329 Phil. 487
[5]
SECOND DIVISION
G.R. No. 102223, August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-
TRADE, INC., (FORMERLY ASPAC-ITEC PHILIPPINES, INC.) AND
FRANCISCO S. AGUIRRE, PETITIONERS, VS. THE COURT OF APPEALS,
ITEC INTERNATIONAL, INC., AND ITEC, INC., RESPONDENTS.
DECISION
TORRES, JR., J.:
Business Corporations, according to Lord Coke, "have no souls." They
do business peddling goods, wares or even services across national
boundaries in "soulless forms" in quest for profits albeit at times,
unwelcomed in these strange lands venturing into uncertain markets
and, the risk of dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the
Court of Appeals on June 7, 1991, sustaining the RTC Order dated
February 22, 1991, denying the petitioners’ Motion to Dismiss, and
directing the issuance of a writ of preliminary injunction, and its
companion Resolution of October 9, 1991, denying the petitioners’
Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI,
for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are
both domestic corporations, while petitioner Francisco S. Aguirre is
their President and majority stockholder. Private Respondents ITEC,
INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the laws of the State of
Alabama, United States of America. There is no dispute that ITEC is a
foreign corporation not licensed to do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner
ASPAC referred to as "Representative Agreement".[1] Pursuant to the
contract, ITEC engaged ASPAC as its "exclusive representative" in the
Philippines for the sale of ITEC’s products, in consideration of which,
ASPAC was paid a stipulated commission. The agreement was signed
by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC
respectively, for and in behalf of their companies.[2] The said
agreement was initially for a term of twenty-four months. After the
lapse of the agreed period, the agreement was renewed for another
twenty-four months.
Through a "License Agreement"[3] entered into by the same parties on
November 10, 1988, ASPAC was able to incorporate and use the name
"ITEC" in its own name. Thus, ASPAC Multi-Trade, Inc. became legally
and publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported
by ITEC, to their sole customer, the Philippine Long Distance
Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new
appellation, and PLDT executed a document entitled "PLDT-
ASPAC/ITEC PROTOCOL"[4] which defined the project details for the
supply of ITEC’s Interface Equipment in connection with the Fifth
Expansion Program of PLDT.
One year into the second term of the parties’ Representative
Agreement, ITEC decided to terminate the same, because petitioner
ASPAC allegedly violated its contractual commitment as stipulated in
their agreements.
ITEC charges the petitioners and another Philippine Corporation,
DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the
President of which is likewise petitioner Aguirre, of using knowledge
and information of ITEC’s products specifications to develop their own
line of equipment and product support, which are similar, if not
identical to ITEC’s own, and offering them to ITEC’s former customer.
On January 31, 1991, the complaint[6] in Civil Case No. 91-294, was
filed with the Regional Trial Court of Makati, Branch 134 by ITEC, INC.
Plaintiff sought to enjoin, first, preliminarily and then, after trial,
permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre and
their agents and business associates, to cease and desist from selling
or attempting to sell to PLDT and to any other party, products which
have been copied or manufactured "in like manner, similar or identical
to the products, wares and equipment of plaintiff," and (2) defendant
ASPAC, to cease and desist from using in its corporate name, letter
heads, envelopes, sign boards and business dealings, plaintiff’s
trademark, internationally known as ITEC; and the recovery from
defendants in solidum, damages of at least P500,000.00, attorney’s
fees and litigation expenses.
In due time, defendants filed a motion to dismiss[7] the complaint on
the following grounds: (1) That plaintiff has no legal capacity to sue as
it is a foreign corporation doing business in the Philippines without the
required BOI authority and SEC license, and (2) that plaintiff is simply
engaged in forum shopping which justifies the application against it of
the principle of "forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which
ITEC INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC,
INC.[8]
In their Supplemental Motion to Dismiss,[9] defendants took note of
the amendment of the complaint and asked the court to consider in
toto their motion to dismiss and their supplemental motion as their
answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the
court a quo on February 22, 1991, issued its Order:[10] (1) denying the
motion to dismiss for being devoid of legal merit with a rejection of
both grounds relied upon by the defendants in their motion to dismiss,
and (2) directing the issuance of a writ of preliminary injunction on the
same day.
From the foregoing order, petitioners elevated the case to the
respondent Court of Appeals on a Petition for Certiorari and
Prohibition[11] under Rule 65 of the Revised Rules of Court, assailing
and seeking the nullification and the setting aside of the Order and the
Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
"We find no reason whether in law or from the facts of record, to
disagree with the (lower court’s) ruling. We therefore are unable to
find in respondent Judge’s issuance of said writ the grave abuse of
discretion ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not show that
Certiorari lies in the present case and therefore, the petition does not
deserve to be given due course.
WHEREFORE, the present petition should be, as it is hereby, denied
due course and accordingly, is hereby dismissed. Costs against the
petitioners.

SO ORDERED."[12]
Petitioners filed a motion for reconsideration[13] on June 7, 1991,
which was likewise denied by the respondent court.
"WHEREFORE, the present motion for reconsideration should be, as it
is hereby, denied for lack of merit. For the same reason, the motion to
have the motion for reconsideration set for oral argument likewise
should be and is hereby denied.
SO ORDERED."[14]
Petitioners are now before us via Petition for Review on Certiorari[15]
under Rule 45 of the Revised Rules of Court.
It is the petitioners’ submission that private respondents are foreign
corporations actually doing business in the Philippines without the
requisite authority and license from the Board of Investments and the
Securities and Exchange Commission, and thus, disqualified from
instituting the present action in our courts. It is their contention that
the provisions of the Representative Agreement, petitioner ASPAC
executed with private respondent ITEC, are similarly "highly
restrictive" in nature as those found in the agreements which
confronted the Court in the case of Top-Weld Manufacturing, Inc. vs.
ECED S.A. et al.,[16] as to reduce petitioner ASPAC to a mere conduit or
extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign corporations are doing
business in the Philippines because when the respondents entered
into the disputed contracts with the petitioner, they were carrying out
the purposes for which they were created, i.e., to manufacture and
market welding products and equipment. The terms and conditions of
the contracts as well as the respondents’ conduct indicate that they
established within our country a continuous business, and not merely
one of a temporary character. The respondents could be exempted
from the requirements of Republic Act 5455 if the petitioner is an
independent entity which buys and distributes products not only of
the petitioner, but also of other manufacturers or transacts business in
its name and for its account and not in the name or for the account of
the foreign principal. A reading of the agreements between the
petitioner and the respondents shows that they are highly restrictive
in nature, thus making the petitioner a mere conduit or extension of
the respondents.
It is alleged that certain provisions of the "Representative Agreement"
executed by the parties are similar to those found in the License
Agreement of the parties in the Top-Weld case which were considered
as "highly restrictive" by this Court. The provisions in point are:
"2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by ITEC
from time to time. Unless otherwise expressly agreed to in writing by
ITEC the purchase price is net to ITEC and does not include any
transportation charges, import charges or taxes into or within the
Territory. All orders from customers are subject to formal acceptance
by ITEC at its Huntsville, Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any product
which competes with an existing ITEC product or any product which
ITEC has under active development.
3.1.2. Actively solicit all potential customers within the Territory in a
systematic and businesslike manner.
3.1.3. Inform ITEC of all request for proposals, requests for bids,
invitations to bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory established by
ITEC. The Sales Goals for the first 24 months is set forth on Attachment
two (2) hereto. The Sales Goal for additional twelve month periods, if
any, shall be sent to the Sales Agent by ITEC at the beginning of each
period. These Sales Goals shall be incorporated into this Agreement
and made a part hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement REPRESENTATIVE is authorized
to solicit sales within the Territory on ITEC’s behalf but is authorized to
bind ITEC only in its capacity as Representative and no other, and then
only to specific customers and on terms and conditions expressly
authorized by ITEC in writing."[17]
Aside from the abovestated provisions, petitioners point out the
following matters of record, which allegedly witness to the
respondents' activities within the Philippines in pursuit of their
business dealings:
"a. While petitioner ASPAC was the authorized exclusive
representative for three (3) years, it solicited from and closed several
sales for and on behalf of private respondents as to their products only
and no other, to PLDT, worth no less than US $15 Million (p. 20, tsn,
Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales
and identified by private respondents’ sole witness, Mr. Clarence Long,
is not in the name of petitioner ASPAC as such representative, but in
the name of private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL"
(Annex C of the original and amended complaints) which defined the
responsibilities of the parties thereto as to the supply, installation and
maintenance of the ITEC equipment sold under said Contract No. 1 is,
as its very title indicates, in the names jointly of the petitioner ASPAC
and private respondents;
d. To evidence receipt of the purchase price of US $15 Million, private
respondent ITEC, Inc. issued in its letter head, a Confirmation of
payment dated November 13, 1989 and its Invoice dated November
22, 1989 (Annexes 1 and 2 of the Motion to Dismiss and marked as
Exhibits 2 and 3 for the petitioners), both of which were identified by
private respondent’s sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991)."[18]
Petitioners contend that the above acts or activities belie the
supposed independence of petitioner ASPAC from private
respondents. "The unrebutted evidence on record below for the
petitioners likewise reveal the continuous character of doing business
in the Philippines by private respondents based on the standards laid
down by this Court in Wang Laboratories, Inc. vs. Hon. Rafael T.
Mendoza, et al.[19] and again in TOP-WELD. (supra)" It thus appears
that as the respondent Court of Appeals and the trial court’s failure to
give credence on the grounds relied upon in support of their Motion to
Dismiss that petitioners ascribe grave abuse of discretion amounting
to an excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no
capacity to bring suit here, the Philippines is not the "most convenient
forum" because the trial court is devoid of any power to enforce its
orders issued or decisions rendered in a case that could not have been
commenced to begin with, such that in insisting to assume and
exercise jurisdiction over the case below, the trial court had gravely
abused its discretion and even actually exceeded its jurisdiction.
As against petitioner’s insistence that private respondent is "doing
business" in the Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the
Rules and Regulations Implementing the Omnibus Investments Code
of 1987, the following:
"(1) A foreign firm is deemed not engaged in business in the
Philippines if it transacts business through middlemen, acting in their
own names, such as indebtors, commercial bookers or commercial
merchants.
(2) A foreign corporation is deemed not "doing business" if its
representative domiciled in the Philippines has an independent status
in that it transacts business in its name and for its account."[20]
Private respondent argues that a scrutiny of its Representative
Agreement with the Petitioners will show that although ASPAC was
named as representative of ITEC., ASPAC actually acted in its own
name and for its own account. The following provisions are particularly
mentioned:
"3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,
REPRESENTATIVE will pay for its own account; all customs duties and
import fees imposed on any ITEC products; all import expediting or
handling charges and expenses imposed on ITEC products; and any
stamp tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as
representative under this Agreement, REPRESENTATIVE shall receive a
sales commission equivalent to a percentum of the FOB value of all
ITEC equipment sold to customers within the territory as a direct result
of REPRESENTATIVE’s sales efforts."[21]
More importantly, private respondents charge ASPAC of admitting its
independence from ITEC by entering and ascribing to provision No. 6
of the Representative Agreement.
"6.0. Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor and not as an
employee, worker, laborer, partner, joint venturer of ITEC as these
terms are defined by the laws, regulations, decrees or the like of any
jurisdiction, including the jurisdiction of the United States, the state of
Alabama and the Territory."[22]
Although it admits that the Representative Agreement contains
provisions which both support and belie the independence of ASPAC,
private respondents echoes the respondent court’s finding that the
lower court did not commit grave abuse of discretion nor acted in
excess of jurisdiction when it found that the ground relied upon by the
petitioners in their motion to dismiss does not appear to be
indubitable.[23]
The issues before us now are whether or not private respondent ITEC
is an unlicensed corporation doing business in the Philippines, and if it
is, whether or not this fact bars it from invoking the injunctive
authority of our courts.
Considering the above, it is necessary to state what is meant by "doing
business" in the Philippines. Section 133 of the Corporation Code,
provides that "No foreign corporation, transacting business in the
Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine
Courts or administrative tribunals on any valid cause of action
recognized under Philippine laws."[24]
Generally, a "foreign corporation" has no legal existence within the
state in which it is foreign. This proceeds from the principle that
juridical existence of a corporation is confined within the territory of
the state under whose laws it was incorporated and organized, and it
has no legal status beyond such territory. Such foreign corporation
may be excluded by any other state from doing business within its
limits, or conditions may be imposed on the exercise of such
privileges.[25] Before a foreign corporation can transact business in this
country, it must first obtain a license to transact business in the
Philippines, and a certificate from the appropriate government agency.
If it transacts business in the Philippines without such a license, it shall
not be permitted to maintain or intervene in any action, suit, or
proceeding in any court or administrative agency of the Philippines,
but it may be sued on any valid cause of action recognized under
Philippine laws.[26]
In a long line of decisions, this Court has not altogether prohibited a
foreign corporation not licensed to do business in the Philippines from
suing or maintaining an action in Philippine Courts. What it seeks to
prevent is a foreign corporation doing business in the Philippines
without a license from gaining access to Philippine Courts. [27]
The purpose of the law in requiring that foreign corporations doing
business in the Philippines be licensed to do so and that they appoint
an agent for service of process is to subject the foreign corporation
doing business in the Philippines to the jurisdiction of its courts. The
object is not to prevent the foreign corporation from performing single
acts, but to prevent it from acquiring a domicile for the purpose of
business without taking steps necessary to render it amenable to suit
in the local courts.[28] The implication of the law is that it was never the
purpose of the legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines,
and thus, in effect, to permit persons to avoid their contracts made
with such foreign corporations.[29]
There is no exact rule or governing principle as to what constitutes
"doing" or "engaging" or "transacting" business. Indeed, such case
must be judged in the light of its peculiar circumstances, upon its
peculiar facts and upon the language of the statute applicable. The
true test, however, seems to be whether the foreign corporation is
continuing the body or substance of the business or enterprise for
which it was organized.[30]
Article 44 of the Omnibus Investments Code of 1987 defines the
phrase to include:
"soliciting orders, purchases, service contracts, opening offices,
whether called "liaison" offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or
who in any calendar year stay in the Philippines for a period or periods
totaling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm,
entity or corporation in the Philippines, and any other act or acts that
imply a continuity or commercial dealings or arrangements and
contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and
object of the business organization."
Thus, a foreign corporation with a settling agent in the Philippines
which issued twelve marine policies covering different shipments to
the Philippines[31]and a foreign corporation which had been collecting
premiums on outstanding policies[32] were regarded as doing business
here.
The same rule was observed relating to a foreign corporation with an
"exclusive distributing agent" in the Philippines, and which has been
selling its products here since 1929,[33] and a foreign corporation
engaged in the business of manufacturing and selling computers
worldwide, and had installed at least 26 different products in several
corporations in the Philippines, and allowed its registered logo and
trademark to be used and made it known that there exists a
designated distributor in the Philippines.[34]
In Georg Grotjahn GMBH and Co. vs. Isnani,[35] it was held that the
uninterrupted performance by a foreign corporation of acts pursuant
to its primary purposes and functions as a regional area headquarters
for its home office, qualifies such corporation as one doing business in
the country.
These foregoing instances should be distinguished from a single or
isolated transaction or occasional, incidental, or casual transactions,
which do not come within the meaning of the law,[36] for in such case,
the foreign corporation is deemed not engaged in business in the
Philippines.
Where a single act or transaction, however, is not merely incidental or
casual but indicates the foreign corporation’s intention to do other
business in the Philippines, said single act or transaction constitutes
"doing" or "engaging in" or "transacting" business in the Philippines.[37]
In determining whether a corporation does business in the Philippines
or not, aside from their activities within the forum, reference may be
made to the contractual agreements entered into by it with other
entities in the country. Thus, in the Top-Weld case (supra), the foreign
corporation’s LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR
AGREEMENT with their local contacts were made the basis of their
being regarded by this Tribunal as corporations doing business in the
country. Likewise, in Merill Lynch Futures, Inc. vs. Court of Appeals,
etc.[38] the FUTURES CONTRACT entered into by the petitioner foreign
corporation weighed heavily in the court’s ruling.
With the abovestated precedents in mind, we are persuaded to
conclude that private respondent had been "engaged in" or "doing
business" in the Philippines for some time now. This is the inevitable
result after a scrutiny of the different contracts and agreements
entered into by ITEC with its various business contacts in the country,
particularly ASPAC and Telephone Equipment Sales and Services, Inc.
(TESSI, for brevity). The latter is a local electronics firm engaged by
ITEC to be its local technical representative, and to create a service
center for ITEC products sold locally. Its arrangements, with these
entities indicate convincingly ITEC’s purpose to bring about the
situation among its customers and the general public that they are
dealing directly with ITEC, and that ITEC is actively engaging in business
in the country.
In its Master Service Agreement[39] with TESSI, private respondents
required its local technical representative to provide the employees of
the technical and service center with ITEC identification cards and
business cards, and to correspond only on ITEC, Inc., letterhead. TESSI
personnel are instructed to answer the telephone with "ITEC Technical
Assistance Center.", such telephone being listed in the telephone book
under the heading of ITEC Technical Assistance Center, and all calls
being recorded and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report
detailing the failure and repair of ITEC products, and to requisition
monthly the materials and components needed to replace stock
consumed in the warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the
respondents shows that there are provisions which are highly
restrictive in nature, such as to reduce petitioner ASPAC to a mere
extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative
Agreement between ITEC and ASPAC provides: "The Representative
shall not represent or offer for sale within the Territory any product
which competes with an existing ITEC product or any product which
ITEC has under active development." Likewise pertinent is the
following provision: "When acting under this Agreement,
REPRESENTATIVE is authorized to solicit sales within the Territory on
ITEC’s behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific customers and
on terms and conditions expressly authorized by ITEC in writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI,
they were carrying out the purposes for which it was created, i.e., to
market electronics and communications products. The terms and
conditions of the contracts as well as ITEC’s conduct indicate that they
established within our country a continuous business, and not merely
one of a temporary character.[40]
Notwithstanding such finding that ITEC is doing business in the
country, petitioner is nonetheless estopped from raising this fact to
bar ITEC from instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue in
Philippine Courts although not authorized to do business here against
a Philippine citizen or entity who had contracted with and benefited by
said corporation.[41] To put it in another way, a party is estopped to
challenge the personality of a corporation after having acknowledged
the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as well as to
domestic corporations.[42] One who has dealt with a corporation of
foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity. The principle will be applied to prevent a
person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases
where such person has received the benefits of the contract.[43]
The rule is deeply rooted in the time-honored axiom of Commodum ex
injuria sua non habere debet - no person ought to derive any
advantage of his own wrong. This is as it should be for as mandated by
law, "every person must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."[44]
Concededly, corporations act through agents like directors and
officers. Corporate dealings must be characterized by utmost good
faith and fairness. Corporations cannot just feign ignorance of the legal
rules as in most cases, they are manned by sophisticated officers with
tried management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable
proportion between benefits and expected burdens. This is a norm
which should be observed where one or the other is a foreign entity
venturing in a global market.

As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time
they enter into a contract and at the time it is to become operative.
(Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98).
Moreover, a person is presumed to be more knowledgeable about his
own state law than his alien or foreign contemporary. In this case, the
record shows that, at least, petitioner had actual knowledge of the
applicability of R.A. No. 5455 at the time the contract was executed
and at all times thereafter. This conclusion is compelled by the fact
that the same statute is now being propounded by the petitioner to
bolster its claim. We, therefore sustain the appellate court’s view that
"it was incumbent upon TOP-WELD to know whether or not IRTI and
ECED were properly authorized to engage in business in the Philippines
when they entered into the licensing and distributorship agreements."
The very purpose of the law was circumvented and evaded when the
petitioner entered into said agreements despite the prohibition of R.A.
No. 5455. The parties in this case being equally guilty of violating R.A.
No. 5455, they are in pari delicto, in which case it follows as a
consequence that petitioner is not entitled to the relief prayed for in
this case.
The doctrine of lack of capacity to sue based on the failure to acquire a
local license is based on considerations of sound public policy. The
license requirement was imposed to subject the foreign corporation
doing business in the Philippines to the jurisdiction of its courts. It was
never intended to favor domestic corporations who enter into solitary
transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business in
this country.[45]
are not at liberty to question plaintiff’s standing to sue, having already
acceded to the same by virtue of its entry into the Representative
Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court,
based on the facts of the case, whether to give due course to the suit
or dismiss it, on the principle of forum non conveniens.[47] Hence, the
Philippine Court may refuse to assume jurisdiction in spite of its having
acquired jurisdiction. Conversely, the court may assume jurisdiction
over the case if it chooses to do so; provided, that the following
requisites are met: 1) That the Philippine Court is one to which the
parties may conveniently resort to; 2) That the Philippine Court is in a
position to make an intelligent decision as to the law and the facts;
and, 3) That the Philippine Court has or is likely to have power to
enforce its decision.[48]
The aforesaid requirements having been met, and in view of the
court’s disposition to give due course to the questioned action, the
matter of the present forum not being the "most convenient" as a
ground for the suit’s dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby
DISMISSED. The decision of the Court of Appeals dated June 7, 1991,
upholding the RTC Order dated February 22, 1991, denying the
petitioners’ Motion to Dismiss, and ordering the issuance of the Writ
of Preliminary Injunction is hereby affirmed in toto.
SO ORDERED.
Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.

In Antam Consolidated Inc. vs. Court of Appeals, et al.[46] we expressed

our chagrin over this commonly used scheme of defaulting local
companies which are being sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke the lack of capacity to
sue of such foreign companies. Obviously, the same ploy is resorted to
by ASPAC to prevent the injunctive action filed by ITEC to enjoin
petitioner from using knowledge possibly acquired in violation of
fiduciary arrangements between the parties.

By entering into the "Representative Agreement" with ITEC, Petitioner

is charged with knowledge that ITEC was not licensed to engage in
business activities in the country, and is thus estopped from raising in
defense such incapacity of ITEC, having chosen to ignore or even
presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted

from the license requirement in order to institute an action in our
courts if its representative in the country maintained an independent
status during the existence of the disputed contract. Petitioner is
deemed to have acceded to such independent character when it
entered into the Representative Agreement with ITEC, particularly,
provision 6.2 (supra).

Petitioner’s insistence on the dismissal of this action due to the

application, or non application, of the private international law rule of
forum non conveniens defies well-settled rules of fair play. According
to petitioner, the Philippine Court has no venue to apply its discretion
whether to give cognizance or not to the present action, because it has
not acquired jurisdiction over the person of the plaintiff in the case,
the latter allegedly having no personality to sue before Philippine
Courts. This argument is misplaced because the court has already
acquired jurisdiction over the plaintiff in the suit, by virtue of his filing
the original complaint. And as we have already observed, petitioner
G.R. No. 103493
SECOND DIVISION
G.R. No. 103493, June 19, 1997
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE
LIMITED, AND ATHONA HOLDINGS, N.V., PETITIONERS, VS. THE
HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA
O. DUCAT, PRECIOSO R. PERLAS, AND WILLIAM H. CRAIG,
RESPONDENTS.
DECISION
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign
judgment upon the rights of the parties under the same cause of
action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in view of
the pendency at the time of the foreign action, dismissed Civil Case
No. 16563 on the ground of litis pendentia, in addition to forum non
conveniens. On appeal, the Court of Appeals affirmed. Hence this
petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained
separate loans from petitioners Ayala International Finance Limited
(hereafter called AYALA)[1] and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by
shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago
Daic, assumed Ducat’s obligation under an Agreement, dated January
27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor’s
Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter
called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for
US$2,807,209.02, while PHILSEC and AYALA extended a loan to
ATHONA in the amount of US$2,500,000.00 as initial payment of the
purchase price. The balance of US$307,209.02 was to be paid by
means of a promissory note executed by ATHONA in favor of 1488, Inc.
Subsequently, upon their receipt of the US$2,500,000.00 from 1488,
Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession
belonging to Ducat.
As ATHONA failed to pay the interest on the balance of
US$307,209.02, the entire amount covered by the note became due
and demandable. Accordingly, on October 17, 1985, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA
in the United States for payment of the balance of US$307,209.02 and
for damages for breach of contract and for fraud allegedly perpetrated
by petitioners in misrepresenting the marketability of the shares of
stock delivered to 1488, Inc. under the Agreement. Originally
instituted in the United States District Court of Texas, 165th Judicial
District, where it was docketed as Case No. 85-57746, the venue of the
action was later transferred to the United States District Court for the
Southern District of Texas, where 1488, Inc. filed an amended
complaint, reiterating its allegations in the original complaint. ATHONA
filed an answer with counterclaim, impleading private respondents
herein as counterdefendants, for allegedly conspiring in selling the
property at a price over its market value. Private respondent Perlas,
who had allegedly appraised the property, was later dropped as
counterdefendant. ATHONA sought the recovery of damages and
excess payment allegedly made to 1488, Inc. and, in the alternative,
the rescission of sale of the property. For their part, PHILSEC and
AYALA filed a motion to dismiss on the ground of lack of jurisdiction
over their person, but, as their motion was denied, they later filed a
joint answer with counterclaim against private respondents and
Edgardo V. Guevarra, PHILSEC’s own former president, for the
rescission of the sale on the ground that the property had been
overvalued. On March 13, 1990, the United States District Court for
the Southern District of Texas dismissed the counterclaim against
Edgardo V. Guevarra on the ground that it was “frivolous and [was]
brought against him simply to humiliate and embarrass him.” For this
reason, the U.S. court imposed so-called Rule 11 sanctions on PHILSEC
and AYALA and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the
United States, petitioners filed a complaint “For Sum of Money with
Damages and Writ of Preliminary Attachment” against private
respondents in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 16563. The complaint reiterated the
allegation of petitioners in their respective counterclaims in Civil
Action No. H-86-440 of the United States District Court of Southern
Texas that private respondents committed fraud by selling the
property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private
respondents’ fraudulent misrepresentations, ATHONA, PHILSEC, and
AYALA were induced to enter into the Agreement and to purchase the
Houston property. Petitioners prayed that private respondents be
ordered to return to ATHONA the excess payment of US$1,700,000.00
and to pay damages. On April 20, 1987, the trial court issued a writ of
preliminary attachment against the real and personal properties of
private respondents.[2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on
the grounds of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440
filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and
(3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action.
Ducat contended that the alleged overpricing of the property
prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and
BPI-IFL which were not parties to the sale and whose only participation
was to extend financial accommodation to ATHONA under a separate
loan agreement. On the other hand, private respondents 1488, Inc.
and its president Daic filed a joint “Special Appearance and Qualified
Motion to Dismiss,” contending that the action being in personam,
extraterritorial service of summons by publication was ineffectual and
did not vest the court with jurisdiction over 1488, Inc., which is a non-
resident foreign corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducat’s motion to dismiss,
stating that “the evidentiary requirements of the controversy may be
more suitably tried before the forum of the litis pendentia in the U.S.,
under the principle in private international law of forum non
conveniens,” even as it noted that Ducat was not a party in the U.S.
case.
A separate hearing was held with regard to 1488, Inc. and Daic’s
motion to dismiss. On March 9, 1988, the trial court [3] granted the
motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that
the “main factual element” of the cause of action in this case which is
the validity of the sale of real property in the United States between
defendant 1488 and plaintiff ATHONA is the subject matter of the
pending case in the United States District Court which, under the
doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or
fluctuations of the fair market value of real estate situated in Houston,
Texas, U.S.A. from the date of the transaction in 1983 up to the
present and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and
Daic because they were non-residents and the action was not an
action in rem or quasi in rem, so that extraterritorial service of
summons was ineffective. The trial court subsequently lifted the writ
of attachment it had earlier issued against the shares of stocks of
1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial
court erred in applying the principle of litis pendentia and forum non
conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks
belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals[4] affirmed the dismissal of
Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground
of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while
the defendants are Philsec, the Ayala International Finance Ltd. (BPI-
IFL’s former name) and the Athona Holdings, NV. The case at bar
involves the same parties. The transaction sued upon by the parties, in
both cases is the Warranty Deed executed by and between Athona
Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges
fraud employed by herein appellants, on the marketability of Ducat’s
securities given in exchange for the Texas property. The recovery of a
sum of money and damages, for fraud purportedly committed by
appellees, in overpricing the Texas land, constitute the action before
the Philippine court, which likewise stems from the same Warranty
Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action
in personam for the recovery of a sum of money for alleged tortious
acts, so that service of summons by publication did not vest the trial
court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of
Civil Case No. 16563 on the ground of forum non conveniens was
likewise affirmed by the Court of Appeals on the ground that the case
can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main
transaction, and involve foreign elements, to wit: 1) the property
subject matter of the sale is situated in Texas, U.S.A.; 2) the seller,
1488 Inc. is a non-resident foreign corporation; 3) although the buyer,
Athona Holdings, a foreign corporation which does not claim to be
doing business in the Philippines, is wholly owned by Philsec, a
domestic corporation, Athona Holdings is also owned by BPI-IFL, also a
foreign corporation; 4) the Warranty Deed was executed in Texas,
U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE
SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED
UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT’S
DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON
BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE
TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF
APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE
TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION
FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE
PETITIONERS’ RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR
CONDUCT PRIVATE RESPONDENTS (WHO ARE MOSTLY NON-
RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are
made.
First. It is important to note in connection with the first point that
while the present case was pending in the Court of Appeals, the United
States District Court for the Southern District of Texas rendered
judgment[5] in the case before it. The judgment, which was in favor of
private respondents, was affirmed on appeal by the Circuit Court of
Appeals.[6] Thus, the principal issue to be resolved in this case is
whether Civil Case No. 16536 is barred by the judgment of the U.S.
court.
Private respondents contend that for a foreign judgment to be
pleaded as res judicata, a judgment admitting the foreign decision is
not necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving
them an opportunity to impeach it on grounds stated in Rule 39, §50
of the Rules of Court, to wit: “want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.”
Petitioners’ contention is meritorious. While this Court has given the
effect of res judicata to foreign judgments in several cases, [7] it was
after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law.[8] It is
not necessary for this purpose to initiate a separate action or
proceeding for enforcement of the foreign judgment. What is essential
is that there is opportunity to challenge the foreign judgment, in order
for the court to properly determine its efficacy. This is because in this
jurisdiction, with respect to actions in personam, as distinguished from
actions in rem, a foreign judgment merely constitutes prima facie
evidence of the justness of the claim of a party and, as such, is subject
to proof to the contrary.[9] Rule 39, §50 provides:
SEC. 50. Effect of foreign judgments. - The effect of a judgment of a
tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union
Insurance Society of Canton, Ltd.,[10] which private respondents invoke
for claiming conclusive effect for the foreign judgment in their favor,
the foreign judgment was considered res judicata because this Court
found “from the evidence as well as from appellant’s own
pleadings”[11] that the foreign court did not make a “clear mistake of
law or fact” or that its judgment was void for want of jurisdiction or
because of fraud or collusion by the defendants. Trial had been
previously held in the lower court and only afterward was a decision
rendered, declaring the judgment of the Supreme Court of the State of
Washington to have the effect of res judicata in the case before the
lower court. In the same vein, in Philippine International Shipping
Corp. v. Court of Appeals,[12] this Court held that the foreign judgment
was valid and enforceable in the Philippines there being no showing
that it was vitiated by want of notice to the party, collusion, fraud or
clear mistake of law or fact. The prima facie presumption under the
Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary.
Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence
presented thereat, to assure a proper determination of whether the
issues then being litigated in the U.S. court were exactly the issues
raised in this case such that the judgment that might be rendered
would constitute res judicata. As the trial court stated in its disputed
order dated March 9, 1988:
On the plaintiff’s claim in its Opposition that the causes of action of
this case and the pending case in the United States are not identical,
precisely the Order of January 26, 1988 never found that the causes of
action of this case and the case pending before the USA Court, were
identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that
petitioners’ action is barred by the principle of res judicata. Petitioners
in fact questioned the jurisdiction of the U.S. court over their persons,
but their claim was brushed aside by both the trial court and the Court
of Appeals.[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic
filed a petition for the enforcement of judgment in the Regional Trial
Court of Makati, where it was docketed as Civil Case No. 92-1070 and
assigned to Branch 134, although the proceedings were suspended
because of the pendency of this case. To sustain the appellate court’s
ruling that the foreign judgment constitutes res judicata and is a bar to
the claim of petitioners would effectively preclude petitioners from
repelling the judgment in the case for enforcement. An absurdity could
then arise: a foreign judgment is not subject to challenge by the
plaintiff against whom it is invoked, if it is pleaded to resist a claim as
in this case, but it may be opposed by the defendant if the foreign
judgment is sought to be enforced against him in a separate
proceeding. This is plainly untenable. It has been held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the
jurisdiction where affirmative relief is being sought. Hence, in the
interest of justice, the complaint should be considered as a petition for
the recognition of the Hongkong judgment under Section 50 (b), Rule
39 of the Rules of Court in order that the defendant, private
respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if
applicable.[14]
Accordingly, to insure the orderly administration of justice, this case
and Civil Case No. 92-1070 should be consolidated.[15] After all, the two
have been filed in the Regional Trial Court of Makati, albeit in different
salas, this case being assigned to Branch 56 (Judge Fernando V.
Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of
Judge Ignacio Capulong. In such proceedings, petitioners should have
the burden of impeaching the foreign judgment and only in the event
they succeed in doing so may they proceed with their action against
private respondents.
with the motion to dismiss. It failed to consider that one of the
plaintiffs (PHILSEC) is a domestic corporation and one of the
defendants (Ventura Ducat) is a Filipino, and that it was the
extinguishment of the latter’s debt which was the object of the
transaction under litigation. The trial court arbitrarily dismissed the
case even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court
to hold that jurisdiction over 1488, Inc. and Daic could not be obtained
because this is an action in personam and summons were served by
extraterritorial service. Rule 14, §17 on extraterritorial service provides
that service of summons on a non-resident defendant may be effected
out of the Philippines by leave of Court where, among others, “the
property of the defendant has been attached within the
Philippines.”[18] It is not disputed that the properties, real and
personal, of the private respondents had been attached prior to
service of summons under the Order of the trial court dated April 20,
1987.[19]
Fourth. As for the temporary restraining order issued by the Court on
June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445
filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions
imposed on the petitioners by the U.S. court, the Court finds that the
judgment sought to be enforced is severable from the main judgment
under consideration in Civil Case No. 16563. The separability of
Guevarra’s claim is not only admitted by petitioners,[20] it appears from
the pleadings that petitioners only belatedly impleaded Guevarra as
defendant in Civil Case No. 16563.[21] Hence, the TRO should be lifted
and Civil Case No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and
Civil Case No. 16563 is REMANDED to the Regional Trial Court of
Makati for consolidation with Civil Case No. 92-1070 and for further
proceedings in accordance with this decision. The temporary
restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

Second. Nor is the trial court’s refusal to take cognizance of the case
justifiable under the principle of forum non conveniens. First, a motion
to dismiss is limited to the grounds under Rule 16, §1, which does not
include forum non conveniens.[16] The propriety of dismissing a case
based on this principle requires a factual determination, hence, it is
more properly considered a matter of defense. Second, while it is
within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after “vital facts are
established, to determine whether special circumstances” require the
court’s desistance.[17]

In this case, the trial court abstained from taking jurisdiction solely on
the basis of the pleadings filed by private respondents in connection
[G. R. No. 120077. October 13, 2000]
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.
LTD. petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS, respondents.
DECISION
PARDO, J.:
The case before the Court is a petition for certiorari[1] to annul
the following orders of the National Labor Relations Commission
(hereinafter referred to as NLRC) for having been issued without or
with excess jurisdiction and with grave abuse of discretion:[2]
(1) Order of May 31, 1993.[3] Reversing and setting aside its
earlier resolution of August 28, 1992.[4] The questioned order declared
that the NLRC, not the Philippine Overseas Employment
Administration (hereinafter referred to as POEA), had jurisdiction over
private respondents complaint;
(2) Decision of December 15, 1994.[5] Directing petitioners to
jointly and severally pay private respondent twelve thousand and six
hundred dollars (US$12,600.00) representing salaries for the
unexpired portion of his contract; three thousand six hundred dollars
(US$3,600.00) as extra four months salary for the two (2) year period
of his contract, three thousand six hundred dollars (US$3,600.00) as
14th month pay or a total of nineteen thousand and eight hundred
dollars (US$19,800.00) or its peso equivalent and attorneys fees
amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995.[6] Denying the motion for
reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as Santos) was an overseas worker employed as a printer
at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in
June 1988, he was directly hired by the Palace Hotel, Beijing, Peoples
Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter
referred to as MHC) and the Manila Hotel International Company,
Limited (hereinafter referred to as MHICL).
When the case was filed in 1990, MHC was still a government-
owned and controlled corporation duly organized and existing under
the laws of the Philippines.
MHICL is a corporation duly organized and existing under the
laws of Hong Kong.[7] MHC is an incorporator of MHICL, owning 50% of
its capital stock.[8]
By virtue of a management agreement[9] with the Palace Hotel
(Wang Fu Company Limited), MHICL[10] trained the personnel and staff
of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Santos received a letter dated May 2,
1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel,
Beijing, China. Mr. Schmidt informed respondent Santos that he was
recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as
printer, but with a higher monthly salary and increased benefits. The
position was slated to open on October 1, 1988.[11]
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and
signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk
mailed a ready to sign employment contract to respondent Santos. Mr.
Henk advised respondent Santos that if the contract was acceptable,
to return the same to Mr. Henk in Manila, together with his passport
and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon
Printing Press, effective June 30, 1988, under the pretext that he was
needed at home to help with the familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henks letter. Respondent Santos enclosed four (4)
signed copies of the employment contract (dated June 4, 1988) and
notified them that he was going to arrive in Manila during the first
week of July 1988.
The employment contract of June 4, 1988 stated that his
employment would commence September 1, 1988 for a period of two
years.[12] It provided for a monthly salary of nine hundred dollars
(US$900.00) net of taxes, payable fourteen (14) times a year.[13]
On June 30, 1988, respondent Santos was deemed resigned from
the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing,
China. He started to work at the Palace Hotel.[14]
Subsequently, respondent Santos signed an amended
employment agreement with the Palace Hotel, effective November 5,
1988. In the contract, Mr. Shmidt represented the Palace Hotel. The
Vice President (Operations and Development) of petitioner MHICL
Miguel D. Cergueda signed the employment agreement under the
word noted.
From June 8 to 29, 1989, respondent Santos was in the
Philippines on vacation leave. He returned to China and reassumed his
post on July 17, 1989.
On July 22, 1989, Mr. Shmidts Executive Secretary, a certain
Joanna suggested in a handwritten note that respondent Santos be
given one (1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent
Santos by letter signed by Mr. Shmidt that his employment at the
Palace Hotel print shop would be terminated due to business reverses
brought about by the political upheaval in China. [15] We quote the
letter:[16]
After the unfortunate happenings in China and especially Beijing
(referring to Tiannamen Square incidents), our business has been
severely affected. To reduce expenses, we will not open/operate
printshop for the time being.
We sincerely regret that a decision like this has to be made, but rest
assured this does in no way reflect your past performance which we
found up to our expectations.
Should a turnaround in the business happen, we will contact you
directly and give you priority on future assignment.
On September 5, 1989, the Palace Hotel terminated the
employment of respondent Santos and paid all benefits due him,
including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the
Philippines.
On October 24, 1989, respondent Santos, through his lawyer,
Atty. Ednave wrote Mr. Shmidt, demanding full compensation
pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:[17]
His service with the Palace Hotel, Beijing was not abruptly terminated
but we followed the one-month notice clause and Mr. Santos received
all benefits due him.
For your information, the Print Shop at the Palace Hotel is still not
operational and with a low business outlook, retrenchment in various
departments of the hotel is going on which is a normal management
practice to control costs.
When going through the latest performance ratings, please also be
advised that his performance was below average and a Chinese
National who is doing his job now shows a better approach.
In closing, when Mr. Santos received the letter of notice, he hardly
showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure.
On February 20, 1990, respondent Santos filed a complaint for
illegal dismissal with the Arbitration Branch, National Capital Region,
National Labor Relations Commission (NLRC). He prayed for an award
of nineteen thousand nine hundred and twenty three dollars
(US$19,923.00) as actual damages, forty thousand pesos (P40,000.00)
as exemplary damages and attorneys fees equivalent to 20% of the
damages prayed for. The complaint named MHC, MHICL, the Palace
Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons
and neither participated in the proceedings before the Labor
Arbiter.[18]
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the
case against petitioners, thus:[19]
WHEREFORE, judgment is hereby rendered:
1. directing all the respondents to pay complainant jointly and
severally;
a) $20,820 US dollars or its equivalent in Philippine currency as
unearned salaries;
b) P50,000.00 as moral damages;
c) P40,000.00 as exemplary damages; and
d) Ten (10) percent of the total award as attorneys fees.
SO ORDERED.
On July 23, 1991, petitioners appealed to the NLRC, arguing that
the POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution,
stating:[20]
WHEREFORE, let the appealed Decision be, as it is hereby, declared
null and void for want of jurisdiction. Complainant is hereby enjoined
to file his complaint with the POEA.
SO ORDERED.
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that the
case was not cognizable by the POEA as he was not an overseas
contract worker.[21]
On May 31, 1993, the NLRC granted the motion and reversed
itself. The NLRC directed Labor Arbiter Emerson Tumanon to hear the
case on the question of whether private respondent was retrenched or
dismissed.[22]
On January 13, 1994, Labor Arbiter Tumanon completed the
proceedings based on the testimonial and documentary evidence
presented to and heard by him.[23]
Subsequently, Labor Arbiter Tumanon was re-assigned as trial
arbiter of the National Capital Region, Arbitration Branch, and the case
was transferred to Labor Arbiter Jose G. de Vera.[24]
On November 25, 1994, Labor Arbiter de Vera submitted his
report.[25] He found that respondent Santos was illegally dismissed
from employment and recommended that he be paid actual damages
equivalent to his salaries for the unexpired portion of his contract.[26]
On December 15, 1994, the NLRC ruled in favor of private
respondent, to wit:[27]
WHEREFORE, finding that the report and recommendations of Arbiter
de Vera are supported by substantial evidence, judgment is hereby
rendered, directing the respondents to jointly and severally pay
complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the un-expired portion of the parties
contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties contract; (3) US$3,600.00 as 14th
month pay for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent, plus (4)
attorneys fees of 10% of complainants total award.
SO ORDERED.
On February 2, 1995, petitioners filed a motion for
reconsideration arguing that Labor Arbiter de Veras recommendation
had no basis in law and in fact.[28]
On March 30, 1995, the NLRC denied the motion for
reconsideration.[29]
Hence, this petition.[30]
On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order and/or writ
of preliminary injunction and a motion for the annulment of the entry
of judgment of the NLRC dated July 31, 1995.[31]
On November 20, 1995, the Court denied petitioners urgent
motion. The Court required respondents to file their respective
comments, without giving due course to the petition.[32]
On March 8, 1996, the Solicitor General filed a manifestation
stating that after going over the petition and its annexes, they can not
defend and sustain the position taken by the NLRC in its assailed
decision and orders. The Solicitor General prayed that he be excused
from filing a comment on behalf of the NLRC[33]
On April 30,1996, private respondent Santos filed his
comment.[34]
On June 26, 1996, the Court granted the manifestation of the
Solicitor General and required the NLRC to file its own comment to the
petition.[35]
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two
foreign jurisdictions and the case involves purely foreign elements. The
only link that the Philippines has with the case is that respondent
Santos is a Filipino citizen.The Palace Hotel and MHICL are foreign
corporations. Not all cases involving our citizens can be tried here.
The employment contract.-- Respondent Santos was hired
directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where respondent
Santos was then employed. He was hired without the intervention of
the POEA or any authorized recruitment agency of the government.[36]
Under the rule of forum non conveniens, a Philippine court or
agency may assume jurisdiction over the case if it chooses to do
so provided: (1) that the Philippine court is one to which the parties
may conveniently resort to; (2) that the Philippine court is in a position
to make an intelligent decision as to the law and the facts; and (3) that
the Philippine court has or is likely to have power to enforce its
decision.[37] The conditions are unavailing in the case at bar.
Not Convenient.-- We fail to see how the NLRC is a convenient
forum given that all the incidents of the case - from the time of
recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of
the Philippines.Neither are they doing business in the Philippines.
Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-
residents of the Philippines.
No power to determine applicable law.-- Neither can an
intelligent decision be made as to the law governing the employment
contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place
where the contract was made).[38]
The employment contract was not perfected in the
Philippines. Respondent Santos signified his acceptance by writing a
letter while he was in the Republic of Oman. This letter was sent to the
Palace Hotel in the Peoples Republic of China.
No power to determine the facts.-- Neither can the NLRC
determine the facts surrounding the alleged illegal dismissal as all acts
complained of took place in Beijing, Peoples Republic of China. The
NLRC was not in a position to determine whether the Tiannamen
Square incident truly adversely affected operations of the Palace Hotel
as to justify respondent Santos retrenchment.
Principle of effectiveness, no power to execute decision.-- Even
assuming that a proper decision could be reached by the NLRC, such
would not have any binding effect against the employer, the Palace
Hotel. The Palace Hotel is a corporation incorporated under the laws
of China and was not even served with summons. Jurisdiction over its
person was not acquired.
 This is not to say that Philippine courts and agencies have no
power to solve controversies involving foreign employers. Neither are
we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an overseas contract
worker, a Philippine forum, specifically the POEA, not the NLRC,
would protect him.[39] He is not an overseas contract worker a fact
which he admits with conviction.[40]
Even assuming that the NLRC was the proper forum, even on the
merits, the NLRCs decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction
over the case, and (2) that MHICL was liable for Santos retrenchment,
still MHC, as a separate and distinct juridical entity cannot be held
liable.
True, MHC is an incorporator of MHICL and owns fifty percent
(50%) of its capital stock. However, this is not enough to pierce the veil
of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is
resorted to when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend a crime. [41] It is
done only when a corporation is a mere alter ego or business conduit
of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,[42] we held that the
mere ownership by a single stockholder or by another corporation of
all or nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate
personalities.
The tests in determining whether the corporate veil may be
pierced are: First, the defendant must have control or complete
domination of the other corporations finances, policy and business
practices with regard to the transaction attacked. There must be proof
that the other corporation had no separate mind, will or existence
with respect the act complained of. Second, control must be used by
the defendant to commit fraud or wrong. Third, the aforesaid control
or breach of duty must be the proximate cause of the injury or loss
complained of. The absence of any of the elements prevents the
piercing of the corporate veil.[43]
It is basic that a corporation has a personality separate and
distinct from those composing it as well as from that of any other legal
entity to which it may be related.[44] Clear and convincing evidence is
needed to pierce the veil of corporate fiction.[45] In this case, we find
no evidence to show that MHICL and MHC are one and the same
entity.
III. MHICL not Liable
Respondent Santos predicates MHICLs liability on the fact that
MHICL signed his employment contract with the Palace Hotel. This fact
fails to persuade us.
First, we note that the Vice President (Operations and
Development) of MHICL, Miguel D. Cergueda signed the employment
contract as a mere witness. He merely signed under the word noted.
When one notes a contract, one is not expressing his agreement
or approval, as a party would.[46] In Sichangco v. Board of
Commissioners of Immigration,[47] the Court recognized that the term
noted means that the person so noting has merely taken cognizance of
the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the witnessing part of the
document. The witnessing part of the document is that which, in a
deed or other formal instrument is that part which comes after the
recitals, or where there are no recitals, after the parties (emphasis
ours).[48] As opposed to a party to a contract, a witness is simply one
who, being present, personally sees or perceives a thing; a beholder, a
spectator, or eyewitness.[49] One who notes something just makes a
brief written statement[50] a memorandum or observation.
Second, and more importantly, there was no existing employer-
employee relationship between Santos and MHICL. In determining the
existence of an employer-employee relationship, the following
elements are considered:[51]
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power to dismiss; and
(4) the power to control employees conduct.
MHICL did not have and did not exercise any of the
aforementioned powers. It did not select respondent Santos as an
employee for the Palace Hotel. He was referred to the Palace Hotel by
his friend, Nestor Buenio. MHICL did notengage respondent Santos to
work. The terms of employment were negotiated and finalized
through correspondence between respondent Santos, Mr. Schmidt
and Mr. Henk, who were officers and representatives of the Palace
Hotel and not MHICL. Neither did respondent Santos adduce any proof
that MHICL had the power to control his conduct.Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that terminated
respondent Santos services.
Neither is there evidence to suggest that MHICL was a labor-only
contractor.[52] There is no proof that MHICL supplied respondent
Santos or even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and
MHICL are one and the same entity. The fact that the Palace Hotel is a
member of the Manila Hotel Group is not enough to pierce the
corporate veil between MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and
considering further that no employer-employee relationship existed
between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina
J. Diosana clearly had no jurisdiction over respondents claim in NLRC
NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over
the following:[53]
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217
of the Labor Code is limited to disputes arising from an employer-
employee relationship which can be resolved by reference to the
Labor Code, or other labor statutes, or their collective bargaining
agreements.[54]
To determine which body has jurisdiction over the present
controversy, we rely on the sound judicial principle that jurisdiction
over the subject matter is conferred by law and is determined by the
allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein.[55]
The lack of jurisdiction of the Labor Arbiter was obvious from the
allegations of the complaint. His failure to dismiss the case amounts to
grave abuse of discretion.[56]
V. The Fallo
 WHEREFORE, the Court hereby GRANTS the petition
for certiorari and ANNULS the orders and resolutions of the National
Labor Relations Commission dated May 31, 1993, December 15, 1994
and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case
No. 00-02-01058-90).
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-
Santiago, JJ., concur.
405 Phil. 413
THIRD DIVISION
G.R. No. 141536, February 26, 2001
GIL MIGUEL T. PUYAT, PETITIONER, VS. RON ZABARTE, RESPONDENT.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine
issue as to any material fact, other than the amount of damages. If this
verity is evident from the pleadings and the supporting affidavits,
depositions and admissions on file with the court, the moving party is
entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, challenging the August 31, 1999 Decision[1] of the Court
of Appeals (CA), which affirmed the Regional Trial Court (RTC) of Pasig
City, Branch 67 in Civil Case No. 64107; and the January 20, 2000 CA
Resolution[2] which denied reconsideration.
The assailed CA Decision disposed as follows:
"WHEREFORE, finding no error in the judgment appealed from, the
same is AFFIRMED."[3]
The Facts
The facts of this case, as narrated by the Court of Appeals, are as
follows: [4]
"It appears that on 24 January 1994, [Respondent] Ron Zabarte
commenced [an action] to enforce the money judgment rendered by
the Superior Court for the State of California, County of Contra Costa,
U.S.A. On 18 March 1994, [petitioner] filed his Answer with the
following special and affirmative defenses:
xxxxxxxxx
`8) The Superior Court for the State of California, County of Contra
Costa[,] did not properly acquire jurisdiction over the subject matter of
and over the persons involved in [C]ase #C21-00265.
`9) The Judgment on Stipulations for Entry in Judgment in Case #C21-
00265 dated December 12, 1991 was obtained without the assistance
of counsel for [petitioner] and without sufficient notice to him and
therefore, was rendered in clear violation of [petitioner's]
constitutional rights to substantial and procedural due process.
`10) The Judgment on Stipulation for Entry in Judgment in Case #C21-
00265 dated December 12, 1991 was procured by means of fraud or
collusion or undue influence and/or based on a clear mistake of fact
and law.
`11) The Judgment on Stipulation for Entry in Judgment in Case #C21-
00265 dated December 12, 1991 is contrary to the laws, public policy
and canons of morality obtaining in the Philippines and the
enforcement of such judgment in the Philippines would result in the
unjust enrichment of [respondent] at the expense of [petitioner] in
this case.
`12) The Judgment on Stipulation for Entry in Judgment in Case #C21-
00265 dated December 12, 1991 is null and void and unenforceable in
the Philippines.
`13) In the transaction, which is the subject matter in Case #C21-
00265, [petitioner] is not in any way liable, in fact and in law, to
[respondent] in this case, as contained in [petitioner's] `Answer to
Complaint' in Case #C21-00265 dated April 1, 1991, Annex `B' of
[respondent's] `Complaint' dated December 6, 1993.
'14) [Respondent] is guilty of misrepresentation or falsification in the
filing of his `Complaint' in this case dated December 6, 1993. Worse,
[respondent] has no capacity to sue in the Philippines.
'15) Venue has been improperly laid in this case.'
(Record, pp. 42-44)
"On 1 August 1994, [respondent] filed a [M]otion for [S]ummary
[J]udgment under Rule 34 of the Rules of Court alleging that the
[A]nswer filed by [petitioner] failed to tender any genuine issue as to
the material facts. In his [O]pposition to [respondent's] motion,
[petitioner] demurred as follows:
`2) [Petitioner] begs to disagree[;] in support hereof, [he] wishes to
mention that in his `Answer with Special and Affirmative Defenses'
dated March 16, 1994 [petitioner] has interposed that the `Judgment
on Stipulations for Entry in Judgment' is null and void, fraudulent,
illegal and unenforceable, the same having been obtained by means of
fraud, collusion, undue influence and/or clear mistake of fact and law.
In addition, [he] has maintained that said `Judgment on Stipulations
for Entry in Judgment' was obtained without the assistance of counsel
for [petitioner] and without sufficient notice to him and therefore, was
rendered in violation of his constitutional rights to substantial and
procedural due process.'
"The [M]otion for [S]ummary [J]udgment was set for hearing on 12
August 1994 during which [respondent] marked and submitted in
evidence the following:
Exhibit `A' - x x x Judgment on Stipulation For Entry In
Judgment of the Supreme Court of the State of
California[,] County of Contra Costa[,] signed by
Hon. Ellen James, Judge of the Superior Court.
Exhibit `B' - x x x Certificate of Authentication of the [O]rder
signed by the Hon. Ellen James, issued by the
Consulate General of the Republic of the
Philippines.
Exhibit `C' - [R]eturn of the [W]rit of [E]xecution (writ
unsatisfied) issued by the sheriff/marshall, County
of Santa Clara, State of California.
Exhibit `D' - [W]rit of [E]xecution
Exhibit 'E' - [P]roof of [S]ervice of copies of [W]rit of
[E]xecution, [N]otice of [L]evy, [M]emorandum of
[G]arnishee, [E]xemptions from [E]nforcement of
[J]udgment.
Exhibit `F' - Certification issued by the Secretary of State,
State of California that Stephen Weir is the duly
elected, qualified and acting [c]ounty [c]lerk of
the County of Contra Costa of the State of
California.
Exhibit - Certificate of [A]uthentication of the [W]rit of
`G' [E]xecution.
"On 6 April 1995, the court a quo issued an [O]rder granting
[respondent's] [M]otion for [S]ummary [J]udgment [and] likewise
granting [petitioner] ten (10) days to submit opposing affidavits, after
which the case would be deemed submitted for resolution (Record,
pp. 152-153). [Petitioner] filed a [M]otion for [R]econsideration of the
aforesaid [O]rder and [respondent] filed [C]omment. On 30 June 1995,
[petitioner] filed a [M]otion to [D]ismiss on the ground of lack of
jurisdiction over the subject matter of the case and forum-non-
conveniens (Record, pp. 166-170). In his [O]pposition to the [M]otion
(Record, pp. 181-182) [respondent] contended that [petitioner could]
no longer question the jurisdiction of the lower court on the ground
that [the latter's] Answer had failed to raise the issue of jurisdiction.
[Petitioner] countered by asserting in his Reply that jurisdiction [could]
not be fixed by agreement of the parties. The lower court dismissed
[his] [M]otion for [R]econsideration and [M]otion [to] [D]ismiss
(Record, pp. 196-198), x x x."
The RTC[5] eventually rendered its February 21, 1997 Decision,[6] which
disposed as follows:
"WHEREFORE, judgment is hereby rendered, ordering [petitioner] to
pay [respondent] the following amounts:
"1. The amount of U.S. dollars $241,991.33, with the interest
of legal rate from October 18, 1991, or its peso
equivalent, pursuant to the [J]udgment of [S]tipulation for
[E]ntry in [J]udgment dated December 19, 1991;
"2. The amount of P30,000.00 as attorney's fees;
"3. To pay the costs of suit.
"The claim for moral damages, not having been substantiated, it is
hereby denied."[7]
Ruling of the Court of Appeals
Affirming the trial court, the Court of Appeals held that petitioner was
estopped from assailing the judgment that had become final and had,
in fact, been partially executed. The CA also ruled that summary
judgment was proper, because petitioner had failed to tender any
genuine issue of fact and was merely maneuvering to delay the full
effects of the judgment.
Citing Ingenohl v. Olsen,[8] the CA also rejected petitioner's argument
that the RTC should have dismissed the action for the enforcement of
a foreign judgment, on the ground of forum non conveniens. It
reasoned out that the recognition of the foreign judgment was based
on comity, reciprocity and res judicata.
Hence, this Petition.[9]
Issue
In his Memorandum, petitioner submits this lone but all-embracing
issue:
"Whether or not the Court of Appeals acted in a manner x x x contrary
to law when it affirmed the Order of the trial court granting
respondent's Motion for Summary Judgment and rendering judgment
against the petitioner."[10]
In his discussion, petitioner contends that the CA erred in ruling in this
wise:
1 That his Answer failed to tender a genuine issue of fact regarding
the following:
2 (a) the jurisdiction of a foreign court over the subject matter

(b)
the validity of the foreign judgment

(c) the judgment's
conformity to Philippine laws, public policy, canons of
morality, and norms against unjust enrichment
3 That the principle of forum non conveniens was inapplicable to the
instant case.
This Court's Ruling
The Petition has no merit.
First Question:
Summary Judgment
Petitioner vehemently insists that summary judgment is inappropriate
to resolve the case at bar, arguing that his Answer allegedly raised
genuine and material factual matters which he should have been
allowed to prove during trial.
On the other hand, respondent argues that the alleged "genuine issues
of fact" raised by petitioner are mere conclusions of law, or
"propositions arrived at not by any process of natural reasoning from a
fact or a combination of facts stated but by the application of the
artificial rules of law to the facts pleaded."[11]
The RTC granted respondent's Motion for Summary Judgment because
petitioner, in his Answer, admitted the existence of the Judgment on
Stipulation for Entry in Judgment. Besides, he had already paid $5,000
to respondent, as provided in the foreign judgment sought to be
enforced.[12] Hence, the trial court ruled that, there being no genuine
issue as to any material fact, the case should properly be resolved
through summary judgment. The CA affirmed this ruling.
We concur with the lower courts. Summary judgment is a procedural
device for the prompt disposition of actions in which the pleadings
raise only a legal issue, and not a genuine issue as to any material fact.
By genuine issue is meant a question of fact that calls for the
presentation of evidence. It should be distinguished from an issue that
is sham, contrived, set in bad faith and patently unsubstantial.[13]
Summary judgment is resorted to in order to avoid long drawn out
litigations and useless delays. When affidavits, depositions and
admissions on file show that there are no genuine issues of fact to be
tried, the Rules allow a party to pierce the allegations in the pleadings
and to obtain immediate relief by way of summary judgment. In short,
since the facts are not in dispute, the court is allowed to decide the
case summarily by applying the law to the material facts.
Petitioner contends that by allowing summary judgment, the two
courts a quo prevented him from presenting evidence to substantiate
his claims. We do not agree. Summary judgment is based on facts
directly proven by affidavits, depositions or admissions. [14] In this case,
the CA and the RTC both merely ruled that trial was not necessary to
resolve the case. Additionally and correctly, the RTC specifically
ordered petitioner to submit opposing affidavits to support his
contentions that (1) the Judgment on Stipulation for Entry in Judgment
was procured on the basis of fraud, collusion, undue influence, or a
clear mistake of law or fact; and (2) that it was contrary to public policy
or the canons of morality.[15]
Again, in its Order[16] dated November 29, 1995, the trial court clarified
that the opposing affidavits were "for [petitioner] to spell out the facts
or circumstances [that] would constitute lack of jurisdiction over the
subject matter of and over the persons involved in Case No. C21-
00265," and that would render the judgment therein null and void. In
this light, petitioner's contention that he was not allowed to present
evidence to substantiate his claims is clearly untenable.
For summary judgment to be valid, Rule 34, Section 3 of the Rules of
Court, requires (a) that there must be no genuine issue as to any
material fact, except for the amount of damages; and (b) that the
party presenting the motion for summary judgment must be entitled
to a judgment as a matter of law.[17] As mentioned earlier, petitioner
admitted that a foreign judgment had been rendered against him and
in favor of respondent, and that he had paid $5,000 to the latter in
partial compliance therewith. Hence, respondent, as the party
presenting the Motion for Summary Judgment, was shown to be
entitled to the judgment.
The CA made short shrift of the first requirement. To show that
petitioner had raised no genuine issue, it relied instead on the finality
of the foreign judgment which was, in fact, partially executed. Hence,
we shall show in the following discussion how the defenses presented
by petitioner failed to tender any genuine issue of fact, and why a full-
blown trial was not necessary for the resolution of the issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which
involved partnership interest, was vested in the Securities and
Exchange Commission, not in the Superior Court of California, County
of Contra Costa.
We disagree. In the absence of proof of California law on the
jurisdiction of courts, we presume that such law, if any, is similar to
Philippine law. We base this conclusion on the presumption of identity
or similarity, also known as processual presumption.[18] The
Complaint,[19] which respondent filed with the trial court, was for the
enforcement of a foreign judgment. He alleged therein that the action
of the foreign court was for the collection of a sum of money, breach
of promissory notes, and damages.[20]
In our jurisdiction, such a case falls under the jurisdiction of civil
courts, not of the Securities and Exchange Commission (SEC). The
jurisdiction of the latter is exclusively over matters enumerated in
Section 5, PD 902-A,[21] prior to its latest amendment. If the foreign
court did not really have jurisdiction over the case, as petitioner
claims, it would have been very easy for him to show this. Since
jurisdiction is determined by the allegations in a complaint, he only
had to submit a copy of the complaint filed with the foreign court.
Clearly, this issue did not warrant trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form
of a Compromise Agreement, cannot be executed without the parties
being assisted by their chosen lawyers. The reason for this, he points
out, is to eliminate collusion, undue influence and/or improper
exertion of ascendancy by one party over the other. He alleges that he
discharged his counsel during the proceedings, because he felt that
the latter was not properly attending to the case. The judge, however,
did not allow him to secure the services of another counsel. Insisting
that petitioner settle the case with respondent, the judge practically
imposed the settlement agreement on him. In his Opposing Affidavit,
petitioner states:
"It is true that I was initially represented by a counsel in the
proceedings in #C21-00625. I discharged him because I then felt that
he was not properly attending to my case or was not competent
enough to represent my interest. I asked the Judge for time to secure
another counsel but I was practically discouraged from engaging one
as the Judge was insistent that I settle the case at once with the
[respondent]. Being a foreigner and not a lawyer at that I did not know
what to do. I felt helpless and the Judge and [respondent's] lawyer
were the ones telling me what to do. Under ordinary circumstances,
their directives should have been taken with a grain of salt especially
so [since respondent's] counsel, who was telling me what to do, had
an interest adverse to mine. But [because] time constraints and undue
influence exerted by the Judge and [respondent's] counsel on me
disturbed and seriously affected my freedom to act according to my
best judgment and belief. In point of fact, the terms of the settlement
were practically imposed on me by the Judge seconded all the time by
[respondent's] counsel. I was then helpless as I had no counsel to
assist me and the collusion between the Judge and [respondent's]
counsel was becoming more evident by the way I was treated in the
Superior Court of [t]he State of California. I signed the `Judgment on
Stipulation for Entry in Judgment' without any lawyer assisting me at
the time and without being fully aware of its terms and
stipulations."[22]
The manifestation of petitioner that the judge and the counsel for the
opposing party had pressured him would gain credibility only if he had
not been given sufficient time to engage the services of a new lawyer.
Respondent's Affidavit[23] dated May 23, 1994, clarified, however, that
petitioner had sufficient time, but he failed to retain a counsel. Having
dismissed his lawyer as early as June 19, 1991, petitioner directly
handled his own defense and negotiated a settlement with respondent
and his counsel in December 1991. Respondent also stated that
petitioner, ignoring the judge's reminder of the importance of having a
lawyer, argued that "he would be the one to settle the case and pay"
anyway. Eventually, the Compromise Agreement was presented in
court and signed before Judge Ellen James on January 3, 1992. Hence,
petitioner's rights to counsel and to due process were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the norm
against unjust enrichment because the judge made him shoulder all
the liabilities in the case, even if there were two other defendants,
G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign
judgment, even if there are other defendants who are not being held
liable together with him. First, the foreign judgment itself does not
mention these other defendants, their participation or their liability to
respondent. Second, petitioner's undated Opposing Affidavit states:
"[A]lthough myself and these entities were initially represented by
Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan &
Severson, x x x I discharged x x x said lawyer. Subsequently, I assumed
the representation for myself and these firms and this was allowed by
the Superior Court of the State of California without any authorization
from G.G.P. & Sons, Inc. and the Genesis Group."[24] Clearly, it was
petitioner who chose to represent the other defendants; hence, he
cannot now be allowed to impugn a decision based on this ground.
In any event, contrary to petitioner's contention, unjust enrichment or
solutio indebiti does not apply to this case. This doctrine contemplates
payment when there is no duty to pay, and the person who receives
the payment has no right to receive it.[25] In this case, petitioner
merely argues that the other two defendants whom he represented
were liable together with him. This is not a case of unjust enrichment.
We do not see, either, how the foreign judgment could be contrary to
law, morals, public policy or the canons of morality obtaining in the
country. Petitioner owed money, and the judgment required him to
pay it. That is the long and the short of this case.
In addition, the maneuverings of petitioner before the trial court
reinforce our belief that his claims are unfounded. Instead of filing
opposing affidavits to support his affirmative defenses, he filed a
Motion for Reconsideration of the Order allowing summary judgment,
as well as a Motion to Dismiss the action on the ground of forum non
conveniens. His opposing affidavits were filed only after the Order of
November 29, 1995 had denied both Motions.[26] Such actuation was
considered by the trial court as a dilatory ploy which justified the
resolution of the action by summary judgment. According to the CA,
petitioner's allegations sought to delay the full effects of the
judgment; hence, summary judgment was proper. On this point, we
concur with both courts.
Second Question:
Forum Non Conveniens
Petitioner argues that the RTC should have refused to entertain the
Complaint for enforcement of the foreign judgment on the principle of
forum non conveniens. He claims that the trial court had no
jurisdiction, because the case involved partnership interest, and there
was difficulty in ascertaining the applicable law in California. All the
aspects of the transaction took place in a foreign country, and
respondent is not even Filipino.
case in order to invalidate the foreign judgment; yet, he avers that the
trial court should not exercise jurisdiction over the same case on the
basis of forum non conveniens. Not only do these defenses weaken
each other, but they bolster the finding of the lower courts that he
was merely maneuvering to avoid or delay payment of his obligation.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision
and Resolution AFFIRMED. Double costs against petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ.,
concur.

We disagree. Under the principle of forum non conveniens, even if the

exercise of jurisdiction is authorized by law, courts may nonetheless
refuse to entertain a case for any of the following practical reasons:
"1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence
there;

2) The belief that the non-resident plaintiff sought the forum[,] a

practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;

3) The unwillingness to extend local judicial facilities to non-residents

or aliens when the docket may already be overcrowded;

4) The inadequacy of the local judicial machinery for effectuating the

right sought to be maintained; and

5) The difficulty of ascertaining foreign law."[27]

None of the aforementioned reasons barred the RTC from exercising
its jurisdiction. In the present action, there was no more need for
material witnesses, no forum shopping or harassment of petitioner, no
inadequacy in the local machinery to enforce the foreign judgment,
and no question raised as to the application of any foreign law.

Authorities agree that the issue of whether a suit should be

entertained or dismissed on the basis of the above-mentioned
principle depends largely upon the facts of each case and on the sound
discretion of the trial court.[28] Since the present action lodged in the
RTC was for the enforcement of a foreign judgment, there was no
need to ascertain the rights and the obligations of the parties based on
foreign laws or contracts. The parties needed only to perform their
obligations under the Compromise Agreement they had entered into.

Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a

judgment in an action in personam rendered by a foreign tribunal
clothed with jurisdiction is presumptive evidence of a right as between
the parties and their successors-in-interest by a subsequent title.[29]

Also, under Section 5(n) of Rule 131, a court -- whether in the

Philippines or elsewhere -- enjoys the presumption that it is acting in
the lawful exercise of its jurisdiction, and that it is regularly performing
its official duty.[30] Its judgment may, however, be assailed if there is
evidence of want of jurisdiction, want of notice to the party, collusion,
fraud or clear mistake of law or fact. But precisely, this possibility
signals the need for a local trial court to exercise jurisdiction. Clearly,
the application of forum non coveniens is not called for.

The grounds relied upon by petitioner are contradictory. On the one

hand, he insists that the RTC take jurisdiction over the enforcement
SECOND DIVISION
G.R. No. 120135, March 31, 2003
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
attorney’s 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]
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;
“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, Queen’s 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, Queen’s 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.”
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 plaintiff’s
baseless action and compelling the defendant needlessly to go through
a protracted trial and clogging the court dockets by another futile
case.”[34]
Records show that the trial court acted within its jurisdiction when it
issued the assailed Order denying petitioners’ motion to dismiss. Does
the denial of the motion to dismiss constitute a patent grave abuse of
discretion? Would appeal, under the circumstances, not prove to be a
speedy and adequate remedy? We will resolve said questions in
conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in
refusing to dismiss the complaint on the ground that plaintiffs have no
cause of action against defendants since plaintiffs are merely
stockholders of the corporations which are the registered owners of
the vessels and the borrowers of petitioners?
No. Petitioners’ argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to sue,
and therefore, the complaint should be dismissed, is untenable. A case
is dismissible for lack of personality to sue upon proof that the plaintiff
is not the real party-in-interest. Lack of personality to sue can be used
as a ground for a Motion to Dismiss based on the fact that the
complaint, on the face thereof, evidently states no cause of action.[35]
In San Lorenzo Village Association, Inc. 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 the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. Under this doctrine, a
court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most “convenient” or available forum
and the parties are not precluded from seeking remedies
elsewhere.[43]
Whether a suit should be entertained or dismissed on the basis of said
doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.[44] In the case of
Communication Materials and Design, Inc. 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 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 court’s 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.

Bellosillo, (Chairman), Mendoza, Quisumbing and Callejo, Sr., JJ.,

concur.
563 Phil. 572
THIRD DIVISION
G.R. No. 149177, November 23, 2007
KAZUHIRO HASEGAWA AND NIPPON ENGINEERING CONSULTANTS
CO., LTD., PETITIONERS, VS. MINORU KITAMURA, RESPONDENT.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the April 18, 2001 Decision[1] of the Court
of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001
Resolution[2] denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co.,
Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,[3] entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.[4] The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.[5] Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's consultancy
contract with the Philippine Government.[6]
When the STAR Project was near completion, the Department of
Public Works and Highways (DPWH) engaged the consultancy services
of Nippon, on January 28, 2000, this time for the detailed engineering
and construction supervision of the Bongabon-Baler Road
Improvement (BBRI) Project.[7] Respondent was named as the project
manager in the contract's Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general
manager for its International Division, informed respondent that the
company had no more intention of automatically renewing his ICA. His
services would be engaged by the company only up to the substantial
completion of the STAR Project on March 31, 2000, just in time for the
ICA's expiry.[9]
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondent’s
contract was for a fixed term that had already expired, and refused to
negotiate for the renewal of the ICA.[10]
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been perfected
in Japan and executed by and between Japanese nationals, moved to
dismiss the complaint for lack of jurisdiction. They asserted that the
claim for improper pre-termination of respondent's ICA could only be
heard and ventilated in the proper courts of Japan following the
principles of lex loci celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.[13]
On June 29, 2000, the RTC, invoking our ruling in Insular Government v.
Frank[14] that matters connected with the performance of contracts
are regulated by the law prevailing at the place of performance,[15]
denied the motion to dismiss.[16] The trial court subsequently denied
petitioners' motion for reconsideration,[17] prompting them to file with
the appellate court, on August 14, 2000, their first Petition for
Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].[18] On
August 23, 2000, the CA resolved to dismiss the petition on procedural
grounds—for lack of statement of material dates and for insufficient
verification and certification against forum shopping. [19] An Entry of
Judgment was later issued by the appellate court on September 20,
2000.[20]
Aggrieved by this development, petitioners filed with the CA, on
September 19, 2000, still within the reglementary period, a second
Petition for Certiorari under Rule 65 already stating therein the
material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same
issues as those in the first, was docketed as CA-G.R. SP No. 60827.[21]
Ruling on the merits of the second petition, the appellate court
rendered the assailed April 18, 2001 Decision[22] finding no grave abuse
of discretion in the trial court's denial of the motion to dismiss. The CA
ruled, among others, that the principle of lex loci celebrationis was not
applicable to the case, because nowhere in the pleadings was the
validity of the written agreement put in issue. The CA thus declared
that the trial court was correct in applying instead the principle of lex
loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by
the CA in the assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review on Certiorari[25]
imputing the following errors to the appellate court:
4 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT THE TRIAL COURT VALIDLY EXERCISED JURISDICTION
OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT
THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A
QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE
AND EXECUTED IN TOKYO, JAPAN.
5
6 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO
THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF
RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL
LAWS.[26]
The pivotal question that this Court is called upon to resolve is
whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the “state of the
most significant relationship rule,” or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the
same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.[27] The same holds true
in the CA's dismissal of the said case due to defects in the formal
requirement of verification[28] and in the other requirement in Rule 46
of the Rules of Court on the statement of the material dates.[29] The
dismissal being without prejudice, petitioners can re-file the petition,
or file a second petition attaching thereto the appropriate verification
and certification—as they, in fact did—and stating therein the material
dates, within the prescribed period[30] in Section 4, Rule 65 of the said
Rules.[31]
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the
merits does not bar another action involving the same parties, on the
same subject matter and theory.[32]
Necessarily, because the said dismissal is without prejudice and has no
res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural grounds,[33] petitioners
are no longer required by the Rules to indicate in their certification of
non-forum shopping in the instant petition for review of the second
certiorari petition, the status of the aforesaid first petition before the
CA. In any case, an omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not
warrant the dismissal and nullification of the entire proceedings,
considering that the evils sought to be prevented by the said
certificate are no longer present.[34]
The Court also finds no merit in respondent's contention that
petitioner Hasegawa is only authorized to verify and certify, on behalf
of Nippon, the certiorari petition filed with the CA and not the instant
petition. True, the Authorization[35] dated September 4, 2000, which is
attached to the second certiorari petition and which is also attached to
the instant petition for review, is limited in scope—its wordings
indicate that Hasegawa is given the authority to sign for and act on
behalf of the company only in the petition filed with the appellate
court, and that authority cannot extend to the instant petition for
review.[36] In a plethora of cases, however, this Court has liberally
applied the Rules or even suspended its application whenever a
satisfactory explanation and a subsequent fulfillment of the
requirements have been made.[37] Given that petitioners herein
sufficiently explained their misgivings on this point and appended to
their Reply[38] an updated Authorization[39] for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the same
as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on
behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001 Authorization
were issued only by Nippon's president and chief executive officer, not
by the company's board of directors. In not a few cases, we have ruled
that corporate powers are exercised by the board of directors; thus,
no person, not even its officers, can bind the corporation, in the
absence of authority from the board.[40] Considering that Hasegawa
verified and certified the petition only on his behalf and not on behalf
of the other petitioner, the petition has to be denied pursuant to
Loquias v. Office of the Ombudsman.[41] Substantial compliance will not
suffice in a matter that demands strict observance of the Rules.[42]
While technical rules of procedure are designed not to frustrate the
ends of justice, nonetheless, they are intended to effect the proper
and orderly disposition of cases and effectively prevent the clogging of
court dockets.[43]
Further, the Court has observed that petitioners incorrectly filed a Rule
65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion to
dismiss is interlocutory, and cannot be the subject of the extraordinary
petition for certiorari or mandamus. The appropriate recourse is to file
an answer and to interpose as defenses the objections raised in the
motion, to proceed to trial, and, in case of an adverse decision, to
elevate the entire case by appeal in due course.[44] While there are
recognized exceptions to this rule,[45] petitioners' case does not fall
among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum,
petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent. The ICA
subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese
language. Thus, petitioners posit that local courts have no substantial
relationship to the parties[46] following the [state of the] most
significant relationship rule in Private International Law.[47]
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the
Motion to Dismiss[48] filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely argued
that the applicable law which will determine the validity or invalidity of
respondent's claim is that of Japan, following the principles of lex loci
celebrationis and lex contractus.[49] While not abandoning this stance
in their petition before the appellate court, petitioners on certiorari
significantly invoked the defense of forum non conveniens.[50] On
petition for review before this Court, petitioners dropped their other
arguments, maintained the forum non conveniens defense, and
introduced their new argument that the applicable principle is the
[state of the] most significant relationship rule.[51]
Be that as it may, this Court is not inclined to deny this petition merely
on the basis of the change in theory, as explained in Philippine Ports
Authority v. City of Iloilo.[52] We only pointed out petitioners'
inconstancy in their arguments to emphasize their incorrect assertion
of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can the
resulting judgment be enforced?[53]
Analytically, jurisdiction and choice of law are two distinct concepts. [54]
Jurisdiction considers whether it is fair to cause a defendant to travel
to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum law.
While jurisdiction and the choice of the lex fori will often coincide, the
“minimum contacts” for one do not always provide the necessary
“significant contacts” for the other.[55] The question of whether the
law of a state can be applied to a transaction is different from the
question of whether the courts of that state have jurisdiction to enter
a judgment.[56]
In this case, only the first phase is at issue—jurisdiction. Jurisdiction,
however, has various aspects. For a court to validly exercise its power
to adjudicate a controversy, it must have jurisdiction over the plaintiff
or the petitioner, over the defendant or the respondent, over the
subject matter, over the issues of the case and, in cases involving
property, over the res or the thing which is the subject of the
litigation.[57] In assailing the trial court's jurisdiction herein, petitioners
are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is
conferred by the sovereign authority which establishes and organizes
the court. It is given only by law and in the manner prescribed by
law.[58] It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein.[59] To succeed in its motion for the dismissal of
an action for lack of jurisdiction over the subject matter of the
claim,[60] the movant must show that the court or tribunal cannot act
on the matter submitted to it because no law grants it the power to
adjudicate the claims.[61]
In the instant case, petitioners, in their motion to dismiss, do not claim
that the trial court is not properly vested by law with jurisdiction to
hear the subject controversy for, indeed, Civil Case No. 00-0264 for
specific performance and damages is one not capable of pecuniary
estimation and is properly cognizable by the RTC of Lipa City.[62] What
they rather raise as grounds to question subject matter jurisdiction are
the principles of lex loci celebrationis and lex contractus, and the “state
of the most significant relationship rule.”
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over the
case and take into account or apply the law of some other State or
States.[74] The court’s power to hear cases and controversies is derived
from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign
law short of treaties or other formal agreements, even in matters
regarding rights provided by foreign sovereigns.[75]
Neither can the other ground raised, forum non conveniens,[76] be
used to deprive the trial court of its jurisdiction herein. First, it is not a
proper basis for a motion to dismiss because Section 1, Rule 16 of the
Rules of Court does not include it as a ground.[77] Second, whether a
suit should be entertained or dismissed on the basis of the said
doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.[78] In this case, the
RTC decided to assume jurisdiction. Third, the propriety of dismissing a
case based on this principle requires a factual determination; hence,
this conflicts principle is more properly considered a matter of
defense.[79]
Accordingly, since the RTC is vested by law with the power to entertain
and hear the civil case filed by respondent and the grounds raised by
petitioners to assail that jurisdiction are inappropriate, the trial and
appellate courts correctly denied the petitioners’ motion to dismiss.

The Court finds the invocation of these grounds unsound. WHEREFORE, premises considered, the petition for review on
certiorari is DENIED.
Lex loci celebrationis relates to the “law of the place of the
ceremony”[63] or the law of the place where a contract is made.[64] The SO ORDERED.
doctrine of lex contractus or lex loci contractus means the “law of the
place where a contract is executed or to be performed.”[65] It controls Ynares-Santiago, (Chairperson), Austria-Martinez, Chico-Nazario, and
the nature, construction, and validity of the contract[66] and it may Reyes, JJ., concur.
pertain to the law voluntarily agreed upon by the parties or the law
intended by them either expressly or implicitly.[67] Under the “state of
the most significant relationship rule,” to ascertain what state law to
apply to a dispute, the court should determine which state has the
most substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the contract
was made, was negotiated, was to be performed, and the domicile,
place of business, or place of incorporation of the parties.[68] This rule
takes into account several contacts and evaluates them according to
their relative importance with respect to the particular issue to be
resolved.[69]

Since these three principles in conflict of laws make reference to the

law applicable to a dispute, they are rules proper for the second
phase, the choice of law.[70] They determine which state's law is to be
applied in resolving the substantive issues of a conflicts problem.[71]
Necessarily, as the only issue in this case is that of jurisdiction, choice-
of-law rules are not only inapplicable but also not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is

exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules. [72] Also, when the
law of a foreign country is invoked to provide the proper rules for the
solution of a case, the existence of such law must be pleaded and
proved.[73]

It should be noted that when a conflicts case, one involving a foreign

element, is brought before a court or administrative agency, there are
570 Phil. 151
SECOND DIVISION
G.R. No. 162894, February 26, 2008
RAYTHEON INTERNATIONAL, INC., Petitioner, vs. STOCKTON W.
ROUZIE, JR., Respondent.
DECISION
TINGA, J,:
Before this Court is a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure which seeks the reversal of the
Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. SP No.
67001 and the dismissal of the civil case filed by respondent against
petitioner with the trial court.
As culled from the records of the case, the following antecedents
appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation
duly organized and existing under the laws of the State of Connecticut,
United States of America, and respondent Stockton W. Rouzie, Jr., an
American citizen, entered into a contract whereby BMSI hired
respondent as its representative to negotiate the sale of services in
several government projects in the Philippines for an agreed
remuneration of 10% of the gross receipts. On 11 March 1992,
respondent secured a service contract with the Republic of the
Philippines on behalf of BMSI for the dredging of rivers affected by the
Mt. Pinatubo eruption and mudflows.[3]
On 16 July 1994, respondent filed before the Arbitration Branch of the
National Labor Relations Commission (NLRC) a suit against BMSI and
Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G.
Browning for alleged nonpayment of commissions, illegal termination
and breach of employment contract.[4] On 28 September 1995, Labor
Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and
RUST to pay respondent’s money claims.[5] Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed
respondent’s complaint on the ground of lack of jurisdiction. [6]
Respondent elevated the case to this Court but was dismissed in a
Resolution dated 26 November 1997. The Resolution became final and
executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted
an action for damages before the Regional Trial Court (RTC) of Bauang,
La Union. The Complaint,[7] docketed as Civil Case No. 1192-BG, named
as defendants herein petitioner Raytheon International, Inc. as well as
BMSI and RUST, the two corporations impleaded in the earlier labor
case. The complaint essentially reiterated the allegations in the labor
case that BMSI verbally employed respondent to negotiate the sale of
services in government projects and that respondent was not paid the
commissions due him from the Pinatubo dredging project which he
secured on behalf of BMSI. The complaint also averred that BMSI and
RUST as well as petitioner itself had combined and functioned as one
company.
In its Answer,[8] petitioner alleged that contrary to respondent’s claim,
it was a foreign corporation duly licensed to do business in the
Philippines and denied entering into any arrangement with respondent
or paying the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of assuming the
alleged obligation of the said companies.[9] Petitioner also referred to
the NLRC decision which disclosed that per the written agreement
between respondent and BMSI and RUST, denominated as “Special
Sales Representative Agreement,” the rights and obligations of the
parties shall be governed by the laws of the State of Connecticut.[10]
Petitioner sought the dismissal of the complaint on grounds of failure
to state a cause of action and forum non conveniens and prayed for
damages by way of compulsory counterclaim.[11]
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary
Hearing Based on Affirmative Defenses and for Summary Judgment[12]
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 Order[14] dated 13 September 2000, the RTC denied petitioner’s
omnibus motion. The trial court held that the factual allegations in the
complaint, assuming the same to be admitted, were sufficient for the
trial court to render a valid judgment thereon. It also ruled that the
principle of forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a foreign
corporation licensed to do business in the Philippines.[15]
Petitioner filed a Motion for Reconsideration[16] of the order, which
motion was opposed by respondent.[17] In an Order dated 31 July
2001,[18] the trial court denied petitioner’s motion. Thus, it filed a Rule
65 Petition[19] 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
Decision[21] denying the petition for certiorari for lack of merit. It also
denied petitioner’s motion for reconsideration in the assailed
Resolution issued on 10 March 2004.[22]
The appellate court held that although the trial court should not have
confined itself to the allegations in the complaint and should have also
considered evidence aliunde in resolving petitioner’s omnibus motion,
it found the evidence presented by petitioner, that is, the deposition
of Walter Browning, insufficient for purposes of determining whether
the complaint failed to state a cause of action. The appellate court also
stated that it could not rule one way or the other on the issue of
whether the corporations, including petitioner, named as defendants
in the case had indeed merged together based solely on the evidence
presented by respondent. Thus, it held that the issue should be
threshed out during trial.[23] Moreover, the appellate court deferred to
the discretion of the trial court when the latter decided not to desist
from assuming jurisdiction on the ground of the inapplicability of the
principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO
DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION
AGAINST RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO
DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON
CONVENIENS.[24]
Incidentally, respondent failed to file a comment despite repeated
notices. The Ceferino Padua Law Office, counsel on record for
respondent, manifested that the lawyer handling the case, Atty.
Rogelio Karagdag, had severed relations with the law firm even before
the filing of the instant petition and that it could no longer find the
whereabouts of Atty. Karagdag or of respondent despite diligent
efforts. In a Resolution[25] dated 20 November 2006, the Court
resolved to dispense with the filing of a comment.

The instant petition lacks merit.
Petitioner mainly asserts that the written contract between
respondent and BMSI included a valid choice of law clause, that is, that
the contract shall be governed by the laws of the State of Connecticut.
It also mentions the presence of foreign elements in the dispute –
namely, the parties and witnesses involved are American corporations
and citizens and the evidence to be presented is located outside the
Philippines – that renders our local courts inconvenient forums.
Petitioner theorizes that the foreign elements of the dispute
necessitate the immediate application of the doctrine of forum non
conveniens.
Recently in Hasegawa v. Kitamura,[26] the Court outlined three
consecutive phases involved in judicial resolution of conflicts-of-laws
problems, namely: jurisdiction, choice of law, and recognition and
enforcement of judgments. Thus, in the instances[27] where the Court
held that the local judicial machinery was adequate to resolve
controversies with a foreign element, the following requisites had to
be proved: (1) that the Philippine Court is one to which the parties
may conveniently resort; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that
the Philippine Court has or is likely to have the power to enforce its
decision.[28]
On the matter of jurisdiction over a conflicts-of-laws problem where
the case is filed in a Philippine court and where the court has
jurisdiction over the subject matter, the parties and the res, it may or
can proceed to try the case even if the rules of conflict-of-laws or the
convenience of the parties point to a foreign forum. This is an exercise
of sovereign prerogative of the country where the case is filed.[29]
Jurisdiction over the nature and subject matter of an action is
conferred by the Constitution and the law[30] and by the material
allegations in the complaint, irrespective of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs sought
therein.[31] Civil Case No. 1192-BG is an action for damages arising
from an alleged breach of contract. Undoubtedly, the nature of the
action and the amount of damages prayed are within the jurisdiction
of the RTC.
As regards jurisdiction over the parties, the trial court acquired
jurisdiction over herein respondent (as party plaintiff) upon the filing
of the complaint. On the other hand, jurisdiction over the person of
petitioner (as party defendant) was acquired by its voluntary
appearance in court.[32]
That the subject contract included a stipulation that the same shall be
governed by the laws of the State of Connecticut does not suggest that
the Philippine courts, or any other foreign tribunal for that matter, are
precluded from hearing the civil action. Jurisdiction and choice of law
are two distinct concepts. Jurisdiction considers whether it is fair to
cause a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties.[33] The choice
of law stipulation will become relevant only when the substantive
issues of the instant case develop, that is, after hearing on the merits
proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-
laws cases, may refuse impositions on its jurisdiction where it is not
the most “convenient” or available forum and the parties are not
precluded from seeking remedies elsewhere.[34] Petitioner’s averments
of the foreign elements in the instant case are not sufficient to oust
the trial court of its jurisdiction over Civil Case No. No. 1192-BG and
the parties involved.
Moreover, the propriety of dismissing a case based on the principle of
forum non conveniens requires a factual determination; hence, it is
more properly considered as a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction on
this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court’s
desistance.[35]
Finding no grave abuse of discretion on the trial court, the Court of
Appeals respected its conclusion that it can assume jurisdiction over
the dispute notwithstanding its foreign elements. In the same manner,
the Court defers to the sound discretion of the lower courts because
their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG
failed to state a cause of action against petitioner. Failure to state a
cause of action refers to the insufficiency of allegation in the
pleading.[36] As a general rule, the elementary test for failure to state a
cause of action is whether the complaint alleges facts which if true
would justify the relief demanded.[37]
The complaint alleged that petitioner had combined with BMSI and
RUST to function as one company. Petitioner contends that the
deposition of Walter Browning rebutted this allegation. On this score,
the resolution of the Court of Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well
as other documents produced in the hearing shows that these
evidence aliunde are not quite sufficient for us to mete a ruling that
the complaint fails to state a cause of action.
Annexes “A” to “E” by themselves are not substantial, convincing and
conclusive proofs that Raytheon Engineers and Constructors, Inc. (REC)
assumed the warranty obligations of defendant Rust International in
the Makar Port Project in General Santos City, after Rust International
ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly
conclude that Raytheon International, Inc., Rust International[,] Inc.
and Brand Marine Service, Inc. have combined into one company, so
much so that Raytheon International, Inc., the surviving company (if at
all) may be held liable for the obligation of BMSI to respondent Rouzie
for unpaid commissions. Neither these documents clearly speak
otherwise.[38]
As correctly pointed out by the Court of Appeals, the question of
whether petitioner, BMSI and RUST merged together requires the
presentation of further evidence, which only a full-blown trial on the
merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED.
The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
67001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Carpio, (Acting Chairperson), Sandoval-Gutierrez, Carpio-Morales, and
Velasco, Jr., JJ., concur.
SECOND DIVISION
G.R. No. 198587, January 14, 2015
SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA,
PETITIONERS, VS. MA. JOPETTE M. REBESENCIO, MONTASSAH B.
SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, RESPONDENTS.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in
the Constitution.
This is a Petition for Review on Certiorari with application for the
issuance of a temporary restraining order and/or writ of preliminary
injunction under Rule 45 of the 1997 Rules of Civil Procedure praying
that judgment be rendered reversing and setting aside the June 16,
2011 Decision[1] and September 13, 2011 Resolution[2] of the Court of
Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation
established and existing under the laws of Jeddah, Kingdom of Saudi
Arabia. It has a Philippine office located at 4/F, Metro House Building,
Sen. Gil J. Puyat Avenue, Makati City.[3] In its Petition filed with this
court, Saudia identified itself as follows:
1. Petitioner SAUDIA is a foreign corporation established and existing
under the Royal Decree No. M/24 of 18.07.1385H (10.02.1962G) in
Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is located
at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City
(Philippine Office). It may be served with orders of this Honorable
Court through undersigned counsel at 4th and 6th Floors, Citibank
Center Bldg., 8741 Paseo de Roxas, Makati City.[4] (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited
and hired by Saudia as Temporary Flight Attendants with the
accreditation and approval of the Philippine Overseas Employment
Administration.[5] After undergoing seminars required by the Philippine
Overseas Employment Administration for deployment overseas, as
well as training modules offered by Saudia (e.g., initial flight
attendant/training course and transition training), and after working as
Temporary Flight Attendants, respondents became Permanent Flight
Attendants. They then entered into Cabin Attendant contracts with
Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16, 1990;[6]
Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal
(Rouen Ruth) on May 22, 1993;[7] and Loraine Schneider-Cruz (Loraine)
on August 27, 1995.[8]
Respondents continued their employment with Saudia until they were
separated from service on various dates in 2006.[9]
Respondents contended that the termination of their employment was
illegal. They alleged that the termination was made solely because
they were pregnant.[10]
As respondents alleged, they had informed Saudia of their respective
pregnancies and had gone through the necessary procedures to
process their maternity leaves. Initially, Saudia had given its approval
but later on informed respondents that its management in Jeddah,
Saudi Arabia had disapproved their maternity leaves. In addition, it
required respondents to file their resignation letters. [11]
Respondents were told that if they did not resign, Saudia would
terminate them all the same. The threat of termination entailed the
loss of benefits, such as separation pay and ticket discount
entitlements.[12]
Specifically, Ma. Jopette received a call on October 16, 2006 from
Saudia's Base Manager, Abdulmalik Saddik (Abdulmalik).[13] Montassah
was informed personally by Abdulmalik and a certain Faisal Hussein on
October 20, 2006 after being required to report to the office one (1)
month into her maternity leave.[14] Rouen Ruth was also personally
informed by Abdulmalik on October 17, 2006 after being required to
report to the office by her Group Supervisor.[15] Loraine received a call
on October 12, 2006 from her Group Supervisor, Dakila Salvador.[16]
Saudia anchored its disapproval of respondents' maternity leaves and
demand for their resignation on its "Unified Employment Contract for
Female Cabin Attendants" (Unified Contract).[17] Under the Unified
Contract, the employment of a Flight Attendant who becomes
pregnant is rendered void. It provides:
(H) Due to the essential nature of the Air Hostess functions to be
physically fit on board to provide various services required in normal
or emergency cases on both domestic/international flights beside her
role in maintaining continuous safety and security of passengers, and
since she will not be able to maintain the required medical fitness while
at work in case of pregnancy, accordingly, if the Air Hostess becomes
pregnant at any time during the term of this contract, this shall
render her employment contract as void and she will be terminated
due to lack of medical fitness.[18] (Emphasis supplied)
In their Comment on the present Petition,[19] respondents emphasized
that the Unified Contract took effect on September 23, 2006 (the first
day of Ramadan),[20] well after they had filed and had their maternity
leaves approved. Ma. Jopette filed her maternity leave application on
September 5, 2006.[21] Montassah filed her maternity leave application
on August 29, 2006, and its approval was already indicated in Saudia's
computer system by August 30, 2006.[22] Rouen Ruth filed her
maternity leave application on September 13, 2006,[23] and Loraine
filed her maternity leave application on August 22, 2006.[24]
Rather than comply and tender resignation letters, respondents filed
separate appeal letters that were all rejected.[25]
Despite these initial rejections, respondents each received calls on the
morning of November 6, 2006 from Saudia's office secretary informing
them that their maternity leaves had been approved. Saudia, however,
was quick to renege on its approval. On the evening of November 6,
2006, respondents again received calls informing them that it had
received notification from Jeddah, Saudi Arabia that their maternity
leaves had been disapproved.[26]
Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In Montassah's
and Rouen Ruth's cases, their resignations were executed on Saudia's
blank letterheads that Saudia had provided. These letterheads already
had the word "RESIGNATION" typed on the subject portions of their
headings when these were handed to respondents.[27]
On November 8, 2007, respondents filed a Complaint against Saudia
and its officers for illegal dismissal and for underpayment of salary,
overtime pay, premium pay for holiday, rest day, premium, service
incentive leave pay, 13th month pay, separation pay, night shift
differentials, medical expense reimbursements, retirement benefits,
illegal deduction, lay-over expense and allowances, moral and
exemplary damages, and attorney's fees.[28] The case was initially
assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC NCR
Case No. 00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter. [29] It claimed that
all the determining points of contact referred to foreign law and
insisted that the Complaint ought to be dismissed on the ground of
forum non conveniens.[30] It added that respondents had no cause of
action as they resigned voluntarily.[31]
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-
Franco rendered the Decision[32] dismissing respondents' Complaint.
The dispositive portion of this Decision reads:
WHEREFORE, premises' considered, judgment is hereby rendered
DISMISSING the instant complaint for lack of jurisdiction/merit.[33]
On respondents' appeal, the National Labor Relations Commission's
Sixth Division reversed the ruling of Executive Labor Arbiter Jambaro-
Franco. It explained that "[considering that complainants-appellants
are OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to
hear and decide their complaint for illegal termination."[34] On the
matter of forum non conveniens, it noted that there were no special
circumstances that warranted its abstention from exercising
jurisdiction.[35] On the issue of whether respondents were validly
dismissed, it held that there was nothing on record to support Saudia's
claim that respondents resigned voluntarily.
The dispositive portion of the November 19, 2009 National Labor
Relations Commission Decision[36] reads:
WHEREFORE, premises considered, judgment is hereby rendered
finding the appeal impressed with merit. The respondents-appellees
are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and
separation pay plus ten (10%) percent thereof as attorney's fees. The
decision of the Labor Arbiter dated December 12, 2008 is hereby
VACATED and SET ASIDE. Attached is the computation prepared by this
Commission and made an integral part of this Decision.[37]
In the Resolution dated February 11, 2010,[38] the National Labor
Relations Commission denied petitioners' Motion for Reconsideration.
In the June 16, 2011 Decision,[39] the Court of Appeals denied
petitioners' Rule 65 Petition and modified the Decision of the National
Labor Relations Commission with respect to the award of separation
pay and backwages.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition is hereby DENIED. The Decision
dated November 19, 2009 issued by public respondent, Sixth Division
of the National Labor Relations Commission - National Capital Region
is MODIFIED only insofar as the computation of the award of
separation pay and backwages. For greater clarity, petitioners are
ordered to pay private respondents separation pay which shall be
computed from private respondents' first day of employment up to
the finality of this decision, at the rate of one month per year of
service and backwages which shall be computed from the date the
private respondents were illegally terminated until finality of this
decision. Consequently, the ten percent (10%) attorney's fees shall be
based on the total amount of the award. The assailed Decision is
affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation based
on the foregoing.[40]
In the Resolution dated September 13, 2011,[41] the Court of Appeals
denied petitioners' Motion for Reconsideration.
Hence, this Appeal was filed.
The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations
Commission may exercise jurisdiction over Saudi Arabian Airlines and
apply Philippine law in adjudicating the present dispute;
Second, whether respondents' voluntarily resigned or were illegally
terminated; and
Lastly, whether Brenda J. Betia may be held personally liable along
with Saudi Arabian Airlines.
I
Summons were validly served on Saudia and jurisdiction over it validly
acquired.
There is no doubt that the pleadings and summons were served on
Saudia through its counsel.[42] Saudia, however, claims that the Labor
Arbiter and the National Labor Relations Commission had no
jurisdiction over it because summons were never served on it but on
"Saudia Manila."[43] Referring to itself as "Saudia Jeddah," it claims that
"Saudia Jeddah" and not "Saudia Manila" was the employer of
respondents because:
First, "Saudia Manila" was never a party to the Cabin Attendant
contracts entered into by respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for
respondents' salaries and benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their
resignations.[44]
Saudia posits that respondents' Complaint was brought against the
wrong party because "Saudia Manila," upon which summons was
served, was never the employer of respondents.[45]
Saudia is vainly splitting hairs in its effort to absolve itself of liability.
Other than its bare allegation, there is no basis for concluding that
"Saudia Jeddah" is distinct from "Saudia Manila."
What is clear is Saudia's statement in its own Petition that what it has
is a "Philippine Office . . . located at 4/F Metro House Building, Sen. Gil
J. Puyat Avenue, Makati City."[46] Even in the position paper that
Saudia submitted to the Labor Arbiter,[47] what Saudia now refers to as
"Saudia Jeddah" was then only referred to as "Saudia Head Office at
Jeddah, KSA,"[48] while what Saudia now refers to as "Saudia Manila"
was then only referred to as "Saudia's office in Manila."[49]
By its own admission, Saudia, while a foreign corporation, has a
Philippine office.
Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign
Investments Act of 1991, provides the following:
The phrase "doing business" shall include . . . opening offices,
whether called "liaison" offices or branches; . . . and any other act or
acts that imply a continuity of commercial dealings or arrangements
and contemplate to that extent the performance of acts or works, or
the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or of the purpose and
object of the business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads
to no other conclusion than that Saudia is a foreign corporation doing
business in the Philippines. As such, Saudia may be sued in the
Philippines and is subject to the jurisdiction of Philippine tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah"
and "Saudia Manila" — the latter being nothing more than Saudia's
local office — service of summons to Saudia's office in Manila sufficed
to vest jurisdiction over Saudia's person in Philippine tribunals.
II
Saudia asserts that Philippine courts and/or tribunals are not in a
position to make an intelligent decision as to the law and the facts.
This is because respondents' Cabin Attendant contracts require the
application of the laws of Saudi Arabia, rather than those of the
Philippines.[50] It claims that the difficulty of ascertaining foreign law
calls into operation the principle of forum non conveniens, thereby
rendering improper the exercise of jurisdiction by Philippine
tribunals.[51]
A choice of law governing the validity of contracts or the interpretation
of its provisions dees not necessarily imply forum non conveniens.
Choice of law and forum non conveniens are entirely different matters.
Choice of law provisions are an offshoot of the fundamental principle
of autonomy of contracts. Article 1306 of the Civil Code firmly
ensconces this:
Article 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or
public policy.
In contrast, forum non conveniens is a device akin to the rule against
forum shopping. It is designed to frustrate illicit means for securing
advantages and vexing litigants that would otherwise be possible if the
venue of litigation (or dispute resolution) were left entirely to the
whim of either party.
Contractual choice of law provisions factor into transnational litigation
and dispute resolution in one of or in a combination of four ways: (1)
procedures for settling disputes, e.g., arbitration; (2) forum, i.e.,
venue; (3) governing law; and (4) basis for interpretation. Forum non
conveniens relates to, but is not subsumed by, the second of these.
Likewise, contractual choice of law is not determinative of jurisdiction.
Stipulating on the laws of a given jurisdiction as the governing law of a
contract does not preclude the exercise of jurisdiction by tribunals
elsewhere. The reverse is equally true: The assumption of jurisdiction
by tribunals does not ipso facto mean that it cannot apply and rule on
the basis of the parties' stipulation. In Hasegawa v. Kitamura:[52]
Analytically, 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 V'hich will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum law.
While jurisdiction and the choice of the lex fori will often, coincide, the
"minimum contacts" for one do not always provide the necessary
"significant contacts" for the other. The question of whether the law of
a state can be applied to a transaction is different from the question of
whether the courts of that state have jurisdiction to enter a
judgment.[53]
As various dealings, commercial or otherwise, are facilitated by the
progressive ease of communication and travel, persons from various
jurisdictions find themselves transacting with each other. Contracts
involving foreign elements are, however, nothing new. Conflict of laws
situations precipitated by disputes and litigation anchored on these
contracts are not totally novel.
Transnational transactions entail differing laws on the requirements Q
for the validity of the formalities and substantive provisions of
contracts and their interpretation. These transactions inevitably lend
themselves to the possibility of various fora for litigation and dispute
resolution. As observed by an eminent expert on transnational law:
The more jurisdictions having an interest in, or merely even a point of
contact with, a transaction or relationship, the greater the number of
potential fora for the resolution of disputes arising out of or related to
that transaction or relationship. In a world of increased mobility,
where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily be
invoked in a single or a set of related disputes.[54]
Philippine law is definite as to what governs the formal or extrinsic
validity of contracts. The first paragraph of Article 17 of the Civil Code
provides that "[t]he forms and solemnities of contracts . . . shall be
governed by the laws of the country in which they are executed"[55]
(i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling conflict
of laws situations on matters pertaining to substantive content of
contracts. It has been noted that three (3) modes have emerged: (1)
lex loci contractus or the law of the place of the making; (2) lex loci
solutionis or the law of the place of performance; and (3) lex loci
intentionis or the law intended by the parties.[56]
Given Saudia's assertions, of particular relevance to resolving the
present dispute is lex loci intentionis.
An author observed that Spanish jurists and commentators "favor lex
loci intentionis."[57] These jurists and commentators proceed from the
Civil Code of Spain, which, like our Civil Code, is silent on what governs
the intrinsic validity of contracts, and the same civil law traditions from
which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc.,[58] manifested preference
for allowing the parties to select the law applicable to their contract":
No conflicts rule on essential validity of contracts is expressly provided
for in our laws. The rule followed by most legal systems, however, is
that the intrinsic validity of a contract must be governed by the lex
contractus or "proper law of the contract." This is the law voluntarily
agreed upon by the parties (the lex loci voluntatis) or the law intended
by them either expressly or implicitly (the lex loci intentionis). The law
selected may be implied from such factors as substantial connection
with the transaction, or the nationality or domicile of the parties.
Philippine courts would do well to adopt the first and most basic rule
in most legal systems, namely, to allow the parties to select the law
applicable to their contract, subject to the limitation that it is not
against the law, morals, or public policy of the forum and that the
chosen law must bear a substantive relationship to the transaction.[59]
(Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts
require the application of the laws of Saudi Arabia. It insists that the
need to comply with these stipulations calls into operation the
doctrine of forum non conveniens and, in turn, makes it necessary for
Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational
litigation in any or a combination of four (4) ways. Moreover, forum
non conveniens relates to one of these: choosing between multiple
possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora —
along with the host of difficulties it poses — is not unique to
transnational litigation. It is a difficulty that similarly arises in disputes
well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single
jurisdiction, such rules as those on forum shopping, litis pendentia, and
res judicata come into operation. Thus, in the Philippines, the 1997
Rules on Civil Procedure provide for willful and deliberate forum
shopping as a ground not only for summary dismissal with prejudice
but also for citing parties and counsels in direct contempt, as well as
for the imposition of administrative sanctions.[60] Likewise, the same
rules expressly provide that a party may seek the dismissal of a
Complaint or another pleading asserting a claim on the ground "[t]hat
there is another action pending between the same parties for the
same cause," i.e., litis pendentia, or "[t]hat the cause of action is
barred by a prior judgment,"[61] i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis
pendentia, and res judicata, is a means of addressing the problem of
parallel litigation. While the rules of forum shopping, litis pendentia,
and res judicata are designed to address the problem of parallel
litigation within a single jurisdiction, forum non conveniens is a means
devised to address parallel litigation arising in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is
inconvenient."[62] It is a concept in private international law and was
devised to combat the "less than honorable" reasons and excuses that
litigants use to secure procedural advantages, annoy and harass
defendants, avoid overcrowded dockets, and select a "friendlier"
venue.[63] Thus, the doctrine of forum non conveniens addresses the
same rationale that the rule against forum shopping does, albeit on a
multijurisdictional scale.
Forum non conveniens, like res judicata,[64] is a concept originating in
common law.[65] However, unlike the rule on res judicata, as well as
those on litis pendentia and forum shopping, forum non conveniens
finds no textual anchor, whether in statute or in procedural rules, in
our civil law system. Nevertheless, jurisprudence has applied forum
non conveniens as basis for a court to decline its exercise of
jurisdiction.[66]
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure undue
advantages by engaging in forum shopping on an international scale. It
is also grounded on principles of comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in
exercising jurisdiction on account of forum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs which
are better and more competently addressed by the latter. Further,
forum non conveniens entails a recognition not only that tribunals
elsewhere are better suited to rule on and resolve a controversy, but
also, that these tribunals are better positioned to enforce judgments
and, ultimately, to dispense justice. Forum non conveniens prevents
the embarrassment of an awkward situation where a tribunal is
rendered incompetent in the face of the greater capability — both
analytical and practical — of a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as
much a matter of efficiency and economy as it is a matter of
international courtesy. A court would effectively be neutering itself if it
insists on adjudicating a controversy when it knows full well that it is in
no position to enforce its judgment. Doing so is not only an exercise in
futility; it is an act of frivolity. It clogs the dockets of a.tribunal and
leaves it to waste its efforts on affairs, which, given transnational
exigencies, will be reduced to mere academic, if not trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "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."[67] In Puyat v.
Zabarte,[68] this court recognized the following situations as among
those that may warrant a court's desistance from exercising
jurisdiction:
1) The belief that the matter can be better tried and
decided elsewhere, either because the main aspects of
the case transpired in a foreign jurisdiction or the
material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the
forum[,] a practice known as forum shopping[,] merely to
secure procedural advantages or to convey or harass the
defendant;
3) The unwillingness to extend local judicial facilities to non-
residents or aliens when the docket may already be
overcrowded;
4) The inadequacy of the local judicial machinery for
effectuating the right sought to be maintained; and
5) The difficulty of ascertaining foreign law.[69]
In Bank of America, NT&SA, Bank of America International, Ltd. v.
Court of Appeals,[70] this court underscored that a Philippine court may
properly assume jurisdiction over a case if it chooses to do so to the
extent: "(1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that
the Philippine Court has or is likely to have power to enforce its
decision."[71]
The use of the word "may" (i.e., "may refuse impositions on its
jurisdiction"[72]) in the decisions shows that the matter of jurisdiction
rests on the sound discretion of a court. Neither the mere invocation
of forum non conveniens nor the averment of foreign elements
operates to automatically divest a court of jurisdiction. Rather, a court
should renounce jurisdiction only "after 'vital facts are established, to
determine whether special circumstances' require the court's
desistance."[73] As the propriety of applying forum non conveniens is
contingent on a factual determination, it is, therefore, a matter of
defense.[74]
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil
Procedure is exclusive in its recital of the grounds for dismissal that are
exempt from the omnibus motion rule: (1) lack of jurisdiction over the
subject matter; (2) litis pendentia; (3) res judicata; and (4) prescription.
Moreover, dismissal on account of forum non conveniens is a
fundamentally discretionary matter. It is, therefore, not a matter for a
defendant to foist upon the court at his or her own convenience;
rather, it must be pleaded at the earliest possible opportunity.
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest possible
opportunity. Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,[75] this court stated that forum non
conveniens is not a ground for a motion to dismiss.[76] The factual
ambience of this case however does not squarely raise the viability of
this doctrine. Until the opportunity comes to review the use of
motions to dismiss for parallel litigation, Hasegawa remains existing
doctrine.
Consistent with forum non conveniens as fundamentally a factual
matter, it is imperative that it proceed from & factually established
basis. It would be improper to dismiss an action pursuant to forum non
conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that a
prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by
duplicitous litigation, the embarrassment of intruding into the affairs
of another sovereign, and the squandering of judicial efforts in
resolving a dispute already lodged and better resolved elsewhere. As
has been noted:
A case will not be stayed o dismissed on [forum] non conveniens
grounds unless the plaintiff is shown to have an available alternative
forum elsewhere. On this, the moving party bears the burden of proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the
foreign court may lack either subject matter or personal jurisdiction
over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the
fairness of its judicial procedures, or as to is operational efficiency
(due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case, [it
was found] that delays of 'up to a quarter of a century' rendered the
foreign forum... inadequate for these purposes.[77]
We deem it more appropriate and in the greater interest of prudence
that a defendant not only allege supposed dangerous tendencies in
litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.
III
Forum non conveniens finds no application and does not operate to
divest Philippine tribunals of jurisdiction and to require the application
of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the
stipulations of the Cabin Attendant contracts that require the
application of the laws of Saudi Arabia.
Forum non conveniens relates to forum, not to the choice of governing
law. Thai forum non conveniens may ultimately result in the
application of foreign law is merely an incident of its application. In
this strict sense, forum non conveniens is not applicable. It is not the
primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum
non conveniens on the incidental matter of the law governing
respondents' relation with Saudia leads to the conclusion that it is
improper for Philippine tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a
forum and'its incidents must grapple with two (2) considerations: first,
the availability and adequacy of recourse to a foreign tribunal; and
second, the question of where, as between the forum court and a
foreign court, the balance of interests inhering in a dispute weighs
more heavily.
The first is a pragmatic matter. It relates to the viability of ceding
jurisdiction to a foreign tribunal and can be resolved by juxtaposing
the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity to
enforce orders and judgments, access to records, requirements for the
acquisition of jurisdiction, and even questions relating to the integrity
of foreign courts, may render undesirable or even totally unfeasible
recourse to a foreign court. As mentioned, we consider it in the
greater interest of prudence that a defendant show, in pleading forum
non conveniens, that litigation has commenced in another jurisdiction
and that a foieign tribunal has, in fact, chosen to exercise jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of
interests inhering in a dispute: first, the vinculum which the parties
and their relation have to a given jurisdiction; and second, the public
interest that must animate a tribunal, in its capacity as an agent of the
sovereign, in choosing to assume or decline jurisdiction. The first is
more concerned with the parties, their personal circumstances, and
private interests; the second concerns itself with the state and the
greater social order.
In considering the vinculum, a court must look into the preponderance
of linkages which the parties and their transaction may have to either
jurisdiction. In this respect, factors, such as the parties' respective
nationalities and places of negotiation, execution, performance,
engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness
that it is an organ of the state. It must, thus, determine if the interests
of the sovereign (which acts through it) are outweighed by those of
the alternative jurisdiction. In this respect, the court delves into a
consideration of public policy. Should it find that public interest weighs
more heavily in favor of its assumption of jurisdiction, it should
proceed in adjudicating the dispute, any doubt or .contrary view
arising from the preponderance of linkages notwithstanding.
Our law on contracts recognizes the validity of contractual choice of
law provisions. Where such provisions exist, Philippine tribunals, acting
as the forum court, generally defer to the parties' articulated choice.
This is consistent with the fundamental principle of autonomy of
contracts. Article 1306 of the Civ:l Code expressly provides that "[t]he
contracting parties may establish 'such stipulations, clauses, terms and
conditions as they may deem convenient."[78] Nevertheless, while a
Philippine tribunal (acting as the forum court) is called upon to respect
the parties' choice of governing law, such respect must not be so
permissive as to lose sight of considerations of law, morals, good
customs, public order, or public policy that underlie the contract
central to the controversy.
Specifically with respect to public policy, in Pakistan International
Airlines Corporation v. Ople,[79] this court explained that:
counter-balancing the principle of autonomy of contracting parties is
the equally general rule that provisions of applicable law, especially
provisions relating to matters affected with public policy, are deemed
written inta the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily
impressed with public interest.[80] (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State
... shall ensure the fundamental equality before the law of women and
men." Contrasted with Article II, Section 1 of the 1987 Constitution's
statement that "[n]o person shall ... be denied the equal protection of
the laws," Article II, Section 14 exhorts the State to "ensure." This does
not only mean that the Philippines shall not countenance nor lend
legal recognition and approbation to measures that discriminate on
the basis of one's being male or female. It imposes an obligation to
actively engage in securing the fundamental equality of men and
women.
The Convention on the Elimination of all Forms of Discrimination
against Women (CEDAW), signed and ratified by the Philippines on July
15, 1980, and on August 5, 1981, respectively,[81] is part of the law of
the land. In view of the widespread signing and ratification of, as well
as adherence (in practice) to it by states, it may even be said that
many provisions of the CEDAW may have become customary
international law. The CEDAW gives effect to the Constitution's policy
statement in Article II, Section 14. Article I of the CEDAW defines
"discrimination against women" as:
any distinction, exclusion or restriction made on the basis of sex which
has the effect or purpose of impairing or nullifying the recognition,
enjoyment or exercise by women, irrespective of their marital status,
on a basis of equality of men and women, of human rights and
fundamental freedoms in the political, economic, social, cultural, civil
or any other field.[82]
The constitutional exhortation to ensure fundamental equality, as
illumined by its enabling law, the CEDAW, must inform and animate all
the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on
the disputes brought before it, to ensure that no discrimination is
heaped upon women on the mere basis of their being women. This is a
point so basic and central that all our discussions and pronouncements
— regardless of whatever averments there may be of foreign law —
must proceed from this premise.
So informed and animated, we emphasize the glaringly discriminatory
nature of Saudia's policy. As argued by respondents, Saudia's policy
entails the termination of employment of flight attendants who
become pregnant. At the risk of stating the obvious, pregnancy is an
occurrence that pertains specifically to women. Saudia's policy
excludes from and restricts employment on the basis of no other
consideration but sex.
We do not lose sight of the reality that pregnancy does present
physical limitations that may render difficult the performance of
functions associated with being a flight attendant. Nevertheless, it
would be the height of iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the termination of one's
employment. It is clear to us that any individual, regardless of gender,
may be subject to exigencies that limit the performance of functions.
However, we fail to appreciate how pregnancy could be such an
impairing occurrence that it leaves no other recourse but the complete
termination of the means through which a woman earns a living.
Apart from the constitutional policy on the fundamental equality
before the law of men and women, it is settled that contracts relating
to labor and employment are impressed with public interest. Article
1700 of the Civil Code provides that "[t]he relation between capital
and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan
International Airlines Corporation[83] are clear and unmistakable:
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the applicable
law of the agreement, and, secondly, lays the venue for settlement of
any dispute arising out of or in connection with the agreement "only
[in] courts of Karachi, Pakistan". The first clause of paragraph 10
cannot be invoked to prevent the application of Philippine labor laws
and'regulations to the subject matter of this case, i.e., the employer-
employee relationship between petitioner PIA and private
respondents. We have already pointed out that the relationship is
much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the
parties agreeing upon some other law to govern their relationship. . . .
Under these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them by Philippine law.[84]
(Emphasis supplied)
As the present dispute relates to (what the respondents allege to be)
the illegal termination of respondents' employment, this case is
immutably a matter of public interest and public policy. Consistent
with clear pronouncements in law and jurisprudence, Philippine laws
properly find application in and govern this case. 'Moreover, as this
premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals may
properly assume jurisdiction over the present controversy. Philippine
jurisprudence provides ample illustrations of when a court's
renunciation of jurisdiction on account of forum non conveniens is
proper or improper.'
In Philsec Investment Corporation v. Court of Appeals,[85] this court
noted that the trial court failed to consider that one of the plaintiffs
was a domestic corporation, that one of the defendants was a Filipino,
and that it was the extinguishment of the latter's debt that was the
object of the transaction subject of the litigation. Thus, this court held,
among others, that the trial court's refusal to assume jurisdiction was
not justified by forum non conveniens and remanded the case to the
trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,[86] this court sustained the
trial court's assumption of jurisdiction considering that the trial court
could properly enforce judgment on the petitioner which was a foreign
corporation licensed to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,[87] this court found no
reason to disturb the trial court's assumption of jurisdiction over a
case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the
plaintiff] resides in the Philippines and the contract allegedly breached
involve[d] employment in the Philippines."[88]
In Pacific Consultants International Asia, Inc. v. Schonfeld,[89] this court
held that the fact that the complainant in an illegal dismissal case was
a Canadian citizen and a repatriate did not warrant the application of
forum non conveniens considering that: (1) the Labor Code does not
include forum non conveniens as a ground for the dismissal of a
complaint for illegal dismissal; (2) the propriety of dismissing a case
based on forum non conveniens requires a factual determination; and
(3) the requisites for assumption of jurisdiction as laid out in Bank of
America, NT&SA[90] were all satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National Labor
Relations Commission[91] that the National Labor Relations Q
Commission was a seriously inconvenient forum. In that case, private
respondent Marcelo G. Santos was working in the Sultanate of Oman
when he received a letter from Palace Hotel recruiting him for
employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment
supposedly due to business reverses arising from political upheavals in
China (i.e., the Tiananmen Square incidents of 1989). Santos later filed
a Complaint for illegal dismissal impleading Palace Hotel's General
Manager, Mr. Gerhard Schmidt, the Manila Hotel International
Company Ltd. (which was, responsible for training Palace Hotel's
personnel and staff), and the Manila Hotel Corporation (which owned
50% of Manila Hotel International Company Ltd.'s capital stock).
In ruling against the National Labor Relations Commission's exercise of
jurisdiction, this court noted that the main aspects of the case
transpired in two (2) foreign jurisdictions, Oman and China, and that
the case involved purely foreign elements. Specifically, Santos was
directly hired by a foreign employer through correspondence sent to
Oman. Also, the proper defendants were neither Philippine nationals
nor engaged in business in the Philippines, while the main witnesses
were not residents of the Philippines. Likewise, this court noted that
the National Labor Relations Commission was in no position to
conduct the following: first, determine the law governing the
employment contract, as it was entered into in foreign soil; second,
determine the facts, as Santos' employment was terminated in Beijing;
and third, enforce its judgment, since Santos' employer, Palace Hotel,
was incorporated under the laws of China and was not even served
with summons.
Contrary to Manila Hotel, the case now before us does not entail a
preponderance of linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not
approximate the circumstances enumerated in Puyat,[92] which this
court recognized as possibly justifying the desistance of Philippine
tribunals from exercising jurisdiction.
First, there is no basis for concluding that the case can be more
conveniently tried elsewhere. As established earlier, Saudia is doing
business in the Philippines. For their part, all four (4) respondents are
Filipino citizens maintaining residence in the Philippines and, apart
from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to
respondents' inconvenience if this case were to be tried elsewhere.
Second, the records are bereft of any indication that respondents filed
their Complaint in an effort to engage in forum shopping or to vex and
inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial
facilities to non-residents or aliens."[93] That Saudia has managed to
bring the present controversy all the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is inadequate
for effectuating the right sought to be maintained. Summons was
properly served on Saudia and jurisdiction over its person was validly
acquired.
Lastly, there is not even room for considering foreign law. Philippine
law properly governs the present dispute.
As the question of applicable law has been settled, the supposed
difficulty of ascertaining foreign law (which requires the application of
forum non conveniens) provides no insurmountable inconvenience or
special circumstance that will justify depriving Philippine tribunals of
jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the
laws of Saudi Arabia which should apply, it does not follow that
Philippine tribunals should refrain from exercising jurisdiction. To.
recall our pronouncements in Puyat,[94] as well as in Bank of America,
NT&SA,[95] it is not so much the mere applicability of foreign law which
calls into operation forum non conveniens. Rather, what justifies a
court's desistance from exercising jurisdiction is "[t]he difficulty of
ascertaining foreign law"[96] or the inability of a "Philippine Court to
make an intelligent decision as to the law[.]"[97]
Consistent with lex loci intentionis, to the extent that it is proper and
practicable (i.e., "to make an intelligent decision" [98]), Philippine
tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy
and reliability of respondents' citation) in this case, respondents
themselves have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write:
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal
and unlawful to terminate the employment of any woman by virtue of
pregnancy. The law in Saudi Arabia is even more harsh and strict [sic]
in that no employer can terminate the employment of a female worker
or give her a warning of the same while on Maternity Leave, the
specific provision of Saudi Labor Laws on the matter is hereto quoted
as follows:
"An employer may not terminate the employment of a female worker
or give her a warning of the same while on maternity leave." (Article
155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree No.
M/51.)[99]
All told, the considerations for assumption of jurisdiction by Philippine
tribunals as outlined in Bank of America, NT&SA[100] have been
satisfied. First, all the parties are based in the Philippines and all the
material incidents transpired in this jurisdiction. Thus, the parties may
conveniently seek relief from Philippine tribunals. Second, Philippine
tribunals are in a position to make an intelligent decision as to the law
and the facts. Third, Philippine tribunals are in a position to enforce
their decisions. There is no compelling basis for ceding jurisdiction to a
foreign tribunal. Quite the contrary, the immense public policy
considerations attendant to this case behoove Philippine tribunals to
not shy away from their duty to rule on the case.
IV
Respondents were illegally terminated.
In Bilbao v. Saudi Arabian Airlines,[101] this court defined voluntary
resignation as "the voluntary act of an employee who is in a situation
where one believes that personal reasons cannot be sacrificed in favor
of the exigency of the service, and one has no other choice but to
dissociate oneself from employment. It is a formal pronouncement or
relinquishment of an office, with the intention of relinquishing the
office accompanied by the act of relinquishment." [102] Thus, essential
to the act of resignation is voluntariness. It must be the result of an
employee's exercise of his or her own will.
In the same case of Bilbao, this court advanced a means for
determining whether an employee resigned voluntarily:
As the intent to relinquish must concur with the overt act of
relinquishment, the acts of the employee before and after the alleged
resignation must be considered in determining whether he or she, in
fact, intended, to sever his or her employment.[103] (Emphasis supplied)
On the other hand, constructive dismissal has been defined as
"cessation of work because 'continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion
in rank or a diminution in pay' and other benefits."[104]
In Penaflor v. Outdoor Clothing Manufacturing Corporation,[105]
constructive dismissal has been described as tantamount to
"involuntarily [sic] resignation due to the harsh, hostile, and
unfavorable conditions set by the employer."[106] In the same case, it
was noted that "[t]he gauge for constructive dismissal is whether a
reasonable person in the employee's position would feel compelled to
give up his employment under the prevailing circumstances."[107]
Applying the cited standards on resignation and constructive dismissal,
it is clear that respondents were constructively dismissed. Hence, their
termination was illegal.
The termination of respondents' employment happened when they
were pregnant and expecting to incur costs on account of child
delivery and infant rearing. As noted by the Court of Appeals,
pregnancy is a time when they need employment to sustain their
families.[108] Indeed, it goes against normal and reasonable human
behavior to abandon one's livelihood in a time of great financial need.
It is clear that respondents intended to remain employed with Saudia.
All they did was avail of their maternity leaves. Evidently, the very
nature of a maternity leave means that a pregnant employee will not
report for work only temporarily and that she will resume the
performance of her duties as soon as the leave allowance expires.
It is also clear that respondents exerted all efforts to' remain employed
with Saudia. Each of them repeatedly filed appeal letters (as much as
five [5] letters in the case of Rebesencio[109]) asking Saudia to
reconsider the ultimatum that they resign or be terminated along with
the forfeiture of their benefits. Some of them even went to Saudia's
office to personally seek reconsideration.[110]
Respondents also adduced a copy of the "Unified Employment
Contract for Female Cabin Attendants."[111] This contract deemed void
the employment of a flight attendant who becomes pregnant and
threatened termination due to lack of medical fitness. [112] The threat of
termination (and the forfeiture of benefits that it entailed) is enough
to compel a reasonable person in respondents' position to give up his
or her employment.
Saudia draws attention to how respondents' resignation letters were
supposedly made in their own handwriting. This minutia fails to
surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of
how any supposed resignation did not arise from respondents' own
initiative. As earlier pointed out, respondents' resignations were
executed on Saudia's blank letterheads that Saudia had provided.
These letterheads already had the word "RESIGNATION" typed on the
subject portion of their respective headings when these were handed
to respondents.[113]
"In termination cases, the burden of proving just or valid cause for
dismissing an employee rests on the employer."[114] In this case, Saudia
makes much of how respondents supposedly completed their exit
interviews, executed quitclaims, received their separation pay, and
took more than a year to file their Complaint.[115] If at all, however,
these circumstances prove only the fact of their occurrence, nothing
more. The voluntariness of respondents' departure from Saudia is non
sequitur.
Mere compliance with standard procedures or processes, such as the
completion of their exit interviews, neither negates compulsion nor
indicates voluntariness.
As with respondent's resignation letters, their exit interview forms
even support their claim of illegal dismissal and militates against
Saudia's arguments. These exit interview forms, as reproduced by
Saudia in its own Petition, confirms the unfavorable conditions as
regards respondents' maternity leaves. Ma. Jopette's and Loraine's exit
interview forms are particularly telling:
a. From Ma. Jopette's exit interview form:
3. In what respects has the job met or failed to meet your
expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY
LEAVE.[116]
b. From Loraine's exit interview form:
1. What are your main reasons for leaving Saudia? What company
are you joining?
xxx xxx xxx
Others
CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)[117]
As to respondents' quitclaims, in Phil. Employ Services and Resources,
Inc. v. Paramio,[118] this court noted that "[i]f (a) there is clear proof
that the waiver was wangled from an unsuspecting or gullible person;
or (b) the terms of the settlement are unconscionable, and on their
face invalid, such quitclaims must be struck down as invalid or
illegal."[119] Respondents executed their quitclaims after having been
unfairly given an ultimatum to resign or be terminated (and forfeit
their benefits).
V
Having been illegally and unjustly dismissed, respondents are entitled
to full backwages and benefits from the time of their termination until
the finality of this Decision. They are likewise entitled to separation
pay in the amount of one (1) month's salary for every year of service
until the fmality of this Decision, with a fraction of a year of at least six
(6) months being counted as one (1) whole year.
Moreover, "[m]oral damages are awarded in termination cases where
the employee's dismissal was attended by bad faith, malice or fraud,
or where it constitutes an act oppressive to labor, or where it was
done in a manner contrary to morals, good customs or public
policy."[120] In this case, Saudia terminated respondents' employment
in a manner that is patently discriminatory and running afoul of the
public interest that underlies employer-employee relationships. As
such, respondents are entitled to moral damages.
To provide an "example or correction for the public good"[121] as
against such discriminatory and callous schemes, respondents are
likewise entitled to exemplary damages.
In a long line of cases, this court awarded exemplary damages to
illegally dismissed employees whose "dismissal[s were] effected in a
wanton, oppressive or malevolent manner."[122] This court has
awarded exemplary damages to employees who were terminated on
such frivolous, arbitrary, and unjust grounds as membership in or
involvement with labor unions,[123] injuries sustained in the course of
employment,[124] development of a medical condition due to the
employer's own violation of the employment contract,[125] and lodging
of a Complaint against the employer.[126] Exemplary damages were
also awarded to employees who were deemed illegally dismissed by
an employer in an attempt to evade compliance with statutorily
established employee benefits.[127] Likewise, employees dismissed for
supposedly just causes, but in violation of due process requirements,
were awarded exemplary damages.[128]
These examples pale in comparison to the present controversy.
Stripped of all unnecessary complexities, respondents were dismissed
for no other reason than simply that they were pregnant. This is as
wanton, oppressive, and tainted with bad faith as any reason for
termination of employment can be. This is no ordinary case of illegal
dismissal. This is a case of manifest gender discrimination. It is an
affront not only to our statutes and policies on employees' security of
tenure, but more so, to the Constitution's dictum of fundamental
equality between men and women.[129]
The award of exemplary damages is, therefore, warranted, not only to
remind employers of the need to adhere to the requirements of
procedural and substantive due process in termination of
employment, but more importantly, to demonstrate that gender Carpio, (Chairperson), Velasco, Jr.,* Del Castillo, and Mendoza, JJ.,
discrimination should in no case be countenanced. concur.

Having been compelled to litigate to seek reliefs for their illegal and
unjust dismissal, respondents are likewise entitled to attorney's fees in
the amount of 10% of the total monetary award.[130]

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the

persons composing it. Thus, as a rule, corporate directors and officers
are not liable for the illegal termination of a corporation's employees.
It is only when they acted in bad faith or with malice that they become
solidarity liable with the corporation.[131]

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang

Manggagawa ng Ever Electrical,[132] this court clarified that "[b]ad faith
does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it
means breach of a known duty through some motive or interest or ill
will; it partakes of the nature of fraud."[133]

Respondents have not produced proof to show that Brenda J. Betia

acted in bad faith or with malice as regards their termination. Thus,
she may not be held solidarity liable with Saudia.

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J.

Betia is not solidarity liable with petitioner Saudi Arabian Airlines, and
second, that petitioner Saudi Arabian Airlines is liable for moral and
exemplary damages. The June 16, 2011 Decision and the September
13, 2011 Resolution of the Court of Appeals in CA-G.R. SP. No. 113006
are hereby AFFIRMED in all other respects. Accordingly, petitioner
Saudi Arabian Airlines is ordered to pay respondents:

(1) Full backwages and all other benefits computed from the
respective dates in which each of the respondents were
illegally terminated until the finality of this Decision;

(2) Separation pay computed from the respective dates in

which each of the respondents commenced employment
until the finality of this Decision at the rate of one (1)
month's salary for every year of service, with a fraction of
a year of at least six (6) months being counted as one (1)
whole year;

(3) Moral damages in the amount of P100,000.00 per

respondent;

(4) Exemplary damages in the amount of P200,000.00 per

respondent; and

(5) Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total

judgment award from the finality of this Decision until full satisfaction
thereof.

This case is REMANDED to the Labor Arbiter to make a detailed

computation of the amounts due to respondents which petitioner
Saudi Arabian Airlines should pay without delay.

SO ORDERED.
THIRD DIVISION
G.R. Nos. 178382-83, September 23, 2015
CONTINENTAL MICRONESIA, INC., PETITIONER, VS. JOSEPH BASSO,
RESPONDENT.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari[1] under Rule 45 of the levised
Rules of Court assailing the Decision[2] dated May 23, 2006 and
Resolution[3] dated June 19, 2007 of the Court of Appeals in the
consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281.
These assailed Decision and Resolution set aside the Decision[4] dated
November 28, 2003 of the National Labor Relations Commission
(NLRC) declaring Joseph Basso's (Basso) dismissal illegal, and ordering
the payment of separation pay as alternative to reinstatement and full
backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation
organized and existing under the laws of and domiciled in the United
States of America (US). It is licensed to do business in the Philippines.[5]
Basso, a US citizen, resided in the Philippines prior to his death.[6]
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden),
Managing Director-Asia of Continental Airlines, Inc. (Continental),
offered Basso the position of General Manager of the Philippine
Branch of Continental. Basso accepted the offer.[7]
It was not until much later that Mr. Braden, who had since returned to
the US, sent Basso the employment contract[8] dated February 1, 1991,
which Mr. Braden had already signed. Basso then signed the
employment contract and returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of
Continental, with Basso retaining his position as General Manager.[9]
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz
(Mr. Schulz), who was then CMI's Vice President of Marketing and
Sales, informing Basso that he has agreed to work in CMI as a
consultant on an "as needed basis" effective February 1, 1996 to July
31, 1996. The letter also informed Basso that: (1) he will not receive
any monetary compensation but will continue being covered by the
insurance provided by CMI; (2) he will enjoy travel privileges; and (3)
CMI will advance Php1,140,000.00 for the payment of housing lease
for 12 months.[10]
On January 11, 1996, Basso wrote a counter-proposal[11] to Mr. Schulz
regarding his employment status in CMI. On March 14, 1996, Basso
wrote another letter addressed to Ms. Marty Woodward (Ms.
Woodward) of CMI's Human Resources Department inquiring about
the status of his employment.[12] On the same day, Ms. Woodward
responded that pursuant to the employment contract dated February
1, 1991, Basso could be terminated at will upon a thirty-day notice.
This notice was allegedly the letter Basso received from Mr. Schulz on
December 20, 1995. Ms. Woodward also reminded Basso of the
telephone conversation between him, Mr. Schulz and Ms. Woodward
on December 19, 1995, where they informed him of the company's
decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also
informed Basso that CMI rejected his counter-proposal and, thus,
terminated his employment effective January 31, 1996. CMI offered
Basso a severance pay, in consideration of the Php1,140,000.00
housing advance that CMI promised him.[13]
Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary
Damages against CMI on December 19, 1996.[14] Alleging the presence
of foreign elements, CMI filed a Motion to Dismiss[15] dated February
10, 1997 on the ground of lack of jurisdiction over the person of CMI
and the subject matter of the controversy. In an Order[16] dated August
27, 1997, the Labor Arbiter granted the Motion to Dismiss. Applying
the doctrine of lex loci contractus, the Labor Arbiter held that the
terms and provisions of the employment contract show that the
parties did not intend to apply our Labor Code (Presidential Decree No.
442). The Labor Arbiter also held that no employer-employee
relationship existed between Basso and the branch office of CMI in the
Philippines, but between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the
determination of certain facts to settle the issue on jurisdiction. NLRC
ruled that the issue on whether the principle of lex loci contractus or
lex loci celebrationis should apply has to be further threshed out.[17]
Labor Arbiter's Ruling
Labor Arbiter Madjayran H. Ajan in his Decision[18] dated September
24, 1999 dismissed the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was
xecuted in the US "since the letter-offer was under the Texas
letterhead and the acceptance of Complainant was returned there."[19]
Thus, applying the doctrine of lex loci celebrationis, US laws apply.
Also, applying lex loci contractus, the Labor Arbiter ruled that the
parties did not intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious
that Philippine laws were not written into it. More specifically, the
Philippine law on taxes and the Labor Code were not intended by the
parties to apply, otherwise Par. 7 on the payment by Complainant U.S.
Federal and Home State income taxes, and Pars. 22/23 on termination
by 30-day prior notice, will not be there. The contract was prepared in
contemplation of Texas or U.S. laws where Par. 7 is required and Pars.
22/23 is allowed.[20]
The Labor Arbiter also ruled that Basso was terminated for a valid
cause based on the allegations of CMI that Basso committed a series of
acts that constitute breach of trust and loss of confidence.[21]
The Labor Arbiter, however, found CMI to have voluntarily submitted
to his office's jurisdiction. CMI participated in the proceedings,
submitted evidence on the merits of the case, and sought affirmative
relief through a motion to dismiss.[22]
NLRC's Ruling
On appeal, the NLRC Third Division promulgated its Decision[23] dated
November 28, 2003, the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and
SET ASIDE. Respondent CMI is ordered to pay complainant the amount
of US$5,416.00 for failure to comply with the due notice requirement.
The other claims are dismissed.
SO ORDERED.[24]
The NLRC did not agree with the pronouncement of the Labor Arbiter
that his office has no jurisdiction over the controversy. It ruled that the
Labor Arbiter acquired jurisdiction over the case when CMI voluntarily
submitted to his office's jurisdiction by presenting evidence, advancing
arguments in support of the legality of its acts, and praying for reliefs
on the merits of the case.[25]
On the merits, the NLRC agreed with the Labor Arbiter that Basso was
dismissed for just and valid causes on the ground of breach of trust
and loss of confidence. The NLRC ruled that under the applicable rules
on loss of trust and confidence of a managerial employee, such as
Basso, mere existence of a basis for believing that such employee has
breached the trust of his employer suffices. However, the NLRC found
that CMI denied Basso the required due process notice in his
dismissal.[26]
Both CMI and Basso filed their respective Motions for Reconsideration
dated January 15, 2004[27] and January 8, 2004.[28] Both motions were
dismissed in separate Resolutions dated March 15, 2004[29] and
February 27, 2004,[30] respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court
of Appeals docketed as CA-G.R. SP No. 83938.[31] Basso imputed grave
abuse of discretion on the part of the NLRC in ruling that he was validiy
dismissed. CMI filed its own Petition for Certiorari dated May 13, 2004
docketed as CA-G.R. SP No. 84281,[32] alleging that the NLRC gravely
abused its discretion when it assumed jurisdiction over the person of
CMI and the subject matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals
consolidated the two cases[33] and ordered the parties to file their
respective Memoranda.
The Court of Appeal's Decision
The Court of Appeals promulgated the now assailed Decision[34] dated
May 23, 2006, the relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No.
84281 is DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No.
83938 is GIVEN DUE COURSE and GRANTED, and accordingly, the
assailed Decision dated November 28, 2003 and Resolution dated
February 27, 2004 of the NLRC are SET ASIDE and VACATED. Instead
judgment is rendered hereby declaring the dismissal of Basso illegal
and ordering Continental to pay him separation pay equivalent to one
(1) month pay for every year of service as an alternative to
reinstatement. Further, ordering Continental to pay Basso his full
backwages from the date of his said illegal dismissal until date of this
decision. The claim for moral and exemplary damages as well as
attorney's fees are dismissed.[35]
The Court of Appeals ruled that the Labor Arbiter and the NLRC had
jurisdiction over the subject matter of the case and over the parties.
The Court of Appeals explained that jurisdiction over the subject
matter of the action is determined by the allegations of the complaint
and the law. Since the case filed by Basso is a termination dispute that
is "undoubtedly cognizable by the labor tribunals", the Labor Arbiter
and the NLRC had jurisdiction to rule on the merits of the case. On the
issue of jurisdiction over he person of the parties, who are foreigners,
the Court of Appeals ruled that jurisdiction over the person of Basso
was acquired when he filed the complaint for illegal dismissal, while
jurisdiction over the person of CMI was acquired through coercive
process of service of summons to its agent in the Philippines. The
Court of Appeals also agreed that the active participation of CMI in the
case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI
illegally dismissed Basso. The Court of Appeals found that CMI's
allegations of loss of trust and confidence were not established. CMI
"failed to prove its claim of the incidents which were its alleged bases
for loss of trust or confidence."[36] While managerial employees can be
dismissed for loss of trust and confidence, there must be a basis for
such loss, beyond mere whim or caprice.
After the parties filed their Motions for Reconsideration,[37] the Court
of Appeals promulgated Resolution[38] dated June 19, 2007 denying
CMI's motion, while partially granting Basso's as to the computation of
backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE
FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY
INTO WHETHER OR NOT THE NLRC COMMITTED GRAVE ABUSE OF
DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
THE LABOR ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND
TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF
TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter
and the NLRC in the illegal dismissal case. The first and third issues will
be discussed jointly.
The labor tribunals had jurisdiction over the parties and the subject
matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be
settled to determine proper jurisdiction over the parties and the
subject matter of the case. It also alleges that the existence of foreign
elements calls or the application of US laws and the doctrines of lex
loci celebrationis (the law of the place of the ceremony), lex loci
contractus (law of the place where a contract is executed), and lex loci
intentionis (the intention of the parties as to the law that should
govern their agreement). CMI also invokes the application of the rule
of forum non conveniens to determine the propriety of the assumption
of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to
be resolved first. Where the facts establish the existence of foreign
elements, he case presents a conflict-of-laws issue.[39] The foreign
element in a case nay appear in different forms, such as in this case,
where one of the parties s an alien and the other is domiciled in
another state.
In Hasegawa v. Kitamura,[40] we stated that in the judicial resolution of
conflict-of-laws problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of
judgments. In resolving the conflicts problem, courts should ask the
following questions:
1. "Under the law, do I have jurisdiction over the subject matter and
the parties to this case?
2. "If the answer is yes, is this a convenient forum to the parties, in
light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular
problem?
4. "If the conflicts rule points to a foreign law, has said law been
properly pleaded and proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the
forum one of the basic exceptions to the application of foreign law? In
short, is there any strong policy or vital interest of the forum that is at
stake in this case and which should preclude the application of foreign
law?[41]
Jurisdiction is defined as the power and authority of the courts to hear,
try and decide cases. Jurisdiction over the subject matter is conferred
by the Constitution or by law and by the material allegations in the
complaint, regardless of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein.[42] It cannot
be acquired through a waiver or enlarged by the omission of the
parties or conferred by the acquiescence of the court.[43] That the
employment contract of Basso was replete with references to US laws,
and that it originated from and was returned to the US, do not
automatically preclude our labor tribunals from exercising jurisdiction
to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor
Code, under Article 217, clearly vests original and exclusive jurisdiction
to hear and decide cases involving termination disputes to the Labor
Arbiter. Hence, the Labor Arbiter and the NLRC have jurisdiction over
the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of
Appeals that the Labor Arbiter acquired jurisdiction over the person of
Basso, notwithstanding his citizenship, when he filed his complaint
against CMI. On the other hand, jurisdiction over the person of CMI
was acquired through the coercive process of service of summons. We
note that CMI never denied that it was served with summons. CMI has,
in fact, voluntarily appeared and participated in the proceedings
before the courts. Though a foreign corporation, CMI is licensed to do
business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing
business in the country be licensed to do so, is to subject the foreign
corporations to the jurisdiction of our courts.[44]
Considering that the Labor Arbiter and the NLRC have jurisdiction over
the parties and the subject matter of this case, these tribunals may
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 being an
exercise of sovereign prerogative of the country where the case is
filed.[45]
The next question is whether the local forum is the convenient forum
in light of the facts of the case. CMI contends that a Philippine court is
an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a
conflict-of-laws case may assume jurisdiction if it chooses to do so,
provided, that the following requisites are met: (1) that the Philippine
Court is one to which the parties may conveniently resort to; (2) that
the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine Court has or is
likely to have power to enforce its decision.[46] All these requisites are
present here.
Basso may conveniently resort to our labor tribunals as he and CMI lad
physical presence in the Philippines during the duration of the trial.
CMI has a Philippine branch, while Basso, before his death, was
residing here. Thus, it could be reasonably expected that no
extraordinary measures were needed for the parties to make
arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and
facts. The incident subject of this case (i.e. dismissal of Basso)
happened in the Philippines, the surrounding circumstances of which
can be ascertained without having to leave the Philippines. The acts
that allegedly led to loss of trust and confidence and Basso's eventual
dismissal were committed in the Philippines. As to the law, we hold
that Philippine law is the proper law of he forum, as we shall discuss
shortly. Also, the labor tribunals have the power to enforce their
judgments because they acquired jurisdiction over the persons of both
parties.
Our labor tribunals being the convenient fora, the next question is
what law should apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the
following 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.[47] These questions are entirely different from
the question of jurisdiction that only seeks to answer whether the
courts of a state where the case is initiated have jurisdiction to enter a
judgment.[48] As such, the power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum
law.[49]
CMI insists that US law is the applicable choice-of-law under the
principles of lex loci celebrationis and lex loci contractus. It argues that
the contract of employment originated from and was returned to the
US after Basso signed it, and hence, was perfected there. CMI further
claims that the references to US law in the employment contract show
the parties' intention to apply US law and not ours. These references
are:
7 Foreign station allowance of forty percent (40%) using the "U.S.
State Department Index, the base being Washington, D.C."
8
9 Tax equalization that made Basso responsible for "federal and any
home state income taxes."
10
11 Hardship allowance of fifteen percent (15%) of base pay based
upon the "U.S. Department of State Indexes of living costs
abroad."
12
13 The employment arrangement is "one at will, terminable by either
party without any further liability on thirty days prior written
notice."[50]
CMI asserts that the US law on labor relations particularly, the US
Railway Labor Act sanctions termination-at-will provisions in an
employment contract. Thus, CMI concludes that if such laws were
applied, there would have been no illegal dismissal to speak of
because the termination-at-will provision in Basso's employment
contract would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,[51] we emphasized that 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 fact or point of contact, such as the
situs of the res, the place of celebration, the place of performance, or
the place of wrongdoing. Pursuant to Saudi Arabian Airlines, we hold
that the "test factors," "points of contact" or "connecting factors" in
this case are the following:

(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the
locus actus;
(4) The place where the act is intended to come into effect, e.g., the
place of performance of contractual duties;
(5) The intention of the contracting parties as to the law that should
govern their agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are
instituted or done.[52]
Applying the foregoing in this case, we conclude that Philippine law
the applicable law. Basso, though a US citizen, was a resident here
from he time he was hired by CMI until his death during the pendency
of the case. CMI, while a foreign corporation, has a license to do
business in the Philippines and maintains a branch here, where Basso
was hired to work. The contract of employment was negotiated in the
Philippines. A purely consensual contract, it was also perfected in the
Philippines when Basso accepted the terms and conditions of his
employment as offered by CMI. The place of performance relative to
Biasso's contractual duties was in the Philippines. The alleged
prohibited acts of Basso that warranted his dismissal were committed
in the Philippines.
Clearly, the Philippines is the state with the most significant
relationship to the problem. Thus, we hold that CMI and Basso
intended Philippine law to govern, notwithstanding some references
made to US laws and the fact that this intention was not expressly
stated in the contract. We explained in Philippine Export and Foreign
Loan Guarantee Corporation v. V. P. Eusebio Construction, Inc.[53] that
the law selected may be implied from such factors as substantial
connection with the transaction, or the nationality or domicile of the
parties.[54] We cautioned, however, that while Philippine courts would
do well to adopt the first and most basic rule in most legal systems,
namely, to allow the parties to select the law applicable to their
contract, the selection is subject to the limitation that it is not against
the law, morals, or public policy of the forum.[55]
Similarly, in Bank of America, NT&SA v. American Realty
Corporation,[56] we ruled that a foreign law, judgment or contract
contrary to a sound and established public policy of the forum shall
not be applied. Thus:
Moreover, foreign law should not be applied when its application
would work undeniable injustice to the citizens or residents of the
forum. To give justice is the most important function of law; hence, a
law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.[57]
Termination-at-will is anathema to the public policies on labor
protection espoused by our laws and Constitution, which dictates that
no worker shall be dismissed except for just and authorized causes
provided by law and after due process having been complied with.[58]
Hence, the US Railway Labor Act, which sanctions termination-at-will,
should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign
law. As any other fact, it must be alleged and proved. [59] If the foreign
law is not properly pleaded or proved, the presumption of identity or
similarity of the foreign law to our own laws, otherwise known as
processual presumption, applies. Here, US law may have been properly
pleaded but it was not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first
and third issues.
The Court of Appeals may review the factual findings of the NLRC in a
Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of
the limited scope of its certiorari jurisdiction when instead of ruling on
the existence of grave abuse of discretion, it proceeded to pass upon
the legality and propriety of Basso's dismissal. Moreover, CMI asserts
that it was error on the part of the Court of Appeals to re-evaluate the
evidence and circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a
Petition for Certiorari under Rule 65 of the Revised Rules of Court was
settled in our decision in St. Martin Funeral Home v. NLRC.[60] The
general rule is that certiorari does not lie to review errors of judgment
of the trial court, as well as that of a quasi-judicial tribunal. In certiorari
proceedings, judicial review does not go as far as to examine and
assess the evidence of the parties and to weigh their probative
value.[61] However, this rule admits of exceptions. In Globe Telecom,
Inc. v. Florendo-Flores,[62] we stated:
In the review of an NLRC decision through a special civil action for
certiorari, resolution is confined only to issues of jurisdiction and grave
abuse of discretion on the part of the labor tribunal. Hence, the Court
refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC.
Occasionally, however, the Court is constrained to delve into factual
matters where, as in the instant case, the findings of the NLRC
contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may
look into the records of the case and re-examine the questioned
findings. As a corollary, this Court is clothed with ample authority to
review matters, even if they are not assigned as errors in their appeal,
if it finds that their consideration is necessary to arrive at a just
decision of the case. The same principles are now necessarily adhered
to and are applied by the Court of Appeals in its expanded jurisdiction
over labor cases elevated through a petition for certiorari; thus, we see
no error on its part when it made anew a factual determination of the
matters and on that basis reversed the ruling of the NLRC.[63] (Citations
omitted.)
Thus, the Court of Appeals may grant the petition when the factual
hidings complained of are not supported by the evidence on record;
when its necessary to prevent a substantial wrong or to do substantial
justice; when the findings of the NLRC contradict those of the Labor
Arbiter; and when necessary to arrive at a just decision of the case.[64]
To make these findings, the Court of Appeals necessarily has to look at
the evidence and make its own factual determination. [65]
Since the findings of the Labor Arbiter differ with that of the NLRC, we
find that the Court of Appeals correctly exercised its power to review
the evidence and the records of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI
Managerial employees enjoy security of tenure and the right of the
management to dismiss must be balanced against the managerial
employee's right to security of tenure, which is not one of the
guaranties he gives up.[66]

In Apo Cement Corporation v. Baptisma,[67] we ruled that for an
employer to validly dismiss an employee on the ground of loss of trust
and confidence under Article 282 (c) of the Labor Code, the employer
must observe the following guidelines: 1) loss of confidence should not
be simulated; 2) it should not be used as subterfuge for causes which
are improper, illegal or unjustified; 3) it may not be arbitrarily asserted
in the face of overwhelming evidence to the contrary; and 4) it must
be genuine, not a mere afterthought to justify earlier action taken in
bad faith. More importantly, it must be based on a willful breach of
trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was
not founded on clearly established facts and evidence sufficient to
warrant dismissal from employment. While proof beyond reasonable
doubt is not required to establish loss of trust and confidence,
substantial evidence is required and on the employer rests the burden
to establish it.[68] There must be some basis for the loss of trust, or that
the employer has reasonable ground to believe that the employee is
responsible for misconduct, which renders him unworthy of the trust
and confidence demanded by his position.[69]
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General
Sales Agent and relied heavily on its judgments.[70]
(2) Basso excessively issued promotional tickets to his
friends who had no direct business with CMI.[71]
(3) The advertising agency that CMI contracted had to deal
directly with Guam because Basso was hardly
available.[72] Mr. Schulz discovered that Basso
exceeded the advertising budget by $76,000.00 in 1994
and by $20,000.00 in 1995.[73]
(4) Basso spent more time and attention to his personal
businesses and was reputed to own nightclubs in the
Philippines.[74]
(5) Basso used free tickets and advertising money to
promote his personal business,[75] such as a brochure
that jointly advertised one of Basso's nightclubs with
CMI.
We find that CMI failed to discharge its burden to prove the above
acts. CMI merely submitted affidavits of its officers, without any other
corroborating evidence. Basso, on the other hand, had adequately
explained his side. On the advertising agency and budget issues raised
by CMI, he explained that these were blatant lies as the advertising
needs of CMI were centralized in its Guam office and the Philippine
office was not authorized to deal with CMI's advertising agency, except
on minor issues.[76] Basso further stated that under CMI's existing
policy, ninety percent (90%) of the advertising decisions were
delegated to the advertising firm of McCann-Ericsson in Japan and only
ten percent (10%) were left to the Philippine office.[77] Basso also
denied the allegations of owning nightclubs and promoting his
personal businesses and explained that it was illegal for foreigners in
the Philippines to engage in retail trade in the first place.
Apart from these accusations, CMI likewise presented the findings of
the audit team headed by Mr. Stephen D. Goepfert, showing that "for
the period of 1995 and 1996, personal passes for Continental and
other airline employees were noted (sic) to be issued for which no
service charge was collected."[78] The audit cited the trip pass log of a
total of 10 months. The trip log does not show, however, that Basso
caused all the ticket issuances. More, half of the trips in the log
occurred from March to July of 1996,[79] a period beyond the tenure of
Basso. Basso was terminated effectively on January 31, 1996 as
indicated in the letter of Ms. Woodward.[80]
CMI also accused Basso of making "questionable overseas phone
calls". Basso, however, adequately explained in his Reply[81] that the
phone calls to Italy and Portland, USA were made for the purpose of
looking for a technical maintenance personnel with US Federal
Aviation Authority qualifications, which CMI needed at that time. The
calls to the US were also made in connection with his functions as
General Manager, such as inquiries on his tax returns filed in Nevada.
Biasso also explained that the phone lines[82] were open direct lines
that all personnel were free to use to make direct long distance
calls.[83]
Finally, CMI alleged that Basso approved the disbursement of
Php80,000.00 to cover the transfer fee of the Manila Polo Club share
from Mr. Kenneth Glover, the previous General Manager, to him. CMI
claimed that "nowhere in the said contract was it likewise indicated
that the Manila Polo Club share was part of the compensation package
given by CMI to Basso."[84] CMI's claims are not credible. Basso
explained that the Manila Polo Club share was offered to him as a
bonus to entice him to leave his then employer, United Airlines. A
letter from Mr. Paul J. Casey, former president of Continental,
supports Basso.[85] In the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental
Airlines, he was given the Manila Polo Club share and authorized to
have the share re-issued in his name. In addition to giving Mr. Basso
the Manila Polo Club share, Continental agreed to pay the dues for a
period of three years and this was embodied in his contract with
Continental. This was all clone with my knowledge and approval.[86]
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for
membership in a club in Manila that your immediate supervisor and I
agree is of at least that value to Continental through you in your role
as our General Manager for the Philippines.[87]
Taken together, the above pieces of evidence suggest that the Manila
Polo Club share was part of Basso's compensation package and thus he
validly used company funds to pay for the transfer fees. If doubts exist
between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter.[88]
Finally, CMI violated procedural due process in terminating Basso. In
King of Kings Transport, Inc. v. Mamac[89] we detailed the procedural
due process steps in termination of employment:
To clarify, the following should be considered in terminating the
services of employees:
(1) The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them,
and a directive that the employees are given the opportunity to submit
their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance
that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a
period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint.
Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and
conduct a hearing or conference wherein the employees will be given
the opportunity to: (1) explain and clarify their defenses to the charge
against them; (2) present evidence in support of their defenses; and
(3) rebut the evidence presented against them by the management.
During the hearing or conference, the employees are given the chance
to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an
amicable settlement.
consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281 are
AFFIRMED, with MODIFICATION as to the award of backwages.
Petitioner Continental Micronesia, Inc. is hereby ordered to pay
Respondent Joseph Basso's heirs: 1) separation pay equivalent to one
(1) month pay for every year of service, and 2) full backwages from
January 31, 1996, the date of his illegal dismissal, to October 2, 2002,
the date of his compulsory retirement age.
SO ORDERED.
Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., and Perez,* JJ.,
concur.

(3) After determining that termination of employment is justified, the

employers shall serve the employees a written notice of termination
indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been
established to justify the severance of their employment. (Emphasis in
original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19,
1995 and March 14, 1996, respectively, are not one of the valid twin
notices. Neither identified the alleged acts that CMI now claims as
bases for Basso's termination. Ms. Woodward's letter even stressed
that the original plan was to remove Basso as General Manager but
with an offer to make him consultant. It was inconsistent of CMI to
declare Basso as unworthy of its trust and confidence and, in the same
breath, offer him the position of consultant. As the Court of Appeals
pointed out:
But mark well that Basso was clearly notified that the sole ground for
his dismissal was the exercise of the termination at will clause in the
employment contract. The alleged loss of trust and confidence claimed
by Continental appears to be a mere afterthought belatedly trotted
out to save the day.[90]
Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly

dismissed from work shall be entitled to reinstatement without loss of
eniority rights and other privileges, and to his full backwages,
inclusive of allowances and to his other benefits or their monetary
equivalent omputed from the time his compensation was withheld up
to the time of actual reinstatement.

Where reinstatement is no longer viable as an option, separation pay

equivalent to one (1) month salary for every year of service should be
awarded as an alternative. The payment of separation pay is in
addition to payment of backwages.[91] In the case of Basso,
reinstatement is no longer possible since he has already passed away.
Thus, Basso's separation pay with full backwages shall be paid to his
heirs.

As to the computation of backwages, we agree with CMI that Basso

was entitled to backwages only up to the time he reached 65 years
old, the compulsory retirement age under the law.[92] This is our
consistent ruling.[93] When Basso was illegally dismissed on January 31,
1996, he was already 58 years old.[94] He turned 65 years old on
October 2, 2002. Since backwages are granted on grounds of equity for
earnings lost by an employee due to his illegal dismissal,[95] Basso was
entitled to backwages only for the period he could have worked had
he not been illegally dismissed, i.e. from January 31, 1996 to October
2, 2002.

WHEREFORE, premises considered, the Decision of the Court of

Appeals dated May 23, 2006 and Resolution dated June 19, 2007 in the
SECOND DIVISION
G.R. No. 172301, August 19, 2015
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, PETITIONER,
VS. ASIAVEST MERCHANT BANKERS (M) BERHAD, RESPONDENT.
DECISION
LEONEN, J.:
This case stemmed from an action for recovery of sum of money filed
before the Regional Trial Court of Pasig by respondent Malaysian
corporation against petitioner Philippine National Construction
Corporation (PNCC), formerly Construction & Development
Corporation of the Philippines. PNCC is a government-acquired asset
corporation.
We resolve whether our courts have subject matter jurisdiction over
an action for recovery of sum of money filed by a Malaysian
corporation against a Philippine corporation involving a contract
executed and performed in Malaysia, and the applicability of the
forum non conveniens principle.
PNCC filed this Petition[1] assailing the Court of Appeals Decision[2]
dated June 10, 2005 dismissing its appeal, and Resolution[3] dated April
7, 2006 denying reconsideration.[4] The trial court ruled in favor of
Asiavest Merchant Bankers (M) Berhad and ordered PNCC to
reimburse it the sum of Malaysian Ringgit (MYR) 3,915,053.54 or its
equivalent in Philippine peso.[5]
PNCC prays that this court reverse and set aside the Court of Appeals
Decision and Resolution, as well as the trial court's Decision[6]
declaring it in default.[7] It prays the trial court's order of default be
reversed and it be allowed to file its Answer, or, the cause of action
having already prescribed under Malaysian laws, the case be dismissed
outright.[8]
PNCC and Asiavest Holdings (M) Sdn. Bhd. (Asiavest Holdings) caused
the incorporation of an associate company known as Asiavest-CDCP
Sdn. Bhd. (Asiavest-CDCP), through which they entered into contracts
to construct rural roads and bridges for the State of Pahang,
Malaysia.[9]
In connection with this construction contract, PNCC obtained various
guarantees and bonds from Asiavest Merchant Bankers (M) Berhad to
guarantee the due performance of its obligations.[10] The four
contracts of guaranty stipulate that Asiavest Merchant Bankers (M)
Berhad shall guarantee to the State of Pahang "the due performance
by PNCC of its construction contracts . . . and the repayment of the
temporary advances given to PNCC[.]"[11] These contracts were
understood to be governed by the laws of Malaysia.[12]
There was failure to perform the obligations under the construction
contract, prompting the State of Pahang to demand payment against
Asiavest Merchant Bankers (M) Berhad's performance bonds.[13] It
"entered into a compromise agreement with the State of Pahang by
paying . . . the reduced amount of [Malaysian Ringgit (MYR)]
3,915,053.54[.]"[14] Consequently, the corporation demanded
indemnity from PNCC by demanding the amount it paid to the State of
Pahang.[15]
On April 12, 1994, Asiavest Merchant Bankers (M) Berhad filed a
Complaint[16] for recovery of sum of money against PNCC before the
Regional Trial Court of Pasig.[17] It based its action on Malaysian laws.
Specifically, it invoked Section 98[18] of the Malaysian Contracts Act of
1950 and Section 11[19] of the Malaysian Civil Law Act of 1956.[20]
PNCC filed Motions for extension of time to file its Answer on May 18,
1994, June 2, 1994, and June 17, 1994. The trial court granted these
motions, with the last one set to expire on July 3, 1994. On July 4,
1994, PNCC filed a Motion for another five-day extension. The trial
court denied this Motion on July 13, 1994.[21]
On July 27, 1994, the trial court declared PNCC in default for failure to
file any responsive pleading, and allowed Asiavest Merchant Bankers
(M) Berhad to present its evidence ex parte.[22]
The Regional Trial Court, in its Decision dated November 29, 1994,
rendered judgment in favor of Asiavest Merchant Bankers (M) Berhad:
WHEREFORE, premises considered and it appearing that plaintiff hads
[sic] proved its claim by preponderance of evidence, judgment is
hereby rendered in favor of plaintiff and against defendant Philippine
National Construction Corporation ordering the latter to pay the
plaintiff:
14 The sum of Malaysian Ringgit M $3,915,053.54 or its equivalent in
[Philippine peso at the bank rate of exchange (on the date of
payment) plus legal interest from the date of demand until
fully paid.
15
16 The sum of P300,000.00 as and by way of attorney's fees; and
17
18 Cost of suit.
SO ORDERED.[23]
The trial court found that Asiavest Merchant Bankers (M) Berhad
complied with the requisites for proof of written foreign laws.[24] The
Malaysian laws invoked were found to be similar with Articles 2066
and 2067 of the Civil Code:[25]
ART. 2066. The guarantor who pays for a debtor must be indemnified
by the latter.
The indemnity comprises:
(1) The total amount of the debt;
(2) The legal interests thereon from the time the payment
was made known to the debtor, even though it did not
earn interest for the creditor;
(3) The expenses incurred by the guarantor after having
notified the debtor that payment had been demanded of
him;
(4) Damages, if they are due.
ART. 2067. The guarantor who pays is subrogated by virtue thereof to
all the rights which the creditor had against the debtor.
If the guarantor has compromised with the creditor, he cannot
demand of the debtor more than what he has really paid.
On January 30, 1995, the trial court denied PNCC's Motion to Lift Order
of Default[26] filed on December 12, 1994.[27] On August 11, 1995, it
also denied PNCC's Motion for Reconsideration Ad Cautelam[28] dated
December 21, 1994.[29] PNCC brought its case before the Court of
Appeals.[30]
The Court of Appeals, in its Decision dated June 10, 2005, dismissed
PNCC's appeal for raising pure questions of law exclusively cognizable
by this court.[31] It likewise denied reconsideration.[32]
Hence, PNCC filed this Petition.
PNCC contends it had consistently raised the propriety of impleading
the two Malaysian corporations, Asiavest-CDCP and Asiavest Holdings,
and their participant liability, which are questions of fact.[33] According
to PNCC, Asiavest-CDCP undertook to hold PNCC "free and harmless
from all its obligations under the construction agreement[,]" [34] while
Asiavest Holdings agreed in the guaranty agreement to share with
PNCC the guarantee liability on a 51% (Asiavest Holdings) - 49% (PNCC)
arrangement.[35] Since the repayment of financing facilities received by
Asiavest-CDCP was jointly guaranteed by PNCC and Asiavest Holdings
as admitted in the Complaint,[36] the lower courts "erred in ordering
[PNCC] to reimburse the entire amount claimed by the respondent."[37]
While the issue on its exact liability was not assigned as an error, PNCC
argues it has amply discussed this issue in its pleadings.[38]
PNCC submits that the trial court could have invoked the principle of
forum non conveniens and refused to take cognizance of the case
considering the difficulty in acquiring jurisdiction over the two
Malaysian corporations and in determining PNCC's exact liability.[39]
PNCC adds that it was deprived of its day in court when its Motion for
another five-day extension to file an Answer was denied, and it was
subsequently declared in default.[40] "[T]he transactions involved
originated from and occurred in a foreign country[.]"[41] This
constrained PNCC to request several extensions in order to collate the
records in preparation for its defense.[42]
PNCC also raises prescription pursuant to Item 6 of the Malaysian
Limitation Act of 1953 (Act 254) in that "actions founded on contract
or to recover any sum ... by virtue of any written law . . . shall not be
brought after the expiration of six years from [accrual of cause of
action]."[43] The Complaint alleged that Asiavest Merchant Bankers (M)
Berhad paid the State of Pahang "in or about 1988[.]"[44] On April 14,
1982, April 2, 1983, and August 2, 1983, Asiavest Merchant Bankers
(M) Berhad made demands against PNCC for payment on the
guarantees in favor of the State of Pahang.[45] Since the Complaint was
filed on April 13, 1994, six years had already elapsed from 1988.[46]
Lastly, PNCC submits that Asiavest Merchant Bankers (M) Berhad
already winded up voluntarily based on the Certification[47] issued by
the Director of the Insolvency and Liquidation Department for Official
Receiver, Malaysia.[48] PNCC alleges that the liquidators declared in
their Account of Receipts and Payments and Statement of the Position
in the Winding Up dated August 3, 1995 and submitted on April 4,
2006 that "there [were] no more debts or claims existing for or against
the respondent."[49] Thus, the case is now moot and academic with the
termination of Asiavest Merchant Bankers (M) Berhad's corporate
existence coupled with the declaration of no claims.[50]
Asiavest Merchant Bankers (M) Berhad counters that the Court of
Appeals did not err in dismissing the appeal as PNCC's Brief [51] only
raised two issues that are both questions of law: lack of jurisdiction
over the subject matter, and deprivation of day in court with the
denial of its Motion for Reconsideration Ad Cautelam.[52]
Asiavest Merchant Bankers (M) Berhad argues that the principle of
forum non conveniens was addressed to the discretion of the trial
court.[53] Moreover, this issue was not raised before the Court of
Appeals. The issue on prescription based on Malaysian laws was also
not raised. In any case, PNCC failed to plead and prove this foreign law
provision.[54]
On its civil personality, Asiavest Merchant Bankers (M) Berhad denies
it has ceased to exist, and this issue was also not raised before the
lower court. In any case, this is of no moment as Asiavest Merchant
Bankers (M) Berhad had already acquired a decision in its favor.[55]
According to Asiavest Merchant Bankers (M) Berhad, PNCC was not
denied due process as it was granted a total of 60 days to file a
responsive pleading before the trial court.[56] It submits that PNCC
wasted almost six months before moving to lift the default order.[57]
Moreover, "the filing and consideration of a party's motion for
reconsideration accords [it] due process."[58]
The Petition raises the following issues:
First, whether the Court of Appeals erred in dismissing the appeal on
the ground that it raised pure questions of law;
Second, whether the Court of Appeals erred in not finding that the two
Malaysian corporations, Asiavest Holdings (M) Sdn. Bhd. and Asiavest-
CDCP Sdn. Bhd., should have been impleaded as parties;
Third, whether the trial court "erred in not refusing to assume
jurisdiction on the ground of forum non-conveniens[;]"[59]
Fourth, whether petitioner Philippine National Construction
Corporation was deprived of due process when the trial court declared
it in default;
Fifth, whether respondent Asiavest Merchant Bankers (M) Berhad's
claim already prescribed under Malaysian laws; and
Lastly, whether this case "should be dismissed considering that
respondent [Asiavest Merchant Bankers (M) Berhad] is no longer an
existing corporation."[60]
I.
On the procedural issue, petitioner submits that the Court of Appeals
erred in finding that only questions of law were raised.[61]
Section 9(3) of Batas Pambansa Blg. 129 enumerates the appellate
jurisdiction of the Court of Appeals. This section includes the proviso:
"except those falling within the appellate jurisdiction of the Supreme
Court[.]" This court's appellate jurisdiction is found in Article VIII,
Section 5(2)(e) of the Constitution:
SECTION 5. The Supreme Court shall have the following powers:
....
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as
the law or the Rules of Court may provide, final judgments and orders
of lower courts in:
....
(e) All cases in which only an error or question of law is involved.
A question of law exists "when the doubt or difference arises as to
what the law is on a certain state of facts[,]"[62] while a question of fact
exists "when the doubt or difference arises as to the truth or the
falsehood of alleged facts[.]"[63] Questions of fact require the
examination of the probative value of the parties' evidence.[64]
This Petition originated from a default judgment against petitioner.
Petitioner was not able to present evidence before the trial court.
Necessarily, the errors raised from the trial court involved only
questions of law.
II.
Petitioner insists that the issue on "the propriety of impleading the
two Malaysian corporations as well as their participant liability . . .
involves a question of fact."[65]
According to petitioner, Asiavest-CDCP undertook to hold petitioner
free and harmless from all its obligations under the construction
agreement, while Asiavest Holdings agreed in the guaranty agreement
to share with PNCC the guarantee liability on a 51% (Asiavest Holdings)
- 49% (PNCC) arrangement.[66] Petitioner submits that "the propriety of
impleading the two Malaysian corporations[,] [and] their participant
liability[,] [are] question[s] of fact."[67]
Petitioner adds that it has consistently mentioned its argument on the
two Malaysian companies in its pleadings before the lower courts.[68]
Specifically, these pleadings were the Motion to Lift Order of
Default[69] with Affidavit of Merit[70] dated December 9, 1994, Motion
for Reconsideration Ad Cautelam,[71] Brief for PNCC,[72] and
Comment[73] on Asiavest Merchant Bankers (M) Berhad's Motion to
Dismiss Appeal.
Respondent counters that this was not assigned as an error before the
Court of Appeals.[74]
Rule 44, Section 13 of the Rules of Court enumerates the required
contents of an appellant's brief. In paragraph (e), the appellant's brief
must include "[a] clear and concise statement of the issues of fact or
law to be submitted to the court for its judgment[.]"
In its appellant's Brief before the Court of Appeals, petitioner only
assigned the following two errors:
I. THE TRIAL COURT GRAVELY ERRED IN RENDERING THE QUESTIONED
DECISION AS IT HAD NO JURISDICTION OVER THE SUBJECT MATTER OF
THE CASE.
II. THE TRIAL COURT GRAVELY ERRED IN DENYING THE MOTION FOR
RECONSIDERATION AD CAUTELAM FILED BY DEFENDANT-APPELLANT
AS IT DEPRIVED THE LATTER OF HIS DAY IN COURT.[75]
The argument on the two Malaysian corporations was raised by
petitioner for the first time in its Motion to Lift Order of Default with
Affidavit of Merit dated December 9, 1994:
7. If the Defendant be given the chance to present its evidence, it will
prove the following:
....
b. Per subcontract agreement entered into by and between defendant
and a third party, Asiavest CDCP Sdn. Bhd., the liability of defendant
(CDCP) in the event of default regarding the performance bonds and
guarantees alleged in the complaint which were posted in the name of
the defendant shall be borne by Asiavest CDCP Sdn. Bhd.
Hence, the need for impleading Asiavest CDCP Sdn. Bhd.
c. Assuming that Defendant is liable to the plaintiff, its liability is joint
with Asiavest Holdings Company and only to the extent of 49% of the
total amount due which is its proportionate share in the joint venture
project entered into by them.[76]
On January 30, 1995, the trial court denied petitioner's Motion to Lift
Order of Default.[77] There is no showing whether petitioner
questioned this trial court Order as petitioner opted to file the Motion
for Reconsideration Ad Cautelam dated December 21, 1994, praying,
among others, that it "be considered as Motion for Reconsideration of
the Decision dated November 29, 1994 in the event that the Motion to
Lift Order of Default is denied[.]"[78] On August 11, 1995, the trial court
also denied this later Motion,[79] and there is no showing whether
petitioner questioned this trial court Order.
In any event, this court has held that "[i]t is essential, to boot, that that
party demonstrate that he has a meritorious cause of action or
defense; otherwise, nothing would be gained by setting the default
order aside."[80]
Petitioner's bare allegations fail to convince. The bases of its argument
to implead and hold the two Malaysian corporations liable are the
subcontract agreement and guaranty agreement. Copies of these
agreements were not submitted with any of its pleadings. Thus, the
lower courts could not have determined for certain whether the two
Malaysian corporations did enter into the alleged agreements, the
subject of the agreements, or the extent of their liabilities, if any.
Petitioner claims that respondent made admissions in its Complaint in
relation to the two Malaysian companies.[81] Specifically, paragraphs 3
and 4 of the Complaint read:
3. While in Malaysia, defendant [PNCC] jointly with Asiavest Holdings
(M) Sdn[.] Bhd[.], caused the incorporation of an associate company
known as Asiavest-CDCP Sdn. Bhd., with which it undertook to
construct rural roads and bridges under contracts with the State of
Pahang, Malaysia.
4. In connection with defendant's construction contracts with the
State of Pahang, it obtained various guarantees and bonds from
plaintiff to guarantee to the State of Pahang and other parties the due
performance of defendant's obligations. Defendant bound itself to
indemnify plaintiff for liability or payment on these bonds and
guarantees.
Defendant also directly guaranteed to plaintiff, jointly with Asiavest
Holdings (M) Sdn. Bhd., the repayment of certain financing facilities
received from plaintiff by Asiavest-CDCP Sdn. Bhd.[82] (Emphasis
supplied)
However, there was no factual finding on the connection between the
"financing facilities" received by Asiavest-CDCP from respondent, and
the performance bond transactions respondent now claims from. This
was argued by respondent in its Brief before the Court of Appeals as
follows:
The suit below was not filed to collect repayment of those financing
facilities, whether against the entity that received the facilities or its
guarantors. It was filed to enforce PNCC's obligation to indemnify
plaintiff Asiavest on its performance bond payments to project owners
that PNCC had abandoned. The Asiavest performance bonds were
transactions different from the "financing facilities" PNCC refers to.
The Asiavest indemnification claims, and the bonds and other
contracts on which they were based, were clearly identified in the
complaint as follows:....[83]
Also, since petitioner mentioned its argument on the two Malaysian
corporations in its Motion to Lift Order of Default[84] and Motion for
Reconsideration Ad Cautelam[85] filed before the trial court, these
were already considered by the lower court when it ruled on both
Motions.
Assuming that the subcontract agreement indeed provides that
Asiavest-CDCP would answer any liability upon default on the
performance bond, petitioner may later claim reimbursement from
this Malaysian corporation the amount it was made to pay by
judgment in this suit.
III.
Petitioner raised only two errors before the Court of Appeals. [86] First,
the trial court had no jurisdiction over the subject matter of the case,
and it would be more convenient for both parties if the case was heard
in the forum where the contracts were executed and performed.[87]
Second, petitioner was deprived of its day in court.[88]
Petitioner raised these contentions before the trial court in its Motion
to Lift Order of Default with Affidavit of Merit dated December 9,
1994[89] and Motion for Reconsideration Ad Cautelam dated December
21, 1994.[90] These were the same two errors it elevated to the Court
of Appeals in its Brief.[91]
On the jurisdiction issue, jurisdiction over the subject matter is
conferred by law.[92] Batas Pambansa Blg. 129, otherwise known as The
Judiciary Reorganization Act of 1980, is one such law that provides for
the jurisdiction of our courts. A plain reading of Section 19[93] shows
that civil actions for payment of sum of money are within the exclusive
original jurisdiction of trial courts:
SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise
exclusive original jurisdiction:
....
(8) In all other cases in which the demand, exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and
costs or the value of the property in controversy exceeds One hundred
thousand pesos (P100,000) or, in such other cases in Metro Manila,
where the demand, exclusive of the abovementioned items exceeds
Two hundred thousand pesos (P200,000).
These jurisdictional amounts were adjusted to P300,000.00, and
P400,000.00 in the case of Metro Manila.[94] Thus, the Regional Trial
Court of Pasig has jurisdiction over respondent's complaint for
recovery of the sum of Malaysian Ringgit (MYR) 3,915,053.54.
Petitioner argues that "[i]n view of the compelling necessity to
implead the two foreign corporations, the Trial Court should have
refused to assume jurisdiction over the case on the ground of forum
non-conveniens, even if the Court might have acquired jurisdiction
over the subject matter and over the person of the petitioner."[95] We
find that the trial court correctly assumed jurisdiction over the
Complaint.
"Forum non conveniens literally translates to 'the forum is
inconvenient.'"[96] This doctrine applies in conflicts of law cases. It
gives courts the choice of not assuming jurisdiction when it appears
that it is not the most convenient forum and the parties may seek
redress in another one.[97] It is a device "designed to frustrate illicit
means for securing advantages and vexing litigants that would
otherwise be possible if the venue of litigation (or dispute resolution)
were left entirely to the whim of either party."[98]
Puyat v. Zabarte[99] enumerated practical reasons when courts may
refuse to entertain a case even though the exercise of jurisdiction is
authorized by law:
1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence
there;
2) The belief that the non-resident plaintiff sought the forum[,] a
practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non- residents
or aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the
right sought to be maintained; and
5) The difficulty of ascertaining foreign law.[100] (Emphasis in the
original)
On the other hand, courts may choose to assume jurisdiction subject
to the following requisites: "(1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."[101]
The determination of whether to entertain a case is addressed to the
sound discretion of the court, which must carefully consider the facts
of the particular case.[102] A mere invocation of the doctrine of forum
non conveniens or an easy averment that foreign elements exist
cannot operate to automatically divest a court of its jurisdiction. It is
crucial for courts to determine first if facts were established such that
special circumstances exist to warrant its desistance from assuming
jurisdiction.[103]
We discussed in Saudi Arabian Airlines v. Rebesencio[104] how the
doctrine grounds on "comity and judicial efficiency"[105] and how it
involves a recognition that other tribunals may be "better positioned
to enforce judgments[:]"[106]
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure undue
advantages by engaging in forum shopping on an international scale. It
is also grounded on principles of comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in
exercising jurisdiction on account of forum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs which
are better and more competently addressed by the latter. Further,
forum non conveniens entails a recognition not only that tribunals
elsewhere are better suited to rule on and resolve a controversy, but
also, that these tribunals are better positioned to enforce judgments
and, ultimately, to dispense justice. Forum non conveniens prevents
the embarrassment of an awkward situation where a tribunal is
rendered incompetent in the face of the greater capability — both
analytical and practical — of a tribunal in another jurisdiction.[107]
(Emphasis supplied)
Saudi Arabian Airlines also discussed the need to raise forum non
conveniens at the earliest possible time, and to show that a prior suit
has been brought in another jurisdiction:
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest possible
opportunity. Otherwise, it shall be deemed waived.
....
Consistent with forum non conveniens as fundamentally a factual
matter, it is imperative that it proceed from a factually established
basis. It would be improper to dismiss an action pursuant to forum non
conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that a
prior suit has, in fact, been brought in another jurisdiction.
....
We deem it more appropriate and in the greater interest of prudence
that a defendant not only allege supposed dangerous tendencies in
litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.[108] (Emphasis in the original)
The trial court assumed jurisdiction and explained in its Order dated
August 11, 1995 that "[o]n the contrary[,] to try the case in the
Philippines, it is believed, would be more convenient to defendant
corporation as its principal office is located in the Philippines, its
records will be more accessible, witnesses would be readily available
and entail less expenses in terms of legal services."[109] We agree.
Petitioner is a domestic corporation with its main office in the
Philippines. It is safe to assume that all of its pertinent documents in
relation to its business would be available in its main office. Most of
petitioner's officers and employees who were involved in the
construction contract in Malaysia could most likely also be found in
the Philippines. Thus, it is unexpected that a Philippine corporation
would rather engage this civil suit before Malaysian courts. Our courts
would be "better positioned to enforce [the] judgment and, ultimately,
to dispense"[110] in this case against petitioner.
Also, petitioner failed to plead and show real and present danger that
another jurisdiction commenced litigation and the foreign tribunal
chose to exercise jurisdiction.[111]
IV.
The other error petitioner raised before the Court of Appeals involved
due process. Petitioner argues it was denied its day in court. We find
no denial of petitioner's right to due process by the lower court.
This court has consistently held that the essence of due process is the
opportunity to be heard. In other words, there is no denial of the right
to due process if there was an opportunity for the parties to defend
their interests in due course.[112]
Petitioner had been able to file a Motion for Reconsideration Ad
Cautelam before the trial court, and later elevated its case before the
Court of Appeals. There is no denial of due process if a party was given
an opportunity to be heard in a Motion for Reconsideration.[113]
Petitioner also did not take advantage of the opportunities it was given
to file a responsive pleading. It allowed the periods it was given for the
filing of pleadings to lapse.
The trial court granted petitioner's three Motions for extension of time
to file its Answer,[114] yet petitioner still failed to file its Answer on the
day it was due. In its Motion to Lift Order of Default, petitioner alleged
that "[t]he Lawyer previously handling this case, Atty. Noel de Leon,
had already transferred to another government office and that he
failed to file an Answer in this case due to excusable negligence
brought about by the failure of the Defendant to furnish and provide
him with all the pertinent documents necessary in the preparation of
its defense."[115] Excusable negligence means negligence that "ordinary
diligence and prudence could not have guarded against."[116] The
Motion did not state the pertinent documents it needed from
respondent that prevented petitioner from filing a timely Answer.
Petitioner never attempted to file its Answer, even belatedly. In its
Petition before this court, petitioner prays that it still be allowed to file
an Answer.[117] Petitioner argued below that the trial court had no
jurisdiction over the subject matter, yet it did not file a Motion to
Dismiss on this ground pursuant to Rule 16, Section 1(b) [118] of the
Rules of Court.
Also, the trial court ordered petitioner in default on July 27, 1994 and
rendered judgment on November 29, 1994. It was only after five
months or on December 12, 1994 that petitioner filed a Motion to Lift
Order of Default.
This Motion included a two-page Affidavit of Merit alleging that the
trial court has no jurisdiction over the subject matter; its subcontract
agreement with Asiavest-CDCP provides that the latter will be the one
liable in case of default in the performance bond; and it is jointly liable
with Asiavest Holdings so its liability, if any, is only to the extent of
49%.[119] The Affidavit did not state the evidence it plans to present in
the event its Motion is granted, or attach documents in support of its
claims.
V.
Petitioner contends that under Item 6 of the Malaysian Limitation Act
of 1953 (Act 254), "actions founded on contract or to recover any sum
. . . by virtue of any written law . . . shall not be brought after the
expiration of six years from [accrual of] cause of action[.]"[120] It
contends that the Complaint was filed on April 13, 1994. Thus, six
years already elapsed from 1988.[121]
Prescription is one of the grounds for a motion to dismiss,[122] but
petitioner did not avail itself of this remedy. Prescription was also not
raised as an error before the Court of Appeals. Nevertheless, we have
ruled that prescription may be raised for the first time before this
court.[123]
Petitioner invokes Malaysian laws on prescription, but it was not able
to prove these foreign law provisions. Our courts follow the doctrine
of processual presumption:
It is hornbook principle, however, that the party invoking the
application of a foreign law has the burden of proving the law, under
the doctrine of processual presumption which, in this case, petitioners
failed to discharge. The Court's ruling in EDI-Staffbuilders Int'l, v. NLRC
illuminates:
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters not
provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties
(lex loci intentiones) to apply to the contract, Saudi Labor Laws should
govern all matters relating to the termination of the employment of
Gran.
In international law, the party who wants to have a foreign law applied
to a dispute or case has the burden of proving the foreign law. The
foreign law is treated as a question of fact to be properly pleaded and
proved as the judge or labor arbiter cannot take judicial notice of a
foreign law. He is presumed to know only domestic or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws
on the matter; thus, the International Law doctrine of presumed-
identity approach or processual presumption comes into play. Where a
foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours. Thus, we apply
Philippine labor laws in determining the issues presented before us.
The Philippines does not take judicial notice of foreign laws, hence,
they must not only be alleged; they must be proven. To prove a
foreign law, the party invoking it must present a copy thereof and
comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
Court[.][124] (Emphasis supplied)
Our provisions on prescription are found in the Civil Code. Specifically,
Article 1144(1) of the Civil Code states that actions upon a written
contract must be brought within 10 years from the accrual of the right,
and not six years.
Even assuming that the six-year prescription applies, petitioner cannot
conclude prescription from the allegations in the Complaint. The
Complaint filed on April 12, 1994 states that Asiavest Merchant
Bankers (M) Berhad reached settlement with the State of Pahang "[i]n
or about 1988[.]"[125] If Asiavest Merchant Bankers (M) Berhad paid on
April 13, 1988 onward, six years would not yet elapse since the
Complaint was filed on April 12, 1994.

VI.

Lastly, petitioner submits that respondent voluntarily winded up and is

no longer an existing corporation based on a Certification issued by
the Director of Insolvency and Liquidation Department for Official
Receiver, Malaysia.[126] Petitioner adds that the appointed liquidators
declared that there were no more debts or claims existing for or
against respondent in their Account of Receipts and Payments and
Statement of the Position in the Winding Up dated August 3, 1995 and
submitted on April 4, 2006.

Respondent denies this allegation. It argues that this was not raised
before the lower courts and, in any case, respondent already acquired
a decision in its favor.[127]

The Petition did not attach a copy of the alleged liquidators'

declaration that respondent had no more existing claims. Based on
petitioner's allegation, this declaration was dated August 3, 1995, an
earlier date than petitioner's Notice of Appeal [128] to the Court of
Appeals dated August 31, 1995. However, petitioner only mentioned
this declaration in its Petition before this court.

It is consistent with fair play that new issues cannot be raised for the
first time before this court if these could have been raised earlier
before the lower courts.[129] Justice and due process demand that this
rule be followed.

In any event, respondent is a Malaysian corporation. Petitioner has not

proven the relevant foreign law provisions to support its allegations
that respondent has ceased to exist and that all its claims are
consequently extinguished.

WHEREFORE, the Petition is DENIED for lack of merit.

SO ORDERED.

Carpio, (Chairperson), Brion, Bersamin,* and Del Castillo, JJ., concur.