be applied, and since, at the very least, an issue exists as to whether the courts of
that country treat the commencement of a separation action as a [*164] repudiation of an earlier-made separation
agreement, summary judgment should not have been granted n2.

n2. In point of fact, the English lawyers, whose affidavits have been submitted by plaintiff, unequivocally opine that the
institution of a separation suit and the award of alimonypendente lite did not, under the law of England, constitute a
repudiation of the separation agreement or bar the present action to recover amounts due under it. [***20]

As to defendant's further contention that, in any event, plaintiff's commencement of the English action amounted to a
 82

[**104] material breach of her covenant not to sue, barring recovery upon the agreement, we need but say that this
question, too, must be governed by English law, and for the same reasons already set forth.

The judgment of the Appellate Division and that of Special Term insofar as they dismiss the complaint should be
reversed, with costs in all courts, and the matter remitted for further proceedings in accordance with this opinion.

ULD, J.

This appeal is concerned with the effect in New York of an agreement made in another State for the support of a child
born out of wedlock.

The complainant Dorothy Haag alleges that in 1947 she moved from Minnesota and took up residence in New York City
and that since then she has been a resident of this State. The defendant Norman Barnes, on the other hand, is now and
was, during the period involved in this litigation, a resident of Illinois.

According to the statements contained in the complainant's affidavits, she met the defendant in the spring of 1954 in
New York. She was a law secretary and had been hired by the defendant through an agency to do work for him while he
was in New York on one of his business trips. The relationship between the man and the girl soon "ripened into
friendship" and, on the basis of representations that he loved her and planned to divorce his wife and marry her, she was
"importuned" into having sexual relations with him.

The complainant further alleges that she became pregnant as a result of having sexual relations with the defendant and
that, upon being informed of this, he asked her to move to Illinois to be near him. She refused and, instead, went to live
in California with her sister to await the birth of her child. Fearing that the defendant was losing interest in her, however,
she returned to Chicago before the child was born and, upon attempting to communicate with the defendant, was
referred to his attorney. The latter told Dorothy to choose a hospital in Chicago, which she did, and the baby was born
there in December, 1955, the defendant paying the expenses.

Shortly after the birth of the child, her attempts to see the defendant in New York failed and she was advised by his
attorney to return to Chicago in order that an agreement might be made for the support of her and her child. Returning
to that city, she procured an attorney, recommended by a friend in New York, and signed an agreement on January 12,
1956. The agreement provides, in pertinent part, as follows:

1. It recites payment to the complainant by the defendant of $2,000 between September, 1955 and January, 1956 and a
willingness on his part to support her child in the future, on condition that such payments "shall not constitute an
admission" that he is the child's father;

2. The defendant promises to pay $50 a week and $75 a month, i.e., a total of $275 a month, "continuing while [the
child] is alive and until she attains the age of sixteen years";

3. The complainant agrees "to properly support, maintain, educate, and care for [the child]";

4. The complainant agrees to keep the child in Illinois for at least two years, except if she marries within that period;

5. The complainant "remise[s], release[s] and forever discharge[s] NORMAN BARNES * * * from all manner of actions * *
* which [she] now has against [him] or ever had or which she * * * hereafter can, shall or may have, for, upon or by
reason of any matter, cause or thing whatsoever * * * including * * * the support of [the child]"; and
 83

6. The parties agree that their agreement "shall in all respects be interpreted, construed and governed by the laws of the
State of Illinois".

Shortly after the agreement was signed, the complainant received permission, pursuant to one of its provisions, to live in
California where she remained for two years. She then returned to New York where she and her child have ever since
been supported by the defendant in full compliance with the terms of his agreement. In fact, he has provided sums far in
excess of his agreement; all told, we were informed on oral argument, the defendant has paid the complainant some
$30,000.

The present proceeding was instituted in 1959 by the service of a complaint and the defendant was thereafter arrested
pursuant to section 64 of the New York City Criminal Courts Act. A motion, made by the defendant, to dismiss the
proceeding was granted by the Court of Special Sessions and the resulting order was affirmed by the Appellate Division.

The ground urged for dismissal was that the parties had entered into an agreement providing for the support of the child
which has been fully performed; that in this agreement the complainant relinquished the right to bring any action for the
support of the child; and that, in any event, the action is precluded by the laws of the State of Illinois which, the parties
expressly agreed, would govern their rights under the agreement. In opposition, the complainant contended that New
York, not Illinois, law applies; that the agreement in question is not a sufficient basis for a motion to dismiss under either
section 63 of the New York City Criminal Courts Act or section 121 of the Domestic Relations Law, since both of these
provisions provide that "An agreement or compromise made by the mother * * * shall be binding only when the court
shall have determined that adequate provision has been made"; and that, even were the Illinois law to apply, it does not
bar the present proceeding.

The motion to dismiss was properly granted; the complainant may not upset a support agreement which is itself
perfectly consistent with the public policy of this State, which was entered into in Illinois with the understanding that it
would be governed by the laws of that State and which constitutes a bar to a suit for further support under Illinois law.

The complainant is correct in her position that, since the agreement was not court approved, it may not be held to be a
bar to her suit under New York internal law. (See N.Y. City Crim. Cts. Act, 63; Domestic Relations Law, 121.) On the
other hand, it is clear that the agreement is a bar under the internal law of Illinois since it provides, in the language of
that State's statute, for a "sum not less than eight hundred dollars". (See Ill. Rev. Stat., former ch. 17, 18, amd. by
former ch. 17, 52 [now ch. 106 3/4, 65].) The simple question before us, therefore, is whether the law of New York or
of Illinois applies.

The traditional view was that the law governing a contract is to be determined by the intention of the parties.
(See Wilson v. Lewiston Mill Co., 150 N.Y. 314, 322-323; Stumpf v. Hallahan, 101 App. Div. 383, 386, affd. 185 N.Y.
550; Grand v. Livingston, 4 App. Div. 589, affd. 158 N.Y. 688.)

The more modern view is that "the courts, instead of regarding as conclusive the parties' intention or the place of
making or performance, lay emphasis rather upon the law of the place `which has the most significant contacts with the
matter in dispute'". (See Auten v. Auten, 308 N.Y. 155, 160; see, also, Rubin v. Irving Trust Co., 305 N.Y. 288, 305.)
Whichever of these views one applies in this case, however, the answer is the same, namely, that Illinois law applies.

The agreement, in so many words, recites that it "shall in all respects be interpreted, construed and governed by the laws
of the State of Illinois" and, since it was also drawn and signed by the complainant in Illinois, the traditional conflicts rule
would, without doubt, treat these factors as conclusive and result in applying Illinois law. But, even if the parties'
 84

intention and the place of the making of the contract are not given decisive effect, they are nevertheless to be given
heavy weight in determining which jurisdiction "`has the most significant contacts with the matter in dispute'".
( Auten v. Auten, 308 N.Y. 155, 160, supra.) And, when these important factors are taken together with other of the
"significant contacts" in the case, they likewise point to Illinois law. Among these other Illinois contacts are the following:
(1) both parties are designated in the agreement as being "of Chicago, Illinois", and the defendant's place of business is
and always has been in Illinois; (2) the child was born in Illinois; (3) the persons designated to act as agents for the
principals (except for a third alternate) are Illinois residents, as are the attorneys for both parties who drew the
agreement; and (4) all contributions for support always have been, and still are being, made from Chicago.

Contrasted with these Illinois contacts, the New York contacts are of far less weight and significance. Chief among these
is the fact that child and mother presently live in New York and that part of the "liaison" took place in New York.

When these contacts are measured against the parties' clearly expressed intention to have their agreement governed by
Illinois law and the more numerous and more substantial Illinois contacts, it may not be gainsaid that the "center of
gravity" of this agreement is Illinois and that, absent compelling public policy to the contrary (see Straus Co. v.Canadian
Pacific Ry. Co., 254 N.Y. 407, 414), Illinois law should apply.

As to the question of public policy, we would emphasize that the issue is not whether the New York statute reflects a
different public policy from that of the Illinois statute, but rather whether enforcement of the particular agreement
before us under Illinois law represents an affront to our public policy. (Cf. Loucks v. Standard Oil Co., 224 N.Y. 99,
111; Mertz v. Mertz, 271 N.Y. 466, 471; Restatement 2d, Conflict of Laws, Tentative Draft No. 6, 332a, comment g.) It is
settled that the New York Paternity Law requires something more than the provision of "the bare necessities otherwise
required to be supplied by the community", that, "although providing for indemnification of the community, [it] is chiefly
concerned with the welfare of the child". (See Schaschlo v. Taishoff, 2 N.Y.2d 408, 411.) In our judgment, enforcement of
the support agreement in this case under Illinois law and the refusal to allow its provisions to be reopened in the present
proceeding does not do violence to this policy.

As matter of fact, the agreement before us clearly goes beyond "indemnification of the community" and the provision of
"bare necessities". Whether we read it as a whole, or look only to the financial provisions concerned ($275 a month until
the child reaches the age of 16), we must conclude that "the welfare of the child" is fully protected.
(See Rhyne v. Katleman, 285 App. Div. 114 0, affg. 206 Misc. 202 [$10,000 lump sum held sufficient].)

The public policy of this State having been satisfied, there is no reason why we should not enforce the provisions of the
parties' support agreement under Illinois law and treat the agreement as a bar to the present action for support.

The order of the Appellate Division should be affirmed.

Chief Judge DESMOND and Judges DYE, FROESSEL, VAN VOORHIS, BURKE and FOSTER concur.

Order affirmed.

[G.R. No. 122191. October 8, 1998]

SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in
his capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon City, respondents.
 85

DECISION

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the Resolution[1] dated
September 27, 1995 and the Decision[2] dated April 10, 1996 of the Court of Appeals[3] in CA-G.R. SP No. 36533,[4] and
the Orders[5] dated August 29, 1994[6] and February 2, 1995[7] that were issued by the trial court in Civil Case No. Q-93-
18394.[8]

The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned Decision[9], are as
follows:

On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia.
xxx

On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members
Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning when they returned to
their hotels, they agreed to have breakfast together at the room of Thamer. When they were in te (sic) room, Allah left
on some pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security
personnel heard her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-
Gazzawi, the latter as an accomplice.

When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta
incident. They then requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta,
SAUDIA Legal Officer Sirah Akkad and base manager Baharini negotiated with the police for the immediate release of the
detained crew members but did not succeed because plaintiff refused to cooperate. She was afraid that she might be
tricked into something she did not want because of her inability to understand the local dialect. She also declined to sign
a blank paper and a document written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but
barred her from the Jakarta flights.

Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.Eventually, they were again put in service by defendant SAUDI
(sic). In September 1990, defendant SAUDIA transferred plaintiff to Manila.

On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors
requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her passport and questioned her about the Jakarta
incident.Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against
Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.

One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to
Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case
against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
 86

Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27,
1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi,
that the investigation was routinary and that it posed no danger to her.

In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but
on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her
that the airline had forbidden her to take flight. At the Inflight Service Office where she was told to go, the secretary of
Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.

On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment
and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286
lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened
in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the music in
violation of Islamic laws; and (3) socializing with the male crew, in contravention of Islamic tradition.[10]

Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied
any assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to
pay for her upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the
international flights.[11]

Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave
Saudi Arabia. Shortly before her return to Manila,[12] she was terminated from the service by SAUDIA, without her being
informed of the cause.

On November 23, 1993, Morada filed a Complaint[13] for damages against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its
country manager.

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss[14] which raised the following grounds, to wit: (1) that
the Complaint states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that
the claim or demand set forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the
trial court has no jurisdiction to try the case.

On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss)[15] Saudia filed a reply[16] thereto on March
3, 1994.

On June 23, 1994, Morada filed an Amended Complaint[17] wherein Al-Balawi was dropped as party defendant. On
August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss Amended Complaint[18].

The trial court issued an Order[19] dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by
Saudia.

From the Order of respondent Judge[20] denying the Motion to Dismiss, SAUDIA filed on September 20, 1994, its Motion
for Reconsideration[21] of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and
try the case on the basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi
Arabia.On October 14, 1994, Morada filed her Opposition[22] (To Defendants Motion for Reconsideration).
 87

In the Reply[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration
raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for
the first time on appeal. Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the
prosecution of the instant case, and hence, without jurisdiction to adjudicate the same.

Respondent Judge subsequently issued another Order[24] dated February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed Order reads as follows:

Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994,
and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of
defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs
Amended Complaint, which is one for the recovery of actual, moral and exemplary damages plus attorneys fees, upon
the basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the
jurisdiction of this Court as regards the subject matter, and there being nothing new of substance which might cause the
reversal or modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is
DENIED.

SO ORDERED.[25]

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of
Writ of Preliminary Injunction and/or Temporary Restraining Order[26] with the Court of Appeals.

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order[27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim.

In another Resolution[28] promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIAs
Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit:

The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with
Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner
is not clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993,
Second Division).

SO ORDERED.

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition[29] for Review with Prayer for
Temporary Restraining Order dated October 13, 1995.

However, during the pendency of the instant Petition, respondent Court of Appeals rendered the Decision[30] dated
April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended
Complaints basis for recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of
respondent Court. It further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as
the petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an appeal.

On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining
Order[31] dated April 30, 1996, given due course by this Court. After both parties submitted their Memoranda,[32] the
instant case is now deemed submitted for decision.

Petitioner SAUDIA raised the following issues:

 88

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the New Civil Code
since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case involves what is known in
private international law as a conflicts problem. Otherwise, the Republic of the Philippines will sit in judgment of the acts
done by another sovereign state which is abhorred.

II.

Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the matter as to absence
of leave of court is now moot and academic when this Honorable Court required the respondents to comment on
petitioners April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order Within Ten
(10) Days From Notice Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to
Section 2, Rule 1 thereof.

III.

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled Saudi Arabian
Airlines v. Hon. Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A
Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-day reglementary period as provided for
under Section 1, Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet
become final and executory and this Honorable Court can take cognizance of this case.[33]

From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:

I.

WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI ARABIAN
AIRLINES.

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private
respondents claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a
foreign element qualifies the instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of
the lex loci delicti commissi rule.[34]

On the other hand, private respondent contends that since her Amended Complaint is based on Articles 19[35] and
21[36] of the Civil Code, then the instant case is properly a matter of domestic law.[37]

Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two
states, the Philippines and Saudi Arabia.

As stated by private respondent in her Amended Complaint[38] dated June 23, 1994:
 89

2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It
may be served with summons and other court processes at Travel Wide Associated Sales (Phils.), Inc., 3rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.

xxxxxxxxx

6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.Eventually, they were again put in service by defendant
SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila.

7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors
requested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her passport and questioned her about the Jakarta
incident.Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against
Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.

8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight
to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case
against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.

9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June
27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam
Saleemi, that the investigation was routinary and that it posed no danger to her.

10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then
but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer
told her that the airline had forbidden her to take that flight. At the Inflight Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until
further orders.

11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her
astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment
and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what
happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition.

12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippine Embassy in
Jeddah. The latter helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the
domestic flights of defendant SAUDIA while, ironically, Thamer and Allah freely served the international flights.[39]

Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that
the problem herein could present a conflicts case.
 90

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to
contain a foreign element. The presence of a foreign element is inevitable since social and economic affairs of individuals
and associations are rarely confined to the geographic limits of their birth or conception.[40]

The forms in which this foreign element may appear are many.[41] The foreign element may simply consist in the fact
that one of the parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one
State involves properties situated in another State. In other cases, the foreign element may assume a complex form.[42]

In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine
national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with
the petitioner Saudia as a flight stewardess, events did transpire during her many occasions of travel across national
borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation to
arise.

We thus find private respondents assertion that the case is purely domestic, imprecise. A conflicts problem presents
itself here, and the question of jurisdiction[43] confronts the court a quo.

After a careful study of the private respondents Amended Complaint,[44] and the Comment thereon, we note that she
aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code.

On one hand, Article 19 of the New Civil Code provides;

Art. 19. 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.

On the other hand, Article 21 of the New Civil Code provides:

Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for damages.

Thus, in Philippine National Bank (PNB) vs. Court of Appeals,[45] this Court held that:

The aforecited provisions on human relations were intended to expand the concept of torts in this jurisdiction by
granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to
specifically provide in the statutes.

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private
respondents assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the
municipal forum.

Based on the allegations[46] in the Amended Complaint, read in the light of the Rules of Court on jurisdiction[47] we find
that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the subject matter of the suit.[48] Its
authority to try and hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, is hereby
amended to read as follows:

SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction:

xxxxxxxxx
 91

(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorneys 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 above-mentioned items exceeds Two hundred
Thousand pesos (P200,000.00). (Emphasis ours)

xxxxxxxxx

And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe venue, Quezon City, is appropriate:

SEC. 2 Venue in Courts of First Instance. [Now Regional Trial Court]

(a) x x x x x x x x x

(b) Personal actions. All other actions may be commenced and tried where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff.

Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City
assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is
quite obvious. Relative advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an
inconvenient forum, vex, harass, or oppress the defendant, e.g. by inflicting upon him needless expense or
disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice of forum should rarely be
disturbed.[49]

Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it
refused to take cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action
elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer maintains substantial connections. That would have
caused a fundamental unfairness to her.

Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by
either of the parties. The choice of forum of the plaintiff (now private respondent) should be upheld.

Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and
Amended Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the
court.

The records show that petitioner SAUDIA has filed several motions[50] praying for the dismissal of Moradas Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and
explicit from the motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA
has effectively submitted to the trial courts jurisdiction by praying for the dismissal of the Amended Complaint on
grounds other than lack of jurisdiction.

As held by this Court in Republic vs. Ker and Company, Ltd.:[51]

We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower courts jurisdiction over
defendants person, prayed for dismissal of the complaint on the ground that plaintiffs cause of action has prescribed. By
interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis
of which it prayed the court to resolve controversy in its favor. For the court to validly decide the said plea of defendant
Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latters person, who, being the proponent of the
 92

affirmative defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the
jurisdiction of the court.

Similarly, the case of De Midgely vs. Ferandos, held that:

When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must
be for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose
than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the
court.A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person
will be held to be a general appearance, if the party in said motion should, for example, ask for a dismissal of the action
upon the further ground that the court had no jurisdiction over the subject matter.[52]

Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial
court has jurisdiction over the case and that its exercise thereof, justified.

As to the choice of applicable law, we note that choice-of-law problems seek to answer two important
questions: (1) What legal system should control a given situation where some of the significant facts occurred in two or
more states; and (2) to what extent should the chosen legal system regulate the situation.[53]

Several theories have been propounded in order to identify the legal system that should ultimately control. Although
ideally, all choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not
always do so. The forum is then faced with the problem of deciding which of these two important values should be
stressed.[54]

Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules
fall. This process is known as characterization, or the doctrine of qualification. It is the process of deciding whether or not
the facts relate to the kind of question specified in a conflicts rule.[55] The purpose of characterization is to enable the
forum to select the proper law.[56]

Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact.[57] An essential
element of conflict rules is the indication of a test or connecting factor or point of contact. Choice-of-law rules invariably
consist of a factual relationship (such as property right, contract claim) and a connecting factor or point of contact, such
as the situsof the res, the place of celebration, the place of performance, or the place of wrongdoing.[58]

Note that one or more circumstances may be present to serve as the possible test for the determination of the
applicable law.[59] These test factors or points of contact or connecting factors could be any of the following:

(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;

(2) the seat of a legal or juridical person, such as a corporation;

(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is
decisive when real rights are involved;

(4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage
celebrated, a will signed or a tort committed.The lex loci actus is particularly important in contracts and torts;

(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the
place where a power of attorney is to be exercised;
 93

(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis;

(7) the place where judicial or administrative proceedings are instituted or done. The lex forithe law of the forumis
particularly important because, as we have seen earlier, matters of procedure not going to the substance of the claim
involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign
law is excluded from application in a given case for the reason that it falls under one of the exceptions to the applications
of foreign law; and

(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or
owner as such. It also covers contractual relationships particularly contracts of affreightment.[60] (Underscoring ours.)

After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed submitted for
purposes of the motion to dismiss, we are convinced that there is reasonable basis for private respondents assertion that
although she was already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely
testify in an investigation of the charges she made against the two SAUDIA crew members for the attack on her person
while they were in Jakarta. As it turned out, she was the one made to face trial for very serious charges, including
adultery and violation of Islamic laws and tradition.

There is likewise logical basis on record for the claim that the handing over or turning over of the person of private
respondent to Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioners purported act
contributed to and amplified or even proximately caused additional humiliation, misery and suffering of private
respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private respondent under
the guise of petitioners authority as employer, taking advantage of the trust, confidence and faith she reposed upon
it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment of private respondent was
wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner
could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.

Considering that the complaint in the court a quo is one involving torts, the connecting factor or point of contact could
be the place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts
case, we find that the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took
place). This is because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina residing
and working here. According to her, she had honestly believed that petitioner would, in the exercise of its rights and in
the performance of its duties, act with justice, give her her due and observe honesty and good faith. Instead, petitioner
failed to protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of no
moment. For in our view what is important here is the place where the over-all harm or the fatality of the alleged injury
to the person, reputation, social standing and human rights of complainant, had lodged, according to the plaintiff below
(herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort.

Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on
tort liability[61] have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with
the modern theories on tort liability, we find here an occasion to apply the State of the most significant relationship rule,
which in our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the following contacts are to
be taken into account and evaluated according to their relative importance with respect to the particular issue: (a) the
place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence,
 94

nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any,
between the parties is centered.[62]

As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is
likewise no question that private respondent is a resident Filipina national, working with petitioner, a resident foreign
corporation engaged here in the business of international air carriage. Thus, the relationship between the parties was
centered here, although it should be stressed that this suit is not based on mere labor law violations. From the record,
the claim that the Philippines has the most significant contact with the matter in this dispute,[63] raised by private
respondent as plaintiff below against defendant (herein petitioner), in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place having the most
interest in the problem, we find, by way of recapitulation, that the Philippine law on tort liability should have paramount
application to and control in the resolution of the legal issues arising out of this case. Further, we hold that the
respondent Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable petitioners insistence
that [s]ince private respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law
on the matter.[64] As aptly said by private respondent, she has no obligation to plead and prove the law of the Kingdom
of Saudi Arabia since her cause of action is based on Articles 19 and 21 of the Civil Code of the Philippines. In her
Amended Complaint and subsequent pleadings she never alleged that Saudi law should govern this case.[65] And as
correctly held by the respondent appellate court, considering that it was the petitioner who was invoking the
applicability of the law of Saudi Arabia, thus the burden was on it [petitioner] to plead and to establish what the law of
Saudi Arabia is.[66]

Lastly, no error could be imputed to the respondent appellate court in upholding the trial courts denial of defendants
(herein petitioners) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal
after trial was obviously available, and the expeditious trial itself indicated by the nature of the case at hand. Indubitably,
the Philippines is the state intimately concerned with the ultimate outcome of the case below not just for the benefit of
all the litigants, but also for the vindication of the countrys system of law and justice in a transnational setting. With
these guidelines in mind, the trial court must proceed to try and adjudge the case in the light of relevant Philippine law,
with due consideration of the foreign element or elements involved. Nothing said herein, of course, should be construed
as prejudging the results of the case in any manner whatsoever.

WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P.
Morada vs. Saudi Arabia Airlines is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further
proceedings.

SECOND DIVISION

CRESCENT PETROLEUM, LTD., G.R. No. 155014 Petitioner,

Present:
Puno, J.,
- versus - Chairman,
Austria-Martinez,
Callejo, Sr.,
Tinga, and
*
Chico-Nazario, JJ.
 95

M/V LOK MAHESHWARI,

THE SHIPPING CORPORATION
OF INDIA, and PORTSERV LIMITED Promulgated:
and/or TRANSMAR SHIPPING, INC.,
Respondents. November 11, 2005
x--------------------------------------------------x

This petition for review on certiorari under Rule 45 seeks the (a) reversal of the November 28, 2001
Decision of the Court of Appeals in CA-G.R. No. CV-54920,[1] which dismissed for want of jurisdiction the
instant case, and the September 3, 2002 Resolution of the same appellate court,[2] which denied
petitioners motion for reconsideration, and (b) reinstatement of the July 25, 1996 Decision[3] of the
Regional Trial Court (RTC) in Civil Case No. CEB-18679, which held that respondents were solidarily
liable to pay petitioner the sum prayed for in the complaint.

The facts are as follows: Respondent M/V Lok Maheshwari (Vessel) is an oceangoing vessel of Indian
registry that is owned by respondent Shipping Corporation of India (SCI), a corporation organized and
existing under the laws of India and principally owned by the Government of India. It was time-chartered
by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-
chartered the Vessel through a time charter to Transmar Shipping, Inc. (Transmar). Transmar further sub-
chartered the Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations
organized and existing under the laws of Canada.

On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent), a
corporation organized and existing under the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing vessels, to deliver marine fuel oils
(bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through an advice via
facsimile dated November 2, 1995. As security for the payment of the bunker fuels and related services,
petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and US$200,000.00. Thus,
petitioner Crescent contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another
Canadian corporation, for the physical delivery of the bunker fuels to the Vessel.

On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544
inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada.
The Chief Engineer Officer of the Vessel duly acknowledged and received the delivery receipt. Marine
Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check was
duly encashed.

Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21, 1995 to
Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers of M/V Lok
Maheshwari in the amount of US$103,544.00 with instruction to remit the amount on or before
December 1, 1995. The period lapsed and several demands were made but no payment was received.
Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were
dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses
of US$8,572.61 for interest, tracking fees, and legal fees.
 96

On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent instituted before
the RTC of Cebu City an action for a sum of money with prayer for temporary restraining order and writ of
preliminary attachment against respondents Vessel and SCI, Portserv and/or Transmar. The case was
raffled to Branch 10 and docketed as Civil Case No. CEB-18679.

On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at P2,710,000.00.
Petitioner Crescent withdrew its prayer for a temporary restraining order and posted the required bond.

On May 18, 1996, summonses were served to respondents Vessel and SCI, and Portserv and/or Transmar
through the Master of the Vessel. On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte motion to approve Pioneers letter of
undertaking, to consider it as counter-bond and to discharge the attachment. On May 29, 1996, the trial
court granted the motion; thus, the letter of undertaking was approved as counter-bond to discharge the
attachment.

For failing to file their respective answers and upon motion of petitioner Crescent, the trial court declared
respondents Vessel and SCI, Portserv and/or Transmar in default. Petitioner Crescent was allowed to
present its evidence ex-parte.

On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff [Crescent] and
against the defendants [Vessel, SCI, Portserv and/or Transmar].

Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the following:

(a) the sum of US$103,544.00, representing the outstanding obligation;

(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per annum for the period
thereafter, until the principal account is fully paid;

(c) attorneys fees of P300,000.00; and

(d) P200,000.00 as litigation expenses.

SO ORDERED.

On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals. They attached copies of
the charter parties between respondent SCI and Halla, between Halla and Transmar, and between
Transmar and Portserv. They pointed out that Portserv was a time charterer and that there is a clause in
the time charters between respondent SCI and Halla, and between Halla and Transmar, which states that
 97

the Charterers shall provide and pay for all the fuel except as otherwise agreed. They submitted a copy of
Part II of the Bunker Fuel Agreement between petitioner Crescent and Portserv containing a stipulation
that New York law governs the construction, validity and performance of the contract. They likewise
submitted certified copies of the Commercial Instruments and Maritime Lien Act of the United States
(U.S.), some U.S. cases, and some Canadian cases to support their defense.

On November 28, 2001, the Court of Appeals issued its assailed Decision, which reversed that of the trial
court, viz:

WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the Regional Trial Court of
Cebu City, Branch 10, is hereby REVERSED and SET ASIDE, and a new one is entered DISMISSING the
instant case for want of jurisdiction.

The appellate court denied petitioner Crescents motion for reconsideration explaining that it dismissed
the instant action primarily on the ground of forum non conveniensconsidering that the parties are
foreign corporations which are not doing business in the Philippines.

Hence, this petition submitting the following issues for resolution, viz:

1. Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the
enforcement of a maritime lien against said vessel and/or its owners and operators;

2. The principle of forum non conveniens is inapplicable to the instant case;

3. The trial court acquired jurisdiction over the subject matter of the instant case, as well as over
the res and over the persons of the parties;

4. The enforcement of a maritime lien on the subject vessel is expressly granted by law. The Ship
Mortgage Acts as well as the Code of Commerce provides for relief to petitioner for its unpaid claim;

5. The arbitration clause in the contract was not rigid or inflexible but expressly allowed
petitioner to enforce its maritime lien in Philippine courts provided the vessel was in the Philippines;

6. The law of the state of New York is inapplicable to the present controversy as the same has not
been properly pleaded and proved;

7. Petitioner has legal capacity to sue before Philippine courts as it is suing upon an isolated
business transaction;

8. Respondents were duly served summons although service of summons upon respondents is
not a jurisdictional requirement, the action being a suit quasi in rem;

9. The trial courts decision has factual and legal bases; and,
 98

10. The respondents should be held jointly and solidarily liable.

In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign supplier in a foreign
port to a vessel of foreign registry that is owned, chartered and sub-chartered by foreign entities.

Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive original
jurisdiction (i)n all actions in admiralty and maritime where the demand or claim exceeds two hundred
thousand pesos (P200,000) or in Metro Manila, where such demand or claim exceeds four hundred
thousand pesos (P400,000). Two (2) tests have been used to determine whether a case involving a
contract comes within the admiralty and maritime jurisdiction of a court - the locational test and
the subject matter test. The English rule follows the locational test wherein maritime and admiralty
jurisdiction, with a few exceptions, is exercised only on contracts made upon the sea and to be executed
thereon. This is totally rejected under the American rule where the criterion in determining whether a
contract is maritime depends on the nature and subject matter of the contract, having reference to
maritime service and transactions.[4] In International Harvester Company of the Philippines v. Aragon,
[5] we adopted the American rule and held that (w)hether or not a contract is maritime depends not on
the place where the contract is made and is to be executed, making the locality the test, but on the subject
matter of the contract, making the true criterion a maritime service or a maritime transaction.

A contract for furnishing supplies like the one involved in this case is maritime and within the jurisdiction
of admiralty.[6] It may be invoked before our courts through an action in rem or quasi in rem or an
action in personam. Thus: [7]

xxx

Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not only the
liens created under Section 580 but also for the collection of any kind of lien whatsoever.[8] In the
Philippines, we have a complete legislation, both substantive and adjective, under which to bring an
action in rem against a vessel for the purpose of enforcing liens. The substantive law is found in Article
580 of the Code of Commerce. The procedural law is to be found in Article 584 of the same Code. The
result is, therefore, that in the Philippines any vessel even though it be a foreign vessel found in any port
of this Archipelago may be attached and sold under the substantive law which defines the right, and the
procedural law contained in the Code of Commerce by which this right is to be enforced.[9] x x x. But
where neither the law nor the contract between the parties creates any lien or charge upon the vessel, the
only way in which it can be seized before judgment is by pursuing the remedy relating to attachment
under Rule 59 [now Rule 57] of the Rules of Court.[10]

But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent bases its claim
of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known
as the Ship Mortgage Decree of 1978, viz:
 99

Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs,
supplies, towage, use of dry dock or maritime 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.

Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following persons shall
be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock or
marine railway, and other necessaries for the vessel: The managing owner, ships husband, master or any
person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or
unlawfully in possession or charge of a vessel shall have authority to bind the vessel.

Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of a
vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when
appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel;
but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by exercise of
reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for
sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries
was without authority to bind the vessel therefor.

Petitioner Crescent submits that these provisions apply to both domestic and foreign vessels, as well as
domestic and foreign suppliers of necessaries. It contends that the use of the term any person in Section
21 implies that the law is not restricted to domestic suppliers but also includes all persons who supply
provisions and necessaries to a vessel, whether foreign or domestic. It points out further that the law
does not indicate that the supplies or necessaries must be furnished in the Philippines in order to give
petitioner the right to seek enforcement of the lien with a Philippine court.[11]

Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No. 1521 or the Ship
Mortgage Decree of 1978 does not apply to a foreign supplier like petitioner Crescent as the provision
refers only to a situation where the person furnishing the supplies is situated inside the territory of the
Philippines and not where the necessaries were furnished in a foreign jurisdiction like Canada.[12]

We find against petitioner Crescent.

I.

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the growth and development
of the shipping industry and to extend the benefits accorded to overseas shipping under Presidential
Decree No. 214 to domestic shipping.[13] It is patterned closely from the U.S. Ship Mortgage Act of 1920
and the Liberian Maritime Law relating to preferred mortgages.[14] Notably, Sections 21, 22 and 23 of
P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of
the U.S. Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S.
jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978
applies in the present case.
 100

The various tests used in the U.S. to determine whether a maritime lien exists are the following:

One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port,
whether such lien exists, or whether the court has or will exercise jurisdiction, depends on the law of the
country where the supplies were furnished, which must be pleaded and proved.[15] This principle was
laid down in the 1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm II[17] (1916), in The
Woudrichem[18] (1921) and in The City of Atlanta[19] (1924).

Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as
the law of the place of supply.[20]

In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New York, joined the crew of a ship of
Danish flag and registry that is owned by a Danish citizen. He signed the ships articles providing that the
rights of the crew members would be governed by Danish law and by the employers contract with the
Danish Seamens Union, of which he was a member. While in Havana and in the course of his employment,
he was negligently injured. He sued the shipowner in a federal district court in New York for damages
under the Jones Act. In holding that Danish law and not the Jones Act was applicable, the Supreme Court
adopted a multiple-contact test to determine, in the absence of a specific Congressional directive as to the
statutes reach, which jurisdictions law should be applied. The following factors were considered: (1)
place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4) allegiance of the
defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum.

Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International Terminal
Operating Co.[22] again considered a foreign seamans personal injury claim under both the Jones Act and
the general maritime law. The Court held that the factors first announced in the case of Lauritzen
were applicable not only to personal injury claims arising under the Jones Act but to all matters arising
under maritime law in general.[23]

Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones Act by a Greek seaman injured aboard a
ship of Greek registry while in American waters. The ship was operated by a Greek corporation which has
its largest office in New York and another office in New Orleans and whose stock is more than 95%
owned by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in regularly scheduled runs
between various ports of the U.S. and the Middle East, Pakistan, and India, with its entire income coming
from either originating or terminating in the U.S. The contract of employment provided that Greek law
and a Greek collective bargaining agreement would apply between the employer and the seaman and that
all claims arising out of the employment contract were to be adjudicated by a Greek court. The U.S.
Supreme Court observed that of the seven factors listed in the Lauritzen test, four were in favor of the
shipowner and against jurisdiction. In arriving at the conclusion that the Jones Act applies, it ruled that
the application of the Lauritzen test is not a mechanical one. It stated thus: [t]he significance of one or
more factors must be considered in light of the national interest served by the assertion of Jones Act
jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be
exhaustive. x x x [T]he shipowners base of operations is another factor of importance in determining
whether the Jones Act is applicable; and there well may be others.
 101

The principles enunciated in these maritime tort cases have been extended to cases involving unpaid
supplies and necessaries such as the
cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine Services v. M/V El
Centroamericano.[26]

Three. The factors provided in Restatement (Second) of Conflicts of Law have also been applied,
especially in resolving cases brought under the Federal Maritime Lien Act. Their application suggests that
in the absence of an effective choice of law by the parties, the forum contacts to be considered include: (a)
the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the
location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of
incorporation and place of business of the parties.[27]

In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,[28] an admiralty action in rem was
brought by an American supplier against a vessel of Norwegian flag owned by a Norwegian Company and
chartered by a London time charterer for unpaid fuel oil and marine diesel oil delivered while the vessel
was in U.S. territory. The contract was executed in London. It was held that because the bunker fuel was
delivered to a foreign flag vessel within the jurisdiction of the U.S., and because the invoice specified
payment in the U.S., the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals
recognized the modern approach to maritime conflict of law problems introduced in the Lauritzen case.
However, it observed that Lauritzen involved a torts claim under the Jones Act while the present claim
involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its conclusion is
limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found
in the Maritime Lien Statute and that the initial choice of law determination is significantly affected by the
statutory policies surrounding a maritime lien. It ruled that the facts in the case call for the application of
the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the congressional
intent in enacting the Maritime Lien Statute to protect the interests of American supplier of goods,
services or necessaries by making maritime liens available where traditional services are routinely
rendered. It concluded that the Maritime Lien Statute represents a relevant policy of the forum that
serves the needs of the international legal system as well as the basic policies underlying maritime law.
The court also gave equal importance to the predictability of result and protection of justified
expectations in a particular field of law. In the maritime realm, it is expected that when necessaries are
furnished to a vessel in an American port by an American supplier, the American Lien Statute will apply to
protect that supplier regardless of the place where the contract was formed or the nationality of the
vessel.

The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I[29] where the
American court refused to apply the Federal Maritime Lien Act to create a maritime lien for goods and
services supplied by foreign companies in foreign ports. In this case, a Swedish company supplied radio
equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some of the contract
negotiations occurred in Spain and the agreement for supplies between the parties indicated Swedish
companys willingness to submit to Swedish law. The ship was later sold under a contract of purchase
providing for the application of New York law and was arrested in the U.S. The U.S. Court of Appeals also
held that while the contacts-based framework set forth in Lauritzen was useful in the analysis of all
maritime choice of law situations, the factors were geared towards a seamans injury claim. As in Gulf
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Trading, the lien arose by operation of law because the ships owner was not a party to the contract under
which the goods were supplied. As a result, the court found it more appropriate to consider the factors
contained in Section 6 of the Restatement (Second) of Conflicts of Law. The U.S. Court held that the
primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and
services.

The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.[30]

II.

Finding guidance from the foregoing decisions, the Court cannot sustain petitioner Crescents insistence
on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien
exists.

First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one the
law of the forum. All other elements are foreign Canada is the place of the wrongful act, of the allegiance
or domicile of the injured and the place of contract; India is the law of the flag and the allegiance of the
defendant shipowner. Balancing these basic interests, it is inconceivable that the Philippine court has any
interest in the case that outweighs the interests of Canada or India for that matter.

Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors under
Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D. No. 1521 or
the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers and was not
intended to create a lien from a contract for supplies between foreign entities delivered in a foreign port.

Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien exists
would not promote the public policy behind the enactment of the law to develop the domestic shipping
industry. Opening up our courts to foreign suppliers by granting them a maritime lien under our laws
even if they are not entitled to a maritime lien under their laws will encourage forum shopping.

Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties to
the contract. Indeed, when the parties entered into a contract for supplies in Canada, they could not have
intended the laws of a remote country like the Philippines to determine the creation of a lien by the mere
accident of the Vessels being in Philippine territory.

III.

But under which law should petitioner Crescent prove the existence of its maritime lien?

In light of the interests of the various foreign elements involved, it is clear that Canada has the most
significant interest in this dispute. The injured party is a Canadian corporation, the sub-charterer which
placed the orders for the supplies is also Canadian, the entity which physically delivered the bunker fuels
is in Canada, the place of contracting and negotiation is in Canada, and the supplies were delivered in
Canada.

The arbitration clause contained in the Bunker Fuel Agreement which states that New York law governs
the construction, validity and performance of the contract is only a factor that may be considered in the
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choice-of-law analysis but is not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien
that is the subject matter of this case arose by operation of law and not by contract because the
shipowner was not a party to the contract under which the goods were supplied.

It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the
existence of a maritime lien. To the end, it insisted on its theory that Philippine law applies. Petitioner
contends that even if foreign law applies, since the same was not properly pleaded and proved, such
foreign law must be presumed to be the same as Philippine law pursuant to the doctrine of processual
presumption.

Thus, we are left with two choices: (1) dismiss the case for petitioners failure to establish a cause of
action[31] or (2) presume that Canadian law is the same as Philippine law. In either case, the case has to
be dismissed.

It is well-settled that a party whose cause of action or defense depends upon a foreign law has the burden
of proving the foreign law. Such foreign law is treated as a question of fact to be properly pleaded and
proved.[32] Petitioner Crescents insistence on enforcing a maritime lien before our courts depended on
the existence of a maritime lien under the proper law. By erroneously claiming a maritime lien under
Philippine law instead of proving that a maritime lien exists under Canadian law, petitioner Crescent
failed to establish a cause of action.[33]

Even if we apply the doctrine of processual presumption, the result will still be the same. Under P.D. No.
1521 or the Ship Mortgage Decree of 1978, the following are the requisites for maritime liens on
necessaries to exist: (1) the necessaries must have been furnished to and for the benefit of the vessel; (2)
the necessaries must have been necessary for the continuation of the voyage of the vessel; (3) the credit
must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5)
the necessaries must be ordered by persons authorized to contract on behalf of the vessel.[34] These do
not avail in the instant case.

First. It was not established that benefit was extended to the vessel. While this is presumed when the
master of the ship is the one who placed the order, it is not disputed that in this case it was the sub-
charterer Portserv which placed the orders to petitioner Crescent.[35] Hence, the presumption does not
arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to the vessel.
Petitioner did not.

Second. Petitioner Crescent did not show any proof that the marine products were necessary for the
continuation of the vessel.

Third. It was not established that credit was extended to the vessel. It is presumed that in the absence of
fraud or collusion, where advances are made to a captain in a foreign port, upon his request, to pay for
necessary repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for
pilotage, towage and like services rendered to the vessel, that they are made upon the credit of the vessel
as well as upon that of her owners.[36] In this case, it was the sub-charterer Portserv which requested for
the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in favor of
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petitioner Crescent prior to the delivery of the bunkers as security for the payment of the obligation
weakens petitioner Crescents contention that credit was extended to the Vessel.

We also note that when copies of the charter parties were submitted by respondents in the Court of
Appeals, the time charters between respondent SCI and Halla and between Halla and Transmar were
shown to contain a clause which states that the Charterers shall provide and pay for all the fuel except as
otherwise agreed. This militates against petitioner Crescents position that Portserv is authorized by the
shipowner to contract for supplies upon the credit of the vessel.

Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it appears
that the repairs and supplies were necessary for the ship and that they were ordered by the master. This
presumption does not arise in this case since the fuels were not ordered by the master and there was no
proof of necessity for the supplies.

Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel as
provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner,
the ships husband, master or any person with whom the management of the vessel at the port of supply is
entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone to whom the
management of the vessel has been entrusted. A time charter is a contract for the use of a vessel for a
specified period of time or for the duration of one or more specified voyages wherein the owner of the
time-chartered vessel retains possession and control through the master and crew who remain his
employees.[37] Not enjoying the presumption of authority, petitioner Crescent should have proved that
Portserv was authorized by the shipowner to contract for supplies. Petitioner failed.

A discussion on the principle of forum non conveniens is unnecessary.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated November 28,
2001, and its subsequent Resolution of September 3, 2002 are AFFIRMED. The instant petition for review
on certiorari is DENIED for lack of merit. Cost against petitioner.

SO ORDERED.