G.R. No.

L-5731

June 22, 1954

HERBERT BROWNELL, JR., as Attorney General of the United States, petitioner-appellee, vs. SUN LIFE ASSURANCE COMPANY OF CANADA, respondent-appellant. Rowland F. Kirks, Stanley Gilbert, Juan T. Santos and Lino M. Patajo for appelle. Perkins, Ponce Enrile and Contreras for appellant. LABRADOR, J.: This is a petition instituted in the Court of the First Instance of Manila under the provisions of the Philippine Property Act of the United States against the Sun Life Assurance Company of Canada, to compel the latter to comply with the demand of the former to pay him the sum of P310.10, which represents one-half of the proceeds of an endowment policy (No. 757199) which matured on August 20, 1946, and which is payable to one Naogiro Aihara, a Japanese national. Under the policy Aihara and his wife, Filomena Gayapan, were insured jointly for the sum of P1,000, and upon its maturity the proceeds thereof were payable to said insured, share and share alike, or P310.10 each. The defenses set up in the court of origin are: (1) that the immunities provided in section 5 (b) (2) of the Trading With the Enemy Act of the United States are of doubtful application in the Philippines, and have never been adopted by any law of the Philippines as applicable here or obligatory on the local courts; (2) that the defendant is a trustee of the funds and is under a legal obligation to see it to that it is paid to the person or persons entitled thereto, and unless the petitioner executes a suitable discharge and an adequate guarantee to indemnify and keep it free and harmless from any further liability under the policy, it may not be compelled to make the payment demanded. The Court of First Instance of Manila having approved and granted the petition, the respondent has appealed to this Court, contending that the Court of origin erred in holding that the Trading With the Enemy Act of the United States is binding upon the inhabitants of this country, notwithstanding the attainment of complete independence on July 4, 1946, and in ordering the payment prayed for. On July 3, 1946, the Congress of the United States passed Public Law 485-79th Congress, known as the Philippine Property Act of 1946. Section 3 thereof provides that "The Trading with the Enemy Act of October 6, 1917 (40 Stat. 411), as amended, shall continue in force in the Philippines after July 4, 1946, ...." To implement the provisions of the act, the President of the United States on July 3, 1946, promulgated Executive Order No. 9747, "continuing the functions of the Alien Property Custodian and the Department of the Treasury in the Philippines." Prior to and preparatory to the approval of said Philippine Property Act of 1946, an agreement was entered into between President Manuel Roxas of the

Commonwealth and U. S. Commissioner Paul V. McNutt whereby title to enemy agricultural lands and other properties was to be conveyed by the United States to the Philippines in order to help the rehabilitation of the latter, but that in order to avoid complex legal problems in relation to said enemy properties, the Alien Property Custodian of the United States was to continue operations in the Philippines even after the latter's independence, that he may settle all claims that may exist or arise against the above-mentioned enemy properties, in accordance with the Trading With the Enemy Act of the United States. (Report of the Committee on Insural Affairs No. 2296 and Senate Report No. 1578 from the Committee on Territories and Insular Affairs, to accompany S. 2345, accompanying H. R. 6801, 79th Congress, 2nd Session.) This purpose of conveying enemy properties to the Philippines after all claims against them shall have been settled is expressly embodied in the Philippine Property Act of 1946. SEC. 3. The Trading With the Enemy Act of October 6, 1917 (40 Stat. 411) is amended, shall continue in force in the Philippines after July 4, 1946, and all powers and authority conferred upon the President of the United States or the Alien Property Custodian by the terms of the said Trading With the Enemy Act, as amended, with respect to the Philippines, shall continue thereafter to be exercised by the President of the United States, or such officer or agency as he may designate: Provided, That all property vested in or transferred to the President of the United States, the Alien Property Custodian, or any such officer or agency as the President of the United States may designate under the Trading With the Enemy Act, as amended, which was located in the Philippines at the time of such vesting, or the proceeds thereof, and which shall remain after the satisfaction of any claim payable under the Trading With the Enemy Act, as amended, and after the payment of such costs and expenses of administration as may be law be charged against such property or proceeds, shall be transferred by the President of the United States to the Republic of the Philippines: Provided further, That such property, or proceeds thereof, may be transferred by the President of the United States to the Republic of the Philippines upon indemnification acceptable to the President of the United States by the Republic of the Philippines for such claims, costs, and expenses of administration as may by law be charged against such property or proceeds thereof before final adjudication of such claims, costs and expenses of administration. Provided further, That the courts of first instance of the Republic of the Philippines are hereby given jurisdiction to make and enter all such rules as to notice or otherwise, and all such orders and decrees and to issue such process as may be necessary and proper in the premises to enforce any orders, rules, and regulations issued by the President of the United States, the Alien Property Custodian, or such officer or agency designated by the President of the United States pursuant to the Trading With the Enemy Act, as amended, with such right of appeal therefrom as may be provided by law: And provided further, That

any suit authorized under the Trading With the Enemy Act, as amended, with respect to property vested in or transferred to the President of the United States, the Alien Property Custodian, or any officer or agency designated by the President of the United States hereunder, which at the time of such vesting or transfer was located with the Philippines, shall after July 4, 1946, be brought in the appropriate court of first instance of the Republic of the Philippines, against the officer or agency hereunder designated by the President of the United States with right of appeal therefrom as may be provided by law. In any litigation authorized under this section, the officer or administrative head of the agency designated hereunder may appear personally, or through attorneys appointed by him, without regard to the requirements of law other than this section. And when the proclamation of the independence of the Philippines by President Truman was made, said independence was granted "in accordance with the subject to the reservations provided in the applicable statutes of the Unites States." The enforcement of the Trading With the Enemy Act of the United States was contemplated to be made applicable after independence, within the meaning of the reservations. On the part of the Philippines, conformity to the enactment of the Philippine Property Act of 1946 of the United States was announced by President Manuel Roxas in a joint statement signed by him and by Commissioner Mcnutt. Ambassador Romulo also formally expressed the conformity of the Philippines Government to the approval of said act to the American Senate prior to its approval. And after the grant of independence, the Congress of the Philippines approved Republic Act No. 8, entitled. AN ACT TO AUTHORIZE THE PRESIDENT OF THE PHLIPPINES TO ENTER INTO SUCH CONTRACT OR UNDERTAKINGS AS MAY BE NECESSARY TO EFFECTUATE THE TRANSFER TO THE REPUBLIC OF THE PHILIPPINES UNDER THE PHILIPPINES PROPERTY ACT OF NINETEEN HUNDRED AND FORTY-SIX OF ANY PROPERTY OR PROPERTY RIGHTS OR THE PROCEEDS THEREOF AUTHORIZED TO BE TRANSFERRED UNDER SAID ACT; PROVIDING FOR THE ADMINISTRATION AND DISPOSITION OF SUCH PROPERTIES ONCE RECEIVED; AND APPROPRIATING THE NECESSARY FUND THEREFOR. The Congress of the Philippines also approved Republic Act No. 7, which established a Foreign Funds Control Office. After the approval of the Philippine Property Act of 1946 of the United States, the Philippine Government also formally expressed, through the Secretary of Foreign Affairs, conformity thereto. (See letters of Secretary dated August 22, 1946, and June 3, 1947.) The Congress of

the Philippines has also approved Republic Act No. 477, which provides for the administration and disposition of properties which have been or may hereafter be transferred to the Republic of the Philippines in accordance with the Philippines Property Act of 1946 of the United States. It is evident, therefore, that the consent of the Philippine Government to the application of the Philippine Property Act of 1946 to the Philippines after independence was given, not only by the Executive Department of the Philippines Government, but also by the Congress, which enacted the laws that would implement or carry out the benefits accruing from the operation of the United States law. The respondent-appellant, however, contends that the operation of the law after independence could not have actually taken, or may not take place, because both Republic Act No. 8 and Republic Act No. 477 do not contain any specific provision whereby the Philippine Property Act of 1946 or its provisions is made applicable to the Philippines. It is also contended that in the absence of such express provision in any of the laws passed by the Philippine Congress, said Philippine Property Act of 1946 does not form part of our laws and is not binding upon the courts and inhabitants of the country. There is no question that a foreign law may have extraterritorial effect in a country other than the country of origin, provided the latter, in which it is sought to be made operative, gives its consent thereto. This principle is supported by the unquestioned authority. The jurisdiction of the nation within its territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent in that power in which would impose such restriction. All exceptions, therefore, to the full and complete power of a nation within its own territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source. This consent may be either express or implied. (Philippine Political Law by Sinco, pp. 27-28, citing Chief Justice Marshall's statement in the Exchange, 7 Cranch 116) In the course of his dissenting opinion in the case of S. S. Lotus, decided by the Permanent Court of International Justice, John Bassett Moore said: 1. It is an admitted principle of International Law that a nation possesses and exercises within its own territory an absolute and exclusive jurisdiction, and that any exception to this right must be traced to the consent of the nation, either express or implied (Schooner Exchange vs. McFadden [812], 7 Cranch 116, 136). The benefit of this principle equally

enures to all independent and sovereign States, and is attended with a corresponding responsibility for what takes place within the national territory. (Digest of International Law, by Backworth, Vol. II, pp. 1-2) The above principle is not denied by respondent-appellant. But its argument on this appeal is that while the acts enacted by the Philippine Congress impliedly accept the benefits of the operation of the United States law (Philippine Property Act of 1946), no provision in the said acts of the Philippine Congress makes said United States law expressly applicable. In answer to this contention, it must be stated that the consent of a Senate to the operation of a foreign law within its territory does not need to be express; it is enough that said consent be implied from its conduct or from that of its authorized officers. 515. No rule of International Law exists which prescribe a necessary form of ratification. Ratification can, therefore, be given tacitly as well as expressly. Tacit ratification takes place when a State begins the execution of a treaty without expressly ratifying it. It is usual for ratification to take the form of a document duly signed by the Heads of the States concerned and their Secretaries for Foreign Affairs. It is usual to draft as many documents as there are parties to the Convention, and to exchange these documents between the parties. Occasionally the whole of the treaty is recited verbatim in the ratifying documents, but sometimes only the title, preamble, and date of the treaty, and the names of the signatory representatives are cited. As ratification is only the confirmation of an already existing treaty, the essential requirements in a ratifying document is merely that it should refer clearly and unmistakably to the treaty to be ratified. The citation of title, preamble, date, and names of the representatives is, therefore quite sufficient to satisfy that requirements. (Oppenheim, pp. 818-819; emphasis ours.) International Law does not require that agreements between nations must be concluded in any particular form or style. The law of nations is much more interested in the faithful performance of international obligations than in prescribing procedural requirements. (Treaties and Executive Agreements, by Myers S. McDougal and Asher Lands, Yale Law Journal, Vol. 54, pp. 318-319) In the case at bar, our ratification of or concurrence to the agreement for the extension of the Philippine Property Act of 1946 is clearly implied from the acts of the President of the Philippines and of the Secretary of Foreign Affairs, as well as by the enactment of Republic Acts Nos. 7, 8, and 477. We must emphasize the fact that the operation of the Philippine Property Act of 1946 in the Philippines is not derived from the unilateral act of the United States

Congress, which made it expressly applicable, or from the saving provision contained in the proclamation of independence. It is well-settled in the United States that its laws have no extraterritorial effect. The application of said law in the Philippines is based concurrently on said act (Philippine Property Act of 1946) and on the tacit consent thereto and the conduct of the Philippine Government itself in receiving the benefits of its provisions. It is also claimed by the respondent-appellant that the trial court erred in ordering it to pay the petitioner the amount demanded, without the execution by the petitioner of a deed of discharge and indemnity for its protection. The Trading With the Enemy Act of the United States, the application of which was extended to the Philippines by mutual agreement of the two Governments, contains an express provision to the effect that delivery of property or interest therein made to or for the account of the United States in pursuance of the provision of the law, shall be considered as a full acquittance and discharge for purposes of the obligation of the person making the delivery or payment. (Section 5(b) (2), Trading With the Enemy Act.) This express provision of the United States law saves the respondentappellant from any further liability for the amount ordered to be paid to the petitioner, and fully protects it from any further claim with respect thereto. The request of the respondent-appellant that a security be granted it for the payment to be made under the law is, therefore, unnecessary, because the judgment rendered in this case is sufficient to prove such acquittance and discharge. The decision appealed from should be as it is hereby affirmed, with costs against the respondent-appellant. Paras, C. J., Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Concepcion, JJ., concur.

G.R. No. L-26379

December 27, 1969

WILLIAM C. REAGAN, ETC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent. Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete, Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.

FERNANDO, J.: A question novel in character, the answer to which has far-reaching implications, is raised by petitioner William C. Reagan, at one time a civilian employee of an American corporation providing technical assistance to the United States Air Force in the Philippines. He would dispute the payment of the income tax assessed on him by respondent Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to a member of the United States Marine Corps, the transaction having taken place at the Clark Field Air Base at Pampanga. It is his contention, seriously and earnestly expressed, that in legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax. Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify by invoking, mistakenly as will hereafter be more fully 1 shown an observation to that effect in a 1951 opinion, petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way of emphasizing the decision reached, that the trading firm as purchaser of army goods must respond for the sales taxes due from an importer, as the American armed forces being exempt could not be taxed as such under the National Internal 2 Revenue Code. Such an assumption, inspired by the commendable aim to render unavailing any attempt at tax evasion on the part of such vendee, found 3 expression anew in a 1962 decision, coupled with the reminder however, to render the truth unmistakable, that "the areas covered by the United States Military Bases are not foreign territories both in the political and geographical sense." As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is moreover obiter. It certainly cannot control the resolution of the specific question that confronts us. We declare our stand in an unequivocal manner. The sale having taken place on what indisputably is Philippine territory, petitioner's liability for the income tax due as a result thereof was unavoidable. As the Court of Tax Appeals reached a similar conclusion, we sustain its decision now before us on appeal. In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started the recital of facts thus: "It appears that petitioner, a citizen of the United States and an employee of Bendix Radio, Division of Bendix Aviation Corporation, which provides technical assistance to the United States Air Force, was assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... . Nine (9) months thereafter and before his tour of duty expired, petitioner imported on April 22, 1960 a tax-free 1960 Cadillac car with accessories valued at $6,443.83, 4 including freight, insurance and other charges." Then came the following: "On July 11, 1960, more than two (2) months after the 1960 Cadillac car was imported into the Philippines, petitioner requested the Base Commander, Clark Air Base, for a

permit to sell the car, which was granted provided that the sale was made to a member of the United States Armed Forces or a citizen of the United States employed in the U.S. military bases in the Philippines. On the same date, July 11, 1960, petitioner sold his car for $6,600.00 to a certain Willie Johnson, Jr. (Private first class), United States Marine Corps, Sangley Point, Cavite, Philippines, as shown by a Bill of Sale . . . executed at Clark Air Base. On the same date, Pfc. Willie (William) Johnson, Jr. sold the car to Fred Meneses for P32,000.00 as 5 evidenced by a deed of sale executed in Manila." As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after deducting the landed cost of the car as well as the personal exemption to which petitioner was entitled, fixed as his net taxable income arising from such transaction the amount of P17,912.34, rendering him liable for income tax in the sum of P2,979.00. After paying the sum, he sought a refund from respondent claiming that he was exempt, but pending action on his request for refund, he filed the case with the Court of Tax Appeals seeking recovery of the sum of P2,979.00 plus the legal rate of interest. As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the said income tax of P2,979.00 was legally collected by 6 respondent for petitioner." After discussing the legal issues raised, primarily the contention that the Clark Air Base "in legal contemplation, is a base outside the Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax Appeals found nothing objectionable in the assessment and thereafter the payment of P2,979.00 as income tax and denied the refund on the same. Hence, this appeal predicated on a legal theory we cannot accept. Petitioner cannot make out a case for reversal. 1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner apparently feeling justified in his refusal to defer to basic postulates of constitutional and international law, induced no doubt by the weight he would accord to the observation made by this Court in the two opinions earlier referred to. To repeat, scant comfort, if at all is to be derived from such an obiter dictum, one which is likewise far from reflecting the fact as it is. Nothing is better settled than that the Philippines being independent and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of its sovereignty.

It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its sovereign rights. There may thus be a curtailment of what otherwise is a power plenary in character. That is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force due to which it has the exclusive capacity of legal self-determination 7 and self-restriction." A state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable competence. Its laws may as to some persons found within its territory no longer control. Nor does the matter end there. It is not precluded from allowing another power to participate in the exercise of jurisdictional right over certain portions of its territory. If it does so, it by no means follows that such areas become impressed with an alien character. They retain their status as native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under lease to the American armed forces by virtue of the military bases agreement of 1947. They are not and cannot be foreign territory. Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with impressive unanimity. We start with the citation from Chief Justice Marshall, announced in the leading case of Schooner Exchange v. 8 M'Faddon, an 1812 decision: "The jurisdiction of the nation within its own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent in that power which could impose such restriction." After which came this paragraph: "All exceptions, therefore, to the full and complete power of a nation within its own territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source." Chief Justice Taney, in an 1857 decision, affirmed the fundamental principle of everyone within the territorial domain of a state being subject to its commands: "For undoubtedly every person who is found within the limits of a government, whether the temporary purposes or as a resident, is bound by its laws." It is no exaggeration then for Justice Brewer to stress that the United States government "is one having jurisdiction over every foot of soil within its territory, and acting 10 directly upon each [individual found therein]; . . ." Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van Devanter. Thus: "It now is settled in the United States and recognized elsewhere that the territory subject to its jurisdiction includes the land areas under its dominion and control the ports, harbors, bays, and other in closed arms of the sea along its coast, and a marginal belt of the sea extending from the coast line 11 outward a marine league, or 3 geographic miles." He could cite moreover, in
9

addition to many American decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson, Westlake, Wheaton and Oppenheim. As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as interpreted and applied by the United States, made clear that not even the embassy premises of a foreign power are to be considered outside the territorial domain of the host state. Thus: "The ground occupied by an embassy is not in fact the territory of the foreign State to which the premises belong through possession or ownership. The lawfulness or unlawfulness of acts there committed is determined by the territorial sovereign. If an attache commits an offense within the precincts of an embassy, his immunity from prosecution is not because he has not violated the local law, but rather for the reason that the individual is exempt from prosecution. If a person not so exempt, or whose immunity is waived, similarly commits a crime therein, the territorial sovereign, if it secures custody of the offender, may subject him to prosecution, even though its criminal code normally does not contemplate the punishment of one who commits an offense outside of the national domain. It is not believed, therefore, that an ambassador himself possesses the right to exercise jurisdiction, contrary to the will of the State of his sojourn, even within his embassy with respect to acts there committed. Nor is there apparent at the present time any tendency on the part of States to 12 acquiesce in his exercise of it." 2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect that it should have held that the Clark Air Force is foreign soil or territory for purposes of income tax legislation is clearly without support in law. As thus correctly viewed, petitioner's hope for the reversal of the decision completely fades away. There is nothing in the Military Bases Agreement that lends support to such an assertion. It has not become foreign soil or territory. This country's jurisdictional rights therein, certainly not excluding the power to tax, have been preserved. As to certain tax matters, an appropriate exemption was provided for. Petitioner could not have been unaware that to maintain the contrary would be to defy reality and would be an affront to the law. While his first assigned error is thus worded, he would seek to impart plausibility to his claim by the ostensible invocation of the exemption clause in the Agreement by virtue of which a "national of the United States serving in or employed in the Philippines in connection with the construction, maintenance, operation or defense of the bases and residing in the Philippines only by reason of such employment" is not to be taxed on his income unless "derived from Philippine source or sources other than the United 13 States sources." The reliance, to repeat, is more apparent than real for as noted at the outset of this opinion, petitioner places more faith not on the language of the provision on exemption but on a sentiment given expression in a 1951 opinion of this Court, which would be made to yield such an unwarranted interpretation at war

with the controlling constitutional and international law principles. At any rate, even if such a contention were more adequately pressed and insisted upon, it is on its face devoid of merit as the source clearly was Philippine. In Saura Import and Export Co. v. Meer, the case above referred to, this Court 15 affirmed a decision rendered about seven months previously, holding liable as an importer, within the contemplation of the National Internal Revenue Code provision, the trading firm that purchased army goods from a United States government agency in the Philippines. It is easily understandable why. If it were not thus, tax evasion would have been facilitated. The United States forces that brought in such equipment later disposed of as surplus, when no longer needed for military purposes, was beyond the reach of our tax statutes. Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the earlier opinion. He could have stopped there. He chose not to do so. The transaction having occurred in 1946, not so long after the liberation of the Philippines, he proceeded to discuss the role of the American military contingent in the Philippines as a belligerent occupant. In the course of such a dissertion, drawing on his well-known gift for rhetoric and cognizant that he was making an as if statement, he did say: "While in army bases or installations within the Philippines those goods were in contemplation of law on foreign soil." It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes as an importer by the purchaser, could have been reached without any need for such expression as that given utterance by Justice Tuason. Its value then as an authoritative doctrine cannot be as much as petitioner would mistakenly attach to it. It was clearly obiter not being necessary for the resolution 16 17 of the issue before this Court. It was an opinion "uttered by the way." It could not then be controlling on the question before us now, the liability of the petitioner for income tax which, as announced at the opening of this opinion, is squarely 18 raised for the first time. On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to be disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the 19 judgment in a subsequent suit when the very point is presented for decision." Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. 20 Collector of Internal Revenue, a 1962 decision relied upon by petitioner, put a different complexion on the matter. Again, it was by way of pure embellishment, there being no need to repeat it, to reach the conclusion that it was the purchaser of army goods, this time from military bases, that must respond for the advance sales taxes as importer. Again, the purpose that animated the reiteration of such a
14

view was clearly to emphasize that through the employment of such a fiction, tax evasion is precluded. What is more, how far divorced from the truth was such statement was emphasized by Justice Barrera, who penned the Co Po opinion, thus: "It is true that the areas covered by the United States Military Bases are not 21 foreign territories both in the political and geographical sense." Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by him was in the way of a legal fiction. Note his stress on "in contemplation of law." To lend further support to a conclusion already announced, being at that a confirmation of what had been arrived at in the earlier case, distinguished by its sound appreciation of the issue then before this Court and to preclude any tax evasion, an observation certainly not to be taken literally was thus given utterance. This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as it undoubtedly was, especially so for the purpose intended, namely to stigmatize as without support in law any attempt on the part of a taxpayer to escape an obligation incumbent upon him. So it was quoted with that end in view in the Co Po case. It certainly does not justify any effort to render futile the collection of a tax legally due, as here. That was farthest from the thought of Justice Tuason. What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of a fictio juris in the science of the law. It was Cardozo who pointed out its value as a device "to advance the ends of justice" although at times 22 it could be "clumsy" and even "offensive". Certainly, then, while far from objectionable as thus enunciated, this observation of Justice Tuason could be misused or misconstrued in a clumsy manner to reach an offensive result. To repeat, properly used, a legal fiction could be relied upon by the law, as Frankfurter 23 noted, in the pursuit of legitimate ends. Petitioner then would be well-advised to take to heart such counsel of care and circumspection before invoking not a legal fiction that would avoid a mockery of the law by avoiding tax evasion but what clearly is a misinterpretation thereof, leading to results that would have shocked its originator. The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to the effect that for income tax purposes the Clark Air Force Base is outside Philippine territory, is utterly without merit. So we have said earlier. 3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is, to paraphrase Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is, whether by design or inadvertence, to misread it. It certainly is not susceptible of the mischievous consequences now sought to be fastened on it by petitioner.

That it would be fraught with such peril to the enforcement of our tax statutes on the military bases under lease to the American armed forces could not have been within the contemplation of Justice Tuason. To so attribute such a bizarre consequence is to be guilty of a grave disservice to the memory of a great jurist. For his real and genuine sentiment on the matter in consonance with the imperative mandate of controlling constitutional and international law concepts was categorically set forth by him, not as an obiter but as the rationale of the decision, 24 in People v. Acierto thus: "By the [Military Bases] Agreement, it should be noted, the Philippine Government merely consents that the United States exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein." Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do not admit of doubt. Thus: "This provision is not and can not on principle or authority be construed as a limitation upon the rights of the Philippine Government. If anything, it is an emphatic recognition and reaffirmation of Philippine sovereignty over the bases and of the truth that all jurisdictional rights granted to the United States and not exercised by the latter are reserved by the 25 Philippines for itself." It is in the same spirit that we approach the specific question confronting us in this litigation. We hold, as announced at the outset, that petitioner was liable for the income tax arising from a sale of his automobile in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our territorial jurisdiction to tax. 4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in the way of an affirmance of the Court of Tax Appeals decision. No useful purpose would be served by discussing the other assigned errors, petitioner himself being fully aware that if the Clark Air Force Base is to be considered, as it ought to be and as it is, Philippine soil or territory, his claim for exemption from the income tax due was distinguished only by its futility. There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. We thus manifest fealty to a pronouncement made time and time again that the law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken 26 and too categorical to be misinterpreted. Petitioner had not done so. Petitioner cannot do so. WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of P2,979.00 as the income tax paid by petitioner is affirmed. With costs against petitioner.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., concur. Reyes, J.B.L., J., concurs in the result. Barredo, J., took no part.

G.R. No. L-41518 June 30, 1976 GUERRERO'S TRANSPORT SERVICES, INC., petitioner, vs. BLAYLOCK TRANSPORTATION SERVICES EMPLOYEES ASSOCIATIONKILUSAN (BTEA-KILUSAN), LABOR ARBITER FRANCISCO M. DE LOS REYES and JOSE CRUZ, respondents. Eladio B. Samson petitioner. Francisco Angeles for private respondents.

ANTONIO, J.: Certiorari and prohibition with preliminary injunction to annul the Orders of the National Labor Relations Commission, of March 26, June 20 and September 25, 1975, as well as the Writ of Execution of September 26, 1975, issued in NLRC Case No. 214, and to restrain respondent Deputy Sheriff of Manila from implementing said writ. On June 1, 1972, the United states Naval Base authorities at Subic, Zambales, conducted a public bidding for a five-year contract for the right to operate and/or manage the transportation services inside the naval base. This bidding was won by Santiago Guerrero, owner- operator of Guerrero's Transport Services, Inc., herein petitioner, over Concepcion F. Blaylock, the then incumbent concessionaire doing business under the name of "Blaylock Transport Services", whose 395 employees are members of respondent union BTEA-KILUSAN. When petitioner, after the commencement of its operation on January 1, 1973, refused to employ the members of the respondent union, the latter. On January, 12, 1975, filed a

complaint with the National Labor Relations Commission docketed as NLRC Case No. 214, against Guerrero's Transport Services, Inc. and Santiago Guerrero, to compel them to employ its members pursuant to Article 1, Section 2 of the RP3 US Base Agreement dated May 27, 1968. This case was dismissed by the National Labor Relations Commission on March 13, 1973, upon petitioner's motion to dismiss on jurisdictional grounds, there being no employer-employee relationship between the 4 parties. Respondent union then appealed said Order on March 26,1973 to the Secretary of the Department of Labor, who, instead of deciding the appeal, remanded the case for review to the NLRC which, subsequently, summoned both parties to a series of 5 conferences. Thereafter, or on October .11, 1973, the NLRC issue a Resolution ordering petitioner, among others, "to absorb all the complainants who filed their applications on or before the deadline" set by petitioner "on 15 November 1972 except those who may have derogatory records with the U.S. Naval Authorities in Subic, Zambales" and directing the Officer-in-charge of the provincial office of the Department of Labor in Olongapo City to "oversee the preparation of the list of those qualified for absorption in accordance with this resolution." Petitioner appealed to Secretary of Labor Blas F. Ople who, in turn, rendered a 6 Decision on December 27, 1973, affirming said Resolution. On January 22, 1974, 7 Santiago A. Guerrero) appealed the decision to the President of the Philippines, but on July 9, 1974, the President, through Assistant Executive Secretary Ronaldo B. Zamora, returned the case to the Secretary of Labor for appropriate action on 8 the appeal, it appearing, that the same does not involve national interest. In the meantime, the Provincial Director of the Labor Office in Zambales furnished, 9 on August 2, 1974, petitioner a list of forty-six (46) members of respondent union 10 BTEA-KILUSAN and former drivers of the Blaylock Transport Service, who are within the coverage of the decision of the Secretary of Labor, and requesting petitioner to report its action on the matter directly to the Chairman, NLRC, Manila. 11 Subsequently, Santiago A. Guerrero received a letter dated September 24, 1974 from Col. Levi L. Basilla, PC (GSC) Camp Olivas, San Fernando, Pampanga, requesting compliance with the Order dated July 19, 1974 of the NLRC in NLRC Case No. 214. In his reply letter dated October 4, 1974, Guerrero informed Col. Basilia that he had substantially complied with the decision of the Secretary of Labor affirming the NLRC Resolution of October 31, 1974 in NLRC Case No. 214, and that any apparent non-compliance therewith was attributable to the individual complainants who failed to submit themselves for processing and examination as requested by the authorities of the U.S. Naval Base in Subic, Zambales, preparatory to their absorption by petitioner.

On January 18, 1975, Acting Executive Secretary Roberto V. Reyes, pursuant to Section 10 of Presidential Decree No. 21, directed the Chief of Constabulary to 12 arrest the executive officers of petitioner. On February 20, 1975, petitioner informed Secretary Reyes that it has substantially complied with the NLRC Resolution of October 31, 1975 as out of those listed by the Regional Labor Director, only a few passed the examination given and some of those who passed failed to comply with the final requirements of the U.S. Naval Base Authority; that only those who passed and complied with the requirements of the U.S. Naval Base Authority were extended appointments as early as December 16, 1974, but none 13 of them, for evident lack of interest, has reported for work. In his 1st endorsement dated March 26, 1975, Secretary Zamora required the Secretary of 14 Labor to verify petitioner's allegations. On the same date, respondent Labor Arbiter Francisco M. de los Reyes, upon a motion for execution filed by respondent union, issued an Order stating that "upon the finality thereof and by way of implementing any writ of execution that might be issued in this case, further hearings shall be held to determine the members of respondent union who are entitled to reinstatement in accordance with the basic guidelines finally determined 15 in this case." On June 20, 1975, respondent Labor Arbiter De los Reyes ordered the reinstatement of 129 individuals "to their former or substantially equivalent 16 positions without loss of seniority and other rights and privileges". On July 16,1975, respondent BTEA-KILUSAN filed a Motion for Issuance of Writ of 17 Execution with respondent Labor Arbiter, but this was objected to by petitioner contending that the Labor Arbiter has no jurisdiction over NLRC Case No. 214 and, 18 therefore, his proceedings and orders resulting therefrom are null and void. On September 1, 1975, the Provincial Director of the Zambales Labor Office, 19 pursuant to the directive of the Secretary of Labor, and the NLRC Resolution 20 dated October 21, 1975 submitted a detailed information to the Assistant Secretary of the Department of Labor on petitioner's compliance, "to enable the 21 Department of Labor to formally close" NLRC Case No. 214. On September 25, 1975, respondent Labor Arbiter, acting on the motion for execution filed by respondent union BTEA-KILUSAN, and finding that both the Orders, dated March 26 and June 20, 1975, have not been appealed pursuant to Article 223 of the Labor Code, declared said Orders final and executory and directed petitioner Guerrero's Transport Services, Inc. to reinstate the 129 complainants and to pay them the amount of P4,290.00 each, or a total of P592,110.00 as back wages covering the period from August 22, 1974 to 22 September 20, 1975.

On September 26, 1975, respondent Labor Arbiter issued a writ directing the respondent Deputy Sheriff of Manila levy on the moneys and/or properties of 23 petitioner, and on the same date respondent Sheriff immediately serve said writ on petitioner who was given a period of five (5) days within which to comply therewith. It was on this factual environment that petitioner instituted the present petition for certiorari and prohibition with preliminary injunction on October 6, 1975. Petitioner asserts that the afore-mentioned Orders were issued by respondent Labor Arbiter without jurisdiction. As prayed for, this Court, on October 6, 1975, issued a temporary restraining order and required the respondents to file an answer within ten (10) days from notice. On October 11, 1975, respondent Labor Arbiter De los Reyes and Sheriff Jose Cruz filed their Comment by way of answer to the petition, explaining the legal justifications of their action on the premises. Upon motion filed on October 11, 1975 by respondent union BTEA-KILUSAN for reconsideration and to lift the temporary restraining order of October 6, 1975, this Court, on October 15, 1975, lifted said restraining order and set the case for hearing on Monday, October 20, 1975 at 3:00 p.m. At the hearing of this case on October 20, 1975, a Compromise Agreement was arrived at by the parties wherein they agreed to submit to the Office of t he Secretary of Labor the determination of members of the respondent union BTEAKILUSAN who shall be reinstated or absorbed by the herein petitioner in the transportation service inside the naval base, which determination shall be considered final. This Court approved this agreement and enjoined "all the parties to strictly observe the terms thereof." This agreement is deemed to have superseded the Resolution of the National Labor Relations Commission of October 31, 1973, as affirmed by the Secretary of Labor on December 27, 1973. Pursuant to this agreement which was embodied in the Resolution of this Court of October 24, 1975, Secretary of Labor Blas F. Ople issued an Order dated November 13, 1975, the pertinent portion of which reads as follows: The issue submitted for resolution hinges on the credibility of the alleged applications. Considering that the employees are economically dependent on their jobs, they have all the reasons and zealousness to pursue their jobs within the legitimate framework of our laws. The applicant are no strangers to the pains and difficulties of unemployment. Because of these factors we

cannot ignore the affidavits of proof presented by the employees concerned as against the declaration of the herein respondent. Firmly entrenched is the rule in this jurisdiction that doubts arising from labor disputes must be construed and interpreted in favor of the workers. RESPONSIVE TO THE FOREGOING, the National Labor Relations Commission through Arbiter Francisco delos Reyes is hereby directed to implement the absorption of the 175 members of the Blaylock Transport Employees Association (BTEAKILUSAN) into the Guerrero Transport Services, subject to the following terms and conditions: 1) that they were bona fide employees of the Blaybock Transportation Service at the time its concession expired: 2) that the appellants shall pass final screening and approval by the appropriate authorities of the U.S. Base concerned. The applicants to be processed for absorption shall be those in the list of 46 submitted by OIC Liberator (Carino on 2 August 1974, and the list of 129 determined by Arbiter de los Reyes as embodied in the Writ of Execution issued on 25 September 1975. The Regional Director of Regional Office No. II, San Fernando, Pampanga, shall make available to the parties the facilities of that Office in the implementation of the aforesaid absorption process.
24

On November 24, 1975, in compliance with the aforesaid directive of the Secretary of Labor, Labor Arbiter Francisco M. delos Reyes conducted a hearing to receive evidence as to who were the bona fide employees of the former concessionaire at the "time of its concession expire". Thereafter, Labor Arbiter De los Reyes issued an Order, dated November 25, 1975, listing in Annex "A" thereof, 174 employees who were bona fide employees of the private respondent, and transmitting a copy of said Order to the Base Commander, U.S. Naval Base, Olongapo City, with the request for the immediate screening and approval of their applications in accordance with applicable rules of said command. The pertinent portion of said Order reads as follows: As far as this Labor Arbiter is concerned, his only participation in this case refers to that portion of the Secretary of Labor's Order directing him to implement "* * * the absorption of the 175

members of the Blaylock Transport Employees Association (BTEA-KILUSAN) into the Guerrero Transport Services," subject to certain terms and conditions. Hence, any question of "prematurity" as espoused by respondent's counsel may not he entertained by this Labor Arbiter. Going now to the applicants who should be entitled to absorption, the Honorable Secretary of Labor specified that the same should be composed of the 46 submitted by OIC Liberator Carino on 2 August 1974 and the 129 applicants determined by this Labor Arbiter. Of the latter, only 128 will be named. A perusal of said list show that the name "Renato Carriaga" has been doubly listed. For convenience, these two listings have now been consolidated and alphabetically arranged and as an integral part of this Order has been made as Annex "A" (pp 1 to 6). For purposes of implementation, the initial step to be undertaken is for the submission of the name of the applicants to the U.S. Navy authorities concerned, which means the U. S. Naval Base at Olongapo City for the screening and approval by the appropriate authorities. Regarding the determination of whether the applicants are bona fide employees of the Blaylock Transportation Service at the time its concession expired, the parties appear to be in agreement that the records of this case will eventually show whether the applicants are such employees. Further, we feel that such employment will likewise appear in the records of the U. S. Naval Base at Olongapo City since persons connected with the Base like the applicants, have to undergo processing by naval authority. WHEREFORE, in view of the foregoing considerations, copies of this Order together with Annex "A" hereof are hereby transmitted to the Base Commander, U. S. Naval Base , Olongapo City with the request for the immediate screening and approval of said applicants, in accordance with applicable rules of that command.
25

A treaty has two (2) aspects as an international agreement between states, and as municipal law for the people of each state to observe. As part of the municipal law, the aforesaid provision of the treaty enters into and forms part of the contract between petitioner and the U.S. Naval Base authorities. In view of said stipulation, the new contractor is, therefore, bound to give "priority" to the employment of the qualified employees of the previous contractor. It is obviously in recognition of such obligation that petitioner entered into the afore-mentioned Compromise Agreement. As above indicated, under the Compromise Agreement as embodied in the Resolution of this Court dated October 24, 1975, the parties agreed to submit to the Secretary of Labor the determination as to who of the members of the respondent union BTEA-KILUSAN shall be absorbed or employed by the herein petitioner Guerrero's Transport Services, Inc., and that such determination shall be considered as final. In connection therewith, the Secretary of Labor issued an Order dated November 13, 1975, directing the National Labor Relations Commission, through Labor Arbiter Francisco de los Reyes, to implement the 26 absorption of the 175 members into the Guerrero's Transport Services, subject to the following conditions, viz.: (a) that they were bona fide employees of the Blaylock Transport Service at the time its concession expired; and (b) that they should pass final screening and approval by the appropriate authorities of the U.S. Naval Base concerned. According to private respondent, however, Commander Vertplaetse of the U.S. Navy Exchange declined to implement the order of the Labor Arbiter, as it is the petitioner who should request for the screening and approval of the applicants. Considering that the afore-mentioned Compromise-Agreement of the parties, as approved by this Court, is more than a mere contract and has the force and effect of any other judgment, it is, therefore, conclusive upon the [parties and their 27 privies. For it is settled that a compromise has, upon the parties, the effect and authority of res judicata and is enforceable by execution upon approval by the 28 court. Since the resolution of the NLRC of October 31, 1973 required the absorption of the applicants subject to the conditions therein contained, and there being no showing that such conditions were complied with, the Labor Arbiter exceeded his authority in awarding back wages to the 129 complainants. ACCORDINGLY, judgment is hereby rendered ordering petitioner to employ members of respondent labor union BTEA-KILUSAN referred to in the Order of the Secretary of Labor dated November 13, 1975 who satisfy the criteria enunciated viz.: (a) those who were bona fide employees of the Blaylock Transport Services at the time its concession expired; and (b) those who pass the final screening and approval by the appropriate authorities of the U.S. Naval Base. For this purpose, petitioner is hereby ordered to submit to and secure from the appropriate

Pursuant to Section 6 of Article I of the Philippine-U S. Labor Agreement of May 27, 1968, the United States Armed Forces undertook, consistent with military requirements, "to provide security for employment, and, in the event certain services are contracted out, the United States Armed Forces shall require the contractor or concessioner to give priority consideration to affected employees for employment. (Emphasis supplied.)

authorities of the U.S. naval Base at Subic, Zambales the requisite screening and approval, the names of the afore-mentioned members of respondent union. The Order dated September 25, 1975 of respondent Labor Arbiter Francisco M. de los Reyes, awarding back wages to the 129 complainants in the total amount of P592,110.00, is hereby set aside. No pronouncement as to costs. Barredo, Aquino and Martin, JJ., concur. Concepcion, Jr., J., is on leave.

Constitution. Petitioner commenced its operation on January 1, 1973. It refused to employ the members of respondent Union, prompting the latter to file a complaint with the National Labor Relations Court against it and one Santiago Guerrero to compel them to employ its members pursuant to Article 1, Section 2 of the RP-US Bases Agreement dated May 27, 1968. Five days thereafter, or on January 17, 1973, the present Constitution came into effect. Time and time again, this Court has correctly stressed how far the present Constitution has gone in seeing to it that the welfare of the economically underprivileged receive full attention. All that has to 1 be done is to refer to the expanded scope of social justice and the specific 2 guarantees intended to vitalize the rights of labor. Security of tenure is one of the basic features. Had that provision been lived up to, the members of respondent Labor Union would not be in the sad plight they are in at present. It is to be admitted that what complicated matters is that the service to be rendered is inside the U.S. Naval Base of Olongapo City. Accordingly, the intervention of the authorities therein cannot be avoided. That is quite understandable. At the same 3 time, in line with what was held in Reagan v. Commissioner of Internal Revenue 4 and People v. Gozo, the jurisdiction vested in this government over every inch of soil of its territory compels the conclusion that its laws are operative even inside a military base or naval reservation except as limited by the Military Bases Agreement. Moreover, the interpretation of such a provision should be most restrictive to assure that there be the least derogation of the rights of the territorial 5 sovereign. The thought cannot be entertained that the naval authorities concerned would be insensible to the fundamental public policy of according the utmost consideration to the claims of labor. This observation is made with the hope that if paid attention to, respondent Labor Union, through the efforts of the administrative officials, could still reasonably hope that the financial burden long sustained by its members could be eased all in accordance with law.

Separate Opinions

FERNANDO, J., concurring: The opinion of the Court penned by Justice Antonio in his usual comprehensive and lucid manner manifests fealty to the mandates of the law. It is entitled to full concurrence. The parties, duly represented by counsel, entered on a compromise. Its terms are thus binding on them. They should be adhered to. Accordingly, there must be compliance with what was ordained by the Secretary of Labor in his order of November 13, 1975. So it has been decided by us. We have no choice on the matter. Unfortunately for respondent Labor Union, no provision was made for backpay. That was an omission that ought to have been remedied before the compromise was entered into. This Court, however sympathetic it may be to the claims of labor, cannot go further than what was assented to by the parties themselves. So the law prescribes. Nontheless, the writer is impelled to write this brief concurrence because of his belief that while this Court is precluded from granting additional relief to the members of respondent Labor Union who, in the meanwhile, had been laid off, still their situation is not necessarily devoid of any hope for improvement. The present Labor Code stresses administrative rather than judicial redress. It has the advantage of greater flexibility, of more discretion on the part of the Secretary of Labor. That could be utilized on their behalf. Certainly, from what appears of record, the course of conduct pursued by petitioner left much to be desired, and not only from their standpoint. It yields the impression, to me at least, that there was no fidelity to the basic policy on labor as prescribed by the present

G.R. No. 122191 October 8, 1998 SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon City, respondents.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul 1 2 and set aside the Resolution dated September 27, 1995 and the Decision dated 3 4 April 10, 1996 of the Court of Appeals in CA-G.R. SP No. 36533, and the Orders 5 6 7 dated August 29, 1994 and February 2, 1995 that were issued by the trial court 8 in Civil Case No. Q-93-18394. The pertinent antecedent facts which gave rise to the instant petition, as stated in 9 the questioned Decision , are as follows: On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia. . . . On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning when they returned to their hotels, they agreed to have breakfast together at the room of Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice. When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager Baharini negotiated with the police for the immediate release of the detained crew members but did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked into something she did not want because of her inability to understand the local dialect. She also declined to sign a blank paper and a document written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the Jakarta flights. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA transferred plaintiff to Manila. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to

see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah. One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIA's Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to

the music in violation of Islamic laws; and (3) socializing with the 10 male crew, in contravention of Islamic tradition. Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international 11 flights. Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave Saudi Arabia. Shortly before her return to 12 Manila, she was terminated from the service by SAUDIA, without her being informed of the cause. On November 23, 1993, Morada filed a Complaint for damages against SAUDIA, and Khaled Al-Balawi ("Al-Balawi"), its country manager. On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss which raised the following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the case. On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 16 Saudia filed a reply thereto on March 3, 1994.
17 15 14 13

In the Reply filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for the first time on appeal. Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of the instant case, and hence, without jurisdiction to adjudicate the same. Respondent Judge subsequently issued another Order dated February 2, 1995, denying SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as follows: Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs Amended Complaint, which is one for the recovery of actual, moral and exemplary damages plus attorney's fees, upon the basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the subject matter, and there being nothing new of substance which might cause the reversal or modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is DENIED. SO ORDERED.
25 24

23

On June 23, 1994, Morada filed an Amended Complaint wherein Al-Balawi was dropped as party defendant. On August 11, 1994, Saudia filed its Manifestation 18 and Motion to Dismiss Amended Complaint . The trial court issued an Order dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by Saudia. From the Order of respondent Judge denying the Motion to Dismiss, SAUDIA 21 filed on September 20, 1994, its Motion for Reconsideration of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed her 22 Opposition (To Defendant's Motion for Reconsideration).
20 19

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of Preliminary Injunction and/or 26 Temporary Restraining Order with the Court of Appeals. Respondent Court of Appeals promulgated a Resolution with Temporary 27 Restraining Order dated February 23, 1995, prohibiting the respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim. In another Resolution promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit: The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
28

Rejoinder, it appearing that herein petitioner is not clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second Division). SO ORDERED. On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition 29 for Review with Prayer for Temporary Restraining Order dated October 13, 1995. However, during the pendency of the instant Petition, respondent Court of Appeals 30 rendered the Decision dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended Complaint's basis for recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an appeal. On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for 31 Temporary Restraining Order dated April 30, 1996, given due course by this 32 Court. After both parties submitted their Memoranda, the instant case is now deemed submitted for decision. Petitioner SAUDIA raised the following issues: I

Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to Section 2, Rule 1 thereof. III Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this 33 Honorable Court can take cognizance of this case. From the foregoing factual and procedural antecedents, the following issues emerge for our resolution: I. WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES". II.

The trial court has no jurisdiction to hear and try Civil Case No. Q93-18394 based on Article 21 of the New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case involves what is known in private international law as a "conflicts problem". Otherwise, the Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is abhorred. II Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the matter as to absence of leave of court is now moot and academic when this Honorable Court required the respondents to comment on petitioner's April 30, 1996 Supplemental Petition For Review With Prayer For A

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD GOVERN. Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private respondent's claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the application of the law of the Kingdom of 34 Saudi Arabia, by virtue of the lex loci delicti commissi rule. On the other hand, private respondent contends that since her Amended 35 36 Complaint is based on Articles 19 and 21 of the Civil Code, then the instant 37 case is properly a matter of domestic law.

Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two states, the Philippines and Saudi Arabia. As stated by private respondent in her Amended Complaint 1994:
38

dated June 23,

9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIA's Manila manger, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her . 10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take that flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders. 11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in violation of Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition. 12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippines Embassy in Jeddah . The latter helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA while, ironically, Thamer and Allah freely 39 served the international flights. Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that the problem herein could present a "conflicts" case. A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a "foreign element". The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are rarely confined to the geographic limits of their birth or 40 conception.

2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It may be served with summons and other court processes at Travel Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo Village, Makati, Metro Manila. xxx xxx xxx 6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila . 7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors reauested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah. 8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sigh a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.

The forms in which this foreign element may appear are many. The foreign element may simply consist in the fact that one of the parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one State involves properties situated in another State. In other cases, the foreign element 42 may assume a complex form. In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to arise. We thus find private respondent's assertion that the case is purely domestic, imprecise. A conflicts problem presents itself here, and the question of jurisdiction 43 confronts the court a quo. After a careful study of the private respondent's Amended Complaint, and the Comment thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code. On one hand, Article 19 of the New Civil Code provides: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and observe honesty and good faith. On the other hand, Article 21 of the New Civil Code provides: Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages. Thus, in Philippine National Bank (PNB) vs. Court of Appeals, that:
45 44

41

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private respondent's assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the municipal forum. Based on the allegations in the Amended Complaint, read in the light of the 47 Rules of Court on jurisdiction we find that the Regional Trial Court (RTC) of 48 Quezon City possesses jurisdiction over the subject matter of the suit. Its authority to try and hear the case is provided for under Section 1 of Republic Act No. 7691, to wit: Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980", is hereby amended to read as follows: Sec. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction: xxx xxx xxx (8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and cots or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours) xxx xxx xxx And following Section 2 (b), Rule 4 of the Revised Rules of Court the venue, Quezon City, is appropriate: Sec. 2 Venue in Courts of First Instance. [Now Regional Trial Court] (a) xxx xxx xxx (b) Personal actions. All other actions may be commenced and tried where the defendant or any of the defendants resides or may
46

this Court held

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

be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff. Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice of 49 forum should rarely be disturbed. Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her. Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the parties. The choice of forum of the plaintiff (now private respondent) should be upheld. Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court. The records show that petitioner SAUDIA has filed several motions praying for the dismissal of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial court's jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction. As held by this Court in Republic vs. Ker and Company, Ltd.:
51 50

the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latter's person, who, being the proponent of the affirmative defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court. Similarly, the case of De Midgely vs. Ferandos, held that; When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the 52 subject matter. Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof, justified. As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal system should control a given situation where some of the significant facts occurred in two or more states; and 53 (2) to what extent should the chosen legal system regulate the situation. Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then faced with the problem of deciding which of these two 54 important values should be stressed. Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This process is known as "characterization", or the "doctrine of qualification". It is the "process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule." 55 The purpose of "characterization" is to enable the forum to select the proper law.
56

We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower court's jurisdiction over defendant's person, prayed for dismissal of the complaint on the ground that plaintiff's cause of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor. For the court to validly decide

Our starting point of analysis here is not a legal relation, but a factual situation, 57 event, or operative fact. An essential element of conflict rules is the indication of a "test" or "connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situs of the res, the place of 58 celebration, the place of performance, or the place of wrongdoing. Note that one or more circumstances may be present to serve as the possible test 59 for the determination of the applicable law. These "test factors" or "points of contact" or "connecting factors" could be any of the following: (1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin; (2) the seat of a legal or juridical person, such as a corporation; (3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive when real rights are involved; (4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts; (5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place where a power of attorney is to be exercised; (6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis; (7) the place where judicial or administrative proceedings are instituted or done. The lex fori the law of the forum is particularly important because, as we have seen earlier, matters of "procedure" not going to the substance of the claim involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls under one of the exceptions to the applications of foreign law; and (8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as

such. It also covers contractual relationships particularly contracts 60 of affreightment. (Emphasis ours.) After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed admitted for purposes of the motion to dismiss, we are convinced that there is reasonable basis for private respondent's assertion that although she was already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges she made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she was the one made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition. There is likewise logical basis on record for the claim that the "handing over" or "turning over" of the person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioner's purported act contributed to and amplified or even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of petitioner's authority as employer, taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven. Considering that the complaint in the court a quo is one involving torts, the "connecting factor" or "point of contact" could be the place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, "act with justice, give her due and observe honesty and good faith." Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of no moment. For in our view what is important here is the place where the over-all harm or the totality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to the plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort. Moreover, with the widespread criticism of the traditional rule of lex loci delicti 61 commissi, modern theories and rules on tort liability have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with the

modern theories on tort liability, we find here an occasion to apply the "State of the most significant relationship" rule, which in our view should be appropriate to apply now, given the factual context of this case. In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken into account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between 62 the parties is centered. As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no question that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in the business of international air carriage. Thus, the "relationship" between the parties was centered here, although it should be stressed that this suit is not based on mere labor law violations. From the record, the claim that the 63 Philippines has the most significant contact with the matter in this dispute, raised by private respondent as plaintiff below against defendant (herein petitioner), in our view, has been properly established. Prescinding from this premise that the Philippines is the situs of the tort complained of and the place "having the most interest in the problem", we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in the resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable petitioner's insistence that "[s]ince private respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law on the 64 matter." As aptly said by private respondent, she has "no obligation to plead and prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code of the Philippines. In her Amended Complaint and subsequent pleadings, she never alleged that Saudi law should 65 govern this case. And as correctly held by the respondent appellate court, "considering that it was the petitioner who was invoking the applicability of the law of Saudi Arabia, then the burden was on it [petitioner] to plead and to establish 66 what the law of Saudi Arabia is". Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously available, and expeditious trial itself indicated by the nature of

the case at hand. Indubitably, the Philippines is the state intimately concerned with the ultimate outcome of the case below, not just for the benefit of all the litigants, but also for the vindication of the country's system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing said herein, of course, should be construed as prejudging the results of the case in any manner whatsoever. WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings. SO ORDERED. Davide, Jr., Bellosillo, Vitug and Panganiban, JJ., concur.

EN BANC G.R. No. 92013 July 25, 1990 SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents. G.R. No. 92047 July 25, 1990 DIONISIO S. OJEDA, petitioner, vs. EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN, respondents. Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.: These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their decision to push through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens and entities in the bidding process. The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon. The Court could not act on these cases immediately because the respondents filed a motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5, 1990 but calling the attention of the respondents to the length of time the petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases. I The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots being: (1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate staff; and (3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant. The properties and the capital goods and services procured from the Japanese government for national development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II. The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans. The procurements are divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development projects. The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that time. A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima Corporation which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease period, all the three leased buildings shall be occupied and used by the Philippine

government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease period and thereafter. However, the government has not acted favorably on this proposal which is pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D. On July 25, 1987, the President issued Executive Order No. 296 entitling nonFilipino citizens or entities to avail of separations' capital goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause. Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the $225 million floor price became merely a suggested floor price. The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property. The petitioner in G.R. No. 92013 raises the following issues: (1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and (2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property? Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate the Roppongi property assails the

constitutionality of Executive Order No. 296 in making the property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be informed about the bidding requirements. II In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired as part of the reparations from the Japanese government for diplomatic and consular use by the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra). The petitioner submits that the Roppongi property comes under "property intended for public service" in paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year Reparations Schedule). The petitioner states that they continue to be intended for a necessary service. They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 6566). Hence, it cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same remains property of public dominion so long as the government has not used it for other purposes nor adopted any measure constituting a removal of its original purpose or use. The respondents, for their part, refute the petitioner's contention by saying that the subject property is not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the rule of lex situs which is used in determining the applicable law regarding the acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a property situated in Japan. The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi property has ceased to become property of public dominion. It has become patrimonial property because it

has not been used for public service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate of the government's intention to remove the Roppongi property from the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property scheduled on March 30, 1989. III In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates: (1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).itc-asl (2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and patrimony (Section 10, Article VI, Constitution); (3) The protection given to Filipino enterprises against unfair competition and trade practices; (4) The guarantee of the right of the people to information on all matters of public concern (Section 7, Article III, Constitution); (5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens of capital goods received by the

Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and (6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section 28, Article III, Constitution). Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a misapplication of public funds He states that since the details of the bidding for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price would still be deducted. IV The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three related properties were through reparations agreements, that these were assigned to the government sector and that the Roppongi property itself was specifically designated under the Reparations Agreement to house the Philippine Embassy. The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations Agreement and the corresponding contract of procurement which bind both the Philippine government and the Japanese government. There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become patrimonial. This, the respondents have failed to do. As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).

The applicable provisions of the Civil Code are: ART. 419. Property is either of public dominion or of private ownership. ART. 420. The following things are property of public dominion (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks shores roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. ART. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service. Has the intention of the government regarding the use of the property been changed because the lot has been Idle for some years? Has it become patrimonial? The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]). The respondents enumerate various pronouncements by concerned public officials insinuating a change of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property under Article 422 of the Civil Code must be definite Abandonment cannot be inferred from the non-use alone specially if the non-use was attributable not to the government's own

deliberate and indubitable will but to a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal premises. A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties. Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text expressly authorizing the sale of the four properties procured from Japan for the government sector. The executive order does not declare that the properties lost their public character. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides: Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary notwithstanding, the above-mentioned properties can be made available for sale, lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens. Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296. Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its implementation, the proceeds of the disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi property from being classified as one of public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public use or service. Rep

Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce of man cannot be tapped as a source of funds. The respondents try to get around the public dominion character of the Roppongi property by insisting that Japanese law and not our Civil Code should apply. It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the sale of extremely valuable government property, Japanese law and not Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to its provision is not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith that Japanese law would allow the sale. We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply. In the instant case, none of the above elements exists. The issues are not concerned with validity of ownership or title. There is no question that the property belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of property belonging to the State. And the validity of the procedures adopted to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply. The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule is misplaced. The opinion does not tackle the alienability of the real properties procured through reparations nor the existence in what body of the authority to sell them. In discussing who are capable of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who can acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We

see no point in belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that it can be sold? The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property. Moreover, the approval does not have the force and effect of law since the President already lost her legislative powers. The Congress had already convened for more than a year. Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion, there is another obstacle to its sale by the respondents. There is no law authorizing its conveyance. Section 79 (f) of the Revised Administrative Code of 1917 provides Section 79 (f ) Conveyances and contracts to which the Government is a party. In cases in which the Government of the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines on behalf of the Government of the Philippines unless the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied) The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive Order No. 292). SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer. (2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied) It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence. Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi property does not withdraw the property from public domain much less authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-finding investigation of the circumstances behind the decision to sell the Philippine government properties in Japan. The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the authority of the President to sell the Roppongi property. The Court stated that the constitutionality of the executive order was not the real issue and that resolving the constitutional question was "neither necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for national economic development projects including the CARP. Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in 1989.

Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues raised by petitioner Ojeda. The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]). The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold: The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits from them. But who would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147) The petitioner in G.R. No. 92047 also states: Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino people endured in World War II.

It is for what it stands for, and for what it could never bring back to life, that its significance today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine government. Roppongi is a reminder that cannot should not be dissipated ... (Rollo-92047, p. 9) It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed. WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT. SO ORDERED. Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ., concur.

must add in fairness that this was not his fault. The fact is that there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of thin air. Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction altogether; and ill any case it is not a law. The sale of the said property may be authorized only by Congress through a duly enacted statute, and there is no such law. Once again, we have affirmed the principle that ours is a government of laws and not of men, where every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am happy to note that in the several cases where this Court has ruled against her, the President of the Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring: I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which could help in further clarifying the issues. Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or determines policies. The President executes such policies. The policies determined by Congress are embodied in legislative enactments that have to be approved by the President to become law. The President, of course, recommends to Congress the approval of policies but, in the final analysis, it is Congress that is the policy determining branch of government. The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by Congress and approved by the President, and presidential acts implementing such laws, are in accordance with the Constitution. The Roppongi property was acquired by the Philippine government pursuant to the reparations agreement between the Philippine and Japanese governments. Under such agreement, this property was acquired by the Philippine government for a specific purpose, namely, to serve as the site of

Separate Opinions

CRUZ, J., concurring: I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following observations only for emphasis. It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General was at best ambiguous, although I

the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code, which provides: Art. 420. The following things are property of public dominion : (1) ... (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (339a) Public dominion property intended for public service cannot be alienated unless the property is first transformed into private property of the state 1 otherwise known as patrimonial property of the state. The transformation of public dominion property to state patrimonial property involves, to my mind, a policy decision. It is a policy decision because the treatment of the property varies according to its classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi from a public dominion property to a state patrimonial property. Congress has made no such decision or declaration. Moreover, the sale of public property (once converted from public dominion to state patrimonial property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides: SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: (1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer. (2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive

head of the agency or instrumentality. (Emphasis supplied) But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise bare of any congressional authority extended to the President to sell Roppongi thru public bidding or otherwise. It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or otherwise without a prior congressional approval, first, converting Roppongi from a public dominion property to a state patrimonial property, and, second, authorizing the President to sell the same. ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining order earlier issued by this Court.

FIRST DIVISION G.R. No. 72494 August 11, 1989 HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner, vs. JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE COURT, respondents. Quiason, Makalintal, Barot & Torres for petitioner. Alejandro, Aranzaso & Associates for private respondents.

This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes arising under this guarantee. ... (p. 33-A, Rollo). The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the obligation from private respondents, conformably with the provisions of the Joint and Several Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the above-mentioned complaint. On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court issued an order dated February 28, 1985 (pp, 64-65, Rollo), which read as follows: In a Motion to Dismiss filed on December 14, 1984, the defendants seek the dismissal of the complaint on two grounds, namely: 1. That the court has no jurisdiction over the subject matter of the complaint; and 2. That the court has no jurisdiction over the persons of the defendants. In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in the motion. "On the first ground, defendants claim that by virtue of the provision in the Guarantee (the actionable document) which reads This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the courts in Singapore shall have jurisdiction over all disputes arising under this guarantee, the Court has no jurisdiction over the subject matter of the case. The Court finds and concludes otherwise. There is nothing in the

MEDIALDEA, J.: This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial Court dated February 28,1985 denying the Motion to Dismiss filed by private respondents Jack Robert Sherman and Deodato Reloj. A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK) against private respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850 before the Regional Trial Court of Quezon City, Branch 84. It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred to as COMPANY), a company incorporated in Singapore applied with, and was granted by, the Singapore branch of petitioner BANK an overdraft facility in the maximum amount of Singapore dollars 200,000.00 (which amount was subsequently increased to Singapore dollars 375,000.00) with interest at 3% over petitioner BANK prime rate, payable monthly, on amounts due under said overdraft facility; as a security for the repayment by the COMPANY of sums advanced by petitioner BANK to it through the aforesaid overdraft facility, on October 7, 1982, both private respondents and a certain Robin de Clive Lowe, all of whom were directors of the COMPANY at such time, executed a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby private respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility. The Joint and Several Guarantee provides, inter alia, that:

Guarantee which says that the courts of Singapore shall have jurisdiction to the exclusion of the courts of other countries or nations. Also, it has long been established in law and jurisprudence that jurisdiction of courts is fixed by law; it cannot be conferred by the will, submission or consent of the parties. On the second ground, it is asserted that defendant Robert' , Sherman is not a citizen nor a resident of the Philippines. This argument holds no water. Jurisdiction over the persons of defendants is acquired by service of summons and copy of the complaint on them. There has been a valid service of summons on both defendants and in fact the same is admitted when said defendants filed a 'Motion for Extension of Time to File Responsive Pleading on December 5, 1984. WHEREFORE, the Motion to Dismiss is hereby DENIED. SO ORDERED. A motion for reconsideration of the said order was filed by private respondents which was, however, denied (p. 66, Rollo). Private respondents then filed before the respondent Intermediate Appellate Court (now Court of Appeals) a petition for prohibition with preliminary injunction and/or prayer for a restraining order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a decision (p. 37, Rollo), the dispositive portion of which reads: WHEREFORE, the petition for prohibition with preliminary injuction is hereby GRANTED. The respondent Court is enjoined from taking further cognizance of the case and to dismiss the same for filing with the proper court of Singapore which is the proper forum. No costs. SO ORDERED. The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition. The main issue is whether or not Philippine courts have jurisdiction over the suit. The controversy stems from the interpretation of a provision in the Joint and Several Guarantee, to wit:

(14) This guarantee and all rights, obligations and liabilites arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee. ... (p. 53-A, Rollo) In rendering the decision in favor of private respondents, the Court of Appeals made, the following observations (pp. 35-36, Rollo): There are significant aspects of the case to which our attention is invited. The loan was obtained by Eastern Book Service PTE, Ltd., a company incorporated in Singapore. The loan was granted by the Singapore Branch of Hongkong and Shanghai Banking Corporation. The Joint and Several Guarantee was also concluded in Singapore. The loan was in Singaporean dollars and the repayment thereof also in the same currency. The transaction, to say the least, took place in Singporean setting in which the law of that country is the measure by which that relationship of the parties will be governed. xxx xxx xxx Contrary to the position taken by respondents, the guarantee agreement compliance that any litigation will be before the courts of Singapore and that the rights and obligations of the parties shall be construed and determined in accordance with the laws of the Republic of Singapore. A closer examination of paragraph 14 of the Guarantee Agreement upon which the motion to dismiss is based, employs in clear and unmistakeable (sic) terms the word 'shall' which under statutory construction is mandatory. Thus it was ruled that: ... the word 'shall' is imperative, operating to impose a duty which may be enforced (Dizon vs. Encarnacion, 9 SCRA 714).lwph1.t There is nothing more imperative and restrictive than what the agreement categorically commands that 'all rights, obligations, and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore.'

While it is true that "the transaction took place in Singaporean setting" and that the Joint and Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the stipulation that "[t]his guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee" be liberally construed. One basic principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice (J. Salonga, Private International Law, 1981, p. 46). Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign tribunal, with more reason as a defendant. However, in this case, private respondents are Philippine residents (a fact which was not disputed by them) who would rather face a complaint against them before a foreign court and in the process incur considerable expenses, not to mention inconvenience, than to have a Philippine court try and resolve the case. Private respondents' stance is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a just obligation. The defense of private respondents that the complaint should have been filed in Singapore is based merely on technicality. They did not even claim, much less prove, that the filing of the action here will cause them any unnecessary trouble, damage, or expense. On the other hand, there is no showing that petitioner BANK filed the action here just to harass private respondents. In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA 187, it was ruled: ... An accurate reading, however, of the stipulation, 'The parties agree to sue and be sued in the Courts of Manila,' does not preclude the filing of suits in the residence of plaintiff or defendant. The plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is the venue are totally absent therefrom. We cannot read into that clause that plaintiff and defendant bound themselves to file suits with respect to the last two transactions in question only or exclusively in Manila. For, that agreement did not change or transfer venue. It simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which they may resort. They did not waive their right to pursue remedy in

the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non praesumitur. This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al., G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of litigation, jurisdiction shall be vested in the Court of Davao City." We held: Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of qualifying or restrictive words in the agreement which would indicate that the place named is the only venue agreed upon by the parties. Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the light of a State to exercise authority over persons and things within its boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and diplomatic representatives of other States, and foreign military units stationed in or marching through State territory with the permission of the latter's authorities. This authority, which finds its source in the concept of sovereignty, is exclusive within and throughout the domain of the State. A State is competent to take hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases brought before them (J. Salonga, Private International Law, 1981, pp. 37-38).lwph1.t As regards the issue on improper venue, petitioner BANK avers that the objection to improper venue has been waived. However, We agree with the ruling of the respondent Court that: While in the main, the motion to dismiss fails to categorically use with exactitude the words 'improper venue' it can be perceived from the general thrust and context of the motion that what is meant is improper venue, The use of the word 'jurisdiction' was merely an attempt to copy-cat the same word employed in the guarantee agreement but conveys the concept of venue. Brushing aside all technicalities, it would appear that jurisdiction was used loosely as to be synonymous with venue. It is in this spirit that this Court must view the motion to dismiss. ... (p. 35, Rollo).

At any rate, this issue is now of no moment because We hold that venue here was properly laid for the same reasons discussed above. The respondent Court likewise ruled that (pp. 36-37, Rollo): ... In a conflict problem, a court will simply refuse to entertain the case if it is not authorized by law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain the case by applying the principle of forum non conveniens. ... However, whether a suit should be entertained or dismissed on the basis of the principle of forum non conveniens depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court (J. Salonga, Private International Law, 1981, p. 49).lwph1.t Thus, the respondent Court should not have relied on such principle. Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of adhesion and that consequently, it cannot be permitted to take a stand contrary to the stipulations of the contract, substantial bases exist for petitioner Bank's choice of forum, as discussed earlier. Lastly, private respondents allege that neither the petitioner based at Hongkong nor its Philippine branch is involved in the transaction sued upon. This is a vain attempt on their part to further thwart the proceedings below inasmuch as wellknown is the rule that a defendant cannot plead any defense that has not been interposed in the court below. ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of the Regional Trial Court is REINSTATED, with costs against private respondents. This decision is immediately executory. SO ORDERED. Narvasa, Cruz, Gancayco and Gri;o-Aquino, JJ., concur.

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents. KAPUNAN, J.: Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today.1wphi1.nt Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution established primarily 1 for dependents of foreign diplomatic personnel and other temporary residents. To enable the School to continue carrying out its educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to employ its own teaching and management personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and regulations attending their employment, except laws that have been or will be enacted for the protection of employees. Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire: a. What is one's domicile? b. Where is one's home economy? c. To which country does one owe economic allegiance?

FIRST DIVISION G.R. No. 128845 June 1, 2000

d. Was the individual hired abroad specifically to work in the School and 2 was the School responsible for bringing that individual to the Philippines?

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a foreign-hire. The School grants foreign-hires certain benefits not accorded local-hires.1avvphi1 These include housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains: A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a promising career path all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of course the primary benefit of a basic salary/retirement compensation. Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable employment after along period in a foreign land. The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting 3 competent professionals in the field of international education. When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a legitimate labor 4 union and the collective bargaining representative of all faculty members" of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the parties. On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination. The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have been hired 5 locally and classified as local hires. The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires. The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are foreigners who have been 6 hired locally and who are paid equally as Filipino local hires. The Acting secretary upheld the point-of-hire classification for the distinction in salary rates: The Principle "equal pay for equal work" does not find applications in the present case. The international character of the School requires the hiring of foreign personnel to deal with different nationalities and different cultures, among the student population. We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the international market. Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the employment which include the employment contract. A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree as follows: All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad, under terms and conditions that are consistent with accepted international practice.

Appendix C of said CBA further provides: The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS). To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in their salaries. The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the 7 teaching faculty of the School. We cannot agree. That public policy abhors inequality and discrimination is beyond contention. Our 8 Constitution and laws reflect the policy against these evils. The Constitution in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith. International law, which springs from general principles of law, likewise proscribes 10 discrimination. General principles of law include principles of equity, i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11 12 The Universal Declaration of Human Rights, the International Covenant on 13 Economic, Social, and Cultural Rights, the International Convention on the 14 Elimination of All Forms of Racial Discrimination, the Convention against 15 Discrimination in Education, the Convention (No. 111) Concerning 16 Discrimination in Respect of Employment and Occupation all embody the general principle against discrimination, the very antithesis of fairness and justice.
9

The Philippines, through its Constitution, has incorporated this principle as part of its national laws. In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more reprehensible. The Constitution specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace the factory, the office or the field but include as well the manner by which employers treat their employees. The Constitution also directs the State to promote "equality of employment 19 opportunities for all." Similarly, the Labor Code provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment.
20 18 17

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. 21 Article 135, for example, prohibits and penalizes the payment of lesser compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization. Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides: The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure, in particular: a. Remuneration which provides all workers, as a minimum, with: (i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; xxx xxx xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar 22 conditions, should be paid similar salaries. This rule applies to the School, its "international character" notwithstanding. The School contends that petitioner has not adduced evidence that local-hires 23 perform work equal to that of foreign-hires. The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is for the employer to explain why the employee is treated unfairly. The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they perform under similar working conditions. The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the principle of equal work for equal pay. "Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of 24 services." In Songco v. National Labor Relations Commission, we said that: "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis supplied.) While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreignhires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed

by local-hires, such as housing, transportation, shipping costs, taxes and home leave travel allowances. The Constitution enjoins the State to "protect the rights of workers and promote 25 26 their welfare," "to afford labor full protection." The State, therefore, has the 27 right and duty to regulate the relations between labor and capital. These relations are not merely contractual but are so impressed with public interest that labor contracts, collective bargaining agreements included, must yield to the 28 common good. Should such contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations. In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.1avvphi1 We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires. A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights and duties of 29 the parties under the collective bargaining provisions of the law." The factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective 30 bargaining history; and (4) similarity of employment status. The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective 31 bargaining rights. It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining. The collective bargaining history in the School also shows that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to localhires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related to their status as foreignhires, and justify the exclusion of the former from the latter. To include foreign-

hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights. WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-hires. SO ORDERED. Puno and Pardo, JJ., concur. Davide, Jr., C.J., on official leave. Ynares-Santiago, J., is on leave.

a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents from applying and enforcing Section 113 of Central Bank Circular No. 960; b.) After hearing, judgment be rendered: 1.) Declaring the respective rights and duties of petitioners and respondents; 2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provisions of the Constitution, hence void; because its provision that "Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever i.) has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in violation of substantive due process guaranteed by the Constitution; ii.) has given foreign currency depositors an undue favor or a class privilege in violation of the equal protection clause of the Constitution; iii.) has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank. The antecedent facts:

EN BANC

G.R. No. 94723 August 21, 1997 KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTT, respondents.

TORRES, JR., J.: In our predisposition to discover the "original intent" of a statute, courts become the unfeeling pillars of the status quo. Ligle do we realize that statutes or even constitutions are bundles of compromises thrown our way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant to our day. The petition is for declaratory relief. It prays for the following reliefs:

On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen recovered from Bartelli the following items:

1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant. On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled hearing for Bartelli's petition for bail the latter escaped from jail. On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989. Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount of P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on February 28, 1989. On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a garnishment properly and legally made by virtue of a court order which has placed the subject deposits in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar deposits or defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body, whatsoever. This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the civil action secured by way of the writ of

preliminary attachment as granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows: May 26, 1989 Ms. Erlinda S. Carolino 12 Pres. Osmena Avenue South Admiral Village Paranaque, Metro Manila Dear Ms. Carolino: This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB Circular No. 960 (1983). The cited provision is absolute in application. It does not admit of any exception, nor has the same been repealed nor amended. The purpose of the law is to encourage dollar accounts within the country's banking system which would help in the development of the economy. There is no intention to render futile the basic rights of a person as was suggested in your subject letter. The law may be harsh as some perceive it, but it is still the law. Compliance is, therefore, enjoined. Very truly yours, (SGD) AGAPITO S. FAJARDO 1 Director Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve summons by publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott." Summons with the complaint was a published in the Manila Times once a week for three consecutive weeks. Greg Bartelli failed to file his answer to the complaint and was declared in default on August 7, 1989. After hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering the latter: 1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;

2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion the amount of P150,000.00 each or a total of P300,000.00 for both of them; 3. To pay plaintiffs exemplary damages of P100,000.00; and 4. To pay attorney's fees in an amount equivalent to 25% of the total amount of damages herein awarded; 5. To pay litigation expenses of P10,000.00; plus 6. Costs of the suit. SO ORDERED. The heinous acts of respondent Greg Bartelli which gave rise to the award were related in graphic detail by the trial court in its decision as follows: The defendant in this case was originally detained in the municipal jail of Makati but was able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel, summons was served upon defendant by publication in the Manila Times, a newspaper of general circulation as attested by the Advertising Manager of the Metro Media Times, Inc., the publisher of the said newspaper. Defendant, however, failed to file his answer to the complaint despite the lapse of the period of sixty (60) days from the last publication; hence, upon motion of the plaintiffs, through counsel, defendant was declared in default and plaintiffs were authorized to present their evidence ex parte. In support of the complaint, plaintiffs presented as witnesses the minor Karen E. Salvacion, her father, Federico N. Salvacion, Jr., a certain Joseph Aguilar and a certain Liberato Madulio, who gave the following testimony: Karen took her first year high school in St. Mary's Academy in Pasay City but has recently transferred to Arellano University for her second year.

In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing her snack on a concrete bench in front of Plaza Fair, an American approached her. She was then alone because Edna Tangile had already left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5) The American asked her name and introduced himself as Greg Bartelli. He sat beside her when he talked to her. He said he was a Math teacher and told her that he has a sister who is a nurse in New York. His sister allegedly has a daughter who is about Karen's age and who was with him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5) The American asked Karen what was her favorite subject and she told him it's Pilipino. He then invited her to go with him to his house where she could teach Pilipino to his niece. He even gave her a stuffed toy to persuade her to teach his niece. (Id., pp. 5-6) They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendant's house along Kalayaan Avenue. (Id., p. 6) When they reached the apartment house, Karen noticed that defendant's alleged niece was not outside the house but defendant told her maybe his niece was inside. When Karen did not see the alleged niece inside the house, defendant told her maybe his niece was upstairs, and invited Karen to go upstairs. (Id., p. 7) Upon entering the bedroom defendant suddenly locked the door. Karen became nervous because his niece was not there. Defendant got a piece of cotton cord and tied Karen's hands with it, and then he undressed her. Karen cried for help but defendant strangled her. He took a packing tape and he covered her mouth with it and he circled it around her head. (Id., p. 7) Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied her feet and hands spread apart to the bed posts. He knelt in front of her and inserted his finger in her sex organ. She felt severe pain. She tried to shout but no sound could come out because there were tapes on her mouth. When defendant withdrew his finger it was full of blood and Karen felt more pain after the withdrawal of the finger. (Id., p. 8)

He then got a Johnson's Baby Oil and he applied it to his sex organ as well as to her sex organ. After that he forced his sex organ into her but he was not able to do so. While he was doing it, Karen found it difficult to breathe and she perspired a lot while feeling severe pain. She merely presumed that he was able to insert his sex organ a little, because she could not see. Karen could not recall how long the defendant was in that position. (Id. pp. 8-9) After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower and he untied her hands. Karen could only hear the sound of the water while the defendant, she presumed, was in the bathroom washing his sex organ. When she took a shower more blood came out from her. In the meantime, defendant changed the mattress because it was full of blood. After the shower, Karen was allowed by defendant to sleep. She fell asleep because she got tired crying. The incident happened at about 4:00 p.m. Karen had no way of determining the exact time because defendant removed her watch. Defendant did not care to give her food before she went to sleep. Karen woke up at about 8:00 o'clock the following morning. (Id., pp. 9-10) The following day, February 5, 1989, a Sunday, after a breakfast of biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, they also took biscuit and coke. She was raped for the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for dinner which defendant had stored downstairs; it was he who cooked the rice that is why it looks like "lugaw". For the third time, Karen was raped again during the night. During those three times defendant succeeded in inserting his sex organ but she could not say whether the organ was inserted wholly. Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and feet nor put a tape on her mouth anymore but she did not cry for help for fear that she might be killed; besides, all the windows and doors were closed. And even if she shouted for help, nobody would hear her. She was so afraid that if somebody would hear her and would be able to call the police, it was still possible that as she was still inside the house, defendant might kill her. Besides, the defendant did not leave that Sunday, ruling out her chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14)

On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty minutes after a breakfast of biscuits; again in the afternoon; and again in the evening. At first, Karen did not know that there was a window because everything was covered by a carpet, until defendant opened the window for around fifteen minutes or less to let some air in, and she found that the window was covered by styrofoam and plywood. After that, he again closed the window with a hammer and he put the styrofoam, plywood, and carpet back. (Id., pp. 14-15) That Monday evening, Karen had a chance to call for help, although defendant left but kept the door closed. She went to the bathroom and saw a small window covered by styrofoam and she also spotted a small hole. She stepped on the bowl and she cried for help through the hole. She cried: "Maawa no po kayo so akin. Tulungan n'yo akong makalabas dito. Kinidnap ako!" Somebody heard her. It was a woman, probably a neighbor, but she got angry and said she was "istorbo". Karen pleaded for help and the woman told her to sleep and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16) She woke up at 6:00 o'clock the following morning, and she saw defendant in bed, this time sleeping. She waited for him to wake up. When he woke up, he again got some food but he always kept the door locked. As usual, she was merely fed with biscuit and coke. On that day, February 7, 1989, she was again raped three times. The first at about 6:30 to 7:00 a.m., the second at about 8:30 9:00, and the third was after lunch at 12:00 noon. After he had raped her for the second time he left but only for a short while. Upon his return, he caught her shouting for help but he did not understand what she was shouting about. After she was raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom and shouted for help. After shouting for about five minutes, she heard many voices. The voices were asking for her name and she gave her name as Karen Salvacion. After a while, she heard a voice of a woman saying they will just call the police. They were also telling her to change her clothes. She went from the bathroom to the room but she did not change her clothes being afraid that should the neighbors call for the police and the defendant see her in different clothes, he might kill her. At that time she was wearing a T-shirt of the American because the latter washed her dress. (Id., p. 16)

Afterwards, defendant arrived and he opened the door. He asked her if she had asked for help because there were many policemen outside and she denied it. He told her to change her clothes, and she did change to the one she was wearing on Saturday. He instructed her to tell the police that she left home and willingly; then he went downstairs but he locked the door. She could hear people conversing but she could not understand what they were saying. (Id., p. 19) When she heard the voices of many people who were conversing downstairs, she knocked repeatedly at the door as hard as she could. She heard somebody going upstairs and when the door was opened, she saw a policeman. The policeman asked her name and the reason why she was there. She told him she was kidnapped. Downstairs, he saw about five policemen in uniform and the defendant was talking to them. "Nakikipag-areglo po sa mga pulis," Karen added. "The policeman told him to just explain at the precinct. (Id., p. 20) They went out of the house and she saw some of her neighbors in front of the house. They rode the car of a certain person she called Kuya Boy together with defendant, the policeman, and two of her neighbors whom she called Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and there she was investigated by a policeman. At about 2:00 a.m., her father arrived, followed by her mother together with some of their neighbors. Then they were brought to the second floor of the police headquarters. (Id., p. 21) At the headquarters, she was asked several questions by the investigator. The written statement she gave to the police was marked as Exhibit A. Then they proceeded to the National Bureau of Investigation together with the investigator and her parents. At the NBI, a doctor, a medico-legal officer, examined her private parts. It was already 3:00 in the early morning of the following day when they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The findings of the medico-legal officer has been marked as Exhibit B. She was studying at the St. Mary's Academy in Pasay City at the time of the incident but she subsequently transferred to Apolinario Mabini, Arellano University, situated along Taft Avenue, because she was ashamed to be the subject of conversation in the school. She first applied for transfer to Jose Abad Santos, Arellano University along Taft Avenue near the Light Rail Transit Station

but she was denied admission after she told the school the true reason for her transfer. The reason for their denial was that they might be implicated in the case. (TSN, Aug. 15, 1989, p. 46) xxx xxx xxx After the incident, Karen has changed a lot. She does not play with her brother and sister anymore, and she is always in a state of shock; she has been absent-minded and is ashamed even to go out of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be restless or sad, (Id., p. 11) The father prays for P500,000.00 moral damages for Karen for this shocking experience which probably, she would always recall until she reaches old age, and he is not sure if she could ever recover from this experience. (TSN, Sept. 24, 1989, pp. 10-11) Pursuant to an Order granting leave to publish notice of decision, said notice was published in the Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the date of the last publication of the notice of judgment and the decision of the trial court had become final, petitioners tried to execute on Bartelli's dollar deposit with China Banking Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular No. 960. Thus, petitioners decided to seek relief from this Court. The issues raised and the arguments articulated by the parties boil down to two: May this Court entertain the instant petition despite the fact that original jurisdiction in petitions for declaratory relief rests with the lower court? Should Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient? Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that "Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever." should be adjudged as unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue favor or a class privilege in violation of the equal protection clause of the Constitution; 3.) it has provided a safe haven for criminals

like the herein respondent Greg Bartelli y Northcott since criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi-legislative power when it took away: a.) the plaintiffs substantive right to have the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to have the judgment credit satisfied by way of the writ of execution out of the bank deposit of the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of Court, which is beyond its power to do so. On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular methods of procedure; and d.) it applies to all members of a class. Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from attachment, garnishment or any other order or process of any court, is to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines; that another reason is to encourage the inflow of foreign currency deposits into the banking institutions thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; that the subject section is being enforced according to the regular methods of procedure; and that it applies to all foreign currency deposits made by any person and therefore does not violate the equal protection clause of the Constitution. Respondent Central Bank further avers that the questioned provision is needed to promote the public interest and the general welfare; that the State cannot just stand idly by while a considerable segment of the society suffers from economic distress; that the State had to take some measures to encourage economic development; and that in so doing persons and property may be subjected to some kinds of restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are exempted from execution/attachment especially provided by law and R.A. No. 6426 as amended is such a law, in that it specifically provides, among others, that foreign currency

deposits shall be exempted from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is only too willing to release the dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has undergone; but it is restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that despite the harsh effect of these laws on petitioners, CBC has no other alternative but to follow the same. This Court finds the petition to be partly meritorious. Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory relief can only be entertained and treated as a petition for mandamus to require respondents to honor and comply with the writ of execution in Civil Case No. 89-3214. This Court has no original and exclusive jurisdiction over a petition for declaratory 2 relief. However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, 3 it may be treated as one for mandamus. Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of kindness by teaching his alleged niece the Filipino language as requested by the American, trustingly went with said stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not once, but ten times. She was detained therein for four (4) days. This American tourist was able to escape from the jail and avoid punishment. On the other hand, the child, having received a favorable judgment in the Civil Case for damages in the amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer for a long, long time; and knowing that this person who had wronged her has the money, could not, however get the award of damages because of this unreasonable law. This questioned law, therefore makes futile the favorable judgment and award of damages that she and her parents fully deserve. As stated by the trial court in its decision, Indeed, after hearing the testimony of Karen, the Court believes that it was undoubtedly a shocking and traumatic experience she had undergone which could haunt her mind for a long, long time,

the mere recall of which could make her feel so humiliated, as in fact she had been actually humiliated once when she was refused admission at the Abad Santos High School, Arellano University, where she sought to transfer from another school, simply because the school authorities of the said High School learned about what happened to her and allegedly feared that they might be implicated in the case. xxx xxx xxx The reason for imposing exemplary or corrective damages is due to the wanton and bestial manner defendant had committed the acts of rape during a period of serious illegal detention of his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive and credulous to believe easily that defendant, an American national, could not have such a bestial desire on her nor capable of committing such a heinous crime. Being only 12 years old when that unfortunate incident happened, she has never heard of an old Filipino adage that in every forest there is a 4 snake, . . . . If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom how the incentive for foreign currency deposit could be more important than his child's rights to said award of damages; in this case, the victim's claim for damages from this alien who had the gall to wrong a child of tender years of a country where he is a mere visitor. This further illustrates the flaw in the questioned provisions. It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was in a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was enacted. But the realities of the present times show that the country has recovered economically; and even if not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the questioned law may be good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us. It has thus been said that But I also know, that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths are disclosed and manners and opinions change with the change of circumstances, institutions must advance also, and
5

keep pace with the times. . . We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors. In his Comment, the Solicitor General correctly opined, thus: The present petition has far-reaching implications on the right of a national to obtain redress for a wrong committed by an alien who takes refuge under a law and regulation promulgated for a purpose which does not contemplate the application thereof envisaged by the alien. More specifically, the petition raises the question whether the protection against attachment, garnishment or other court process accorded to foreign currency deposits by PD No. 1246 and CB Circular No. 960 applies when the deposit does not come from a lender or investor but from a mere transient or tourist who is not expected to maintain the deposit in the bank for long. The resolution of this question is important for the protection of nationals who are victimized in the forum by foreigners who are merely passing through. xxx xxx xxx . . . Respondents China Banking Corporation and Central Bank of the Philippines refused to honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the following provision of Central Bank Circular No. 960: Sec. 113. Exemption from attachment. Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426: Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall promulgate such rules and regulations as may be necessary to carry out the provisions of this Act which shall take effect after the publication of such rules and

regulations in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and regulations decreasing the rights of depositors, the rules and regulations at the time the deposit was made shall govern. The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as amended by P.D. 1246, thus: Sec. 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. The purpose of PD 1246 in according protection against attachment, garnishment and other court process to foreign currency deposits is stated in its whereases, viz.: WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035, certain Philippine banking institutions and branches of foreign banks are authorized to accept deposits in foreign currency; WHEREAS, under the provisions of Presidential Decree No. 1034 authorizing the establishment of an offshore banking system in the Philippines,

offshore banking units are also authorized to receive foreign currency deposits in certain cases; WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines; WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; Thus, one of the principal purposes of the protection accorded to foreign currency deposits is "to assure the development and speedy growth of the Foreign Currency Deposit system and the Offshore Banking in the Philippines" (3rd Whereas). The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD No. 1034 are as follows: WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political stability, a growing economy and adequate communication facilities, among others, exist in the Philippines; WHEREAS, it is in the interest of developing countries to have as wide access as possible to

the sources of capital funds for economic development; WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating employment opportunities and expertise in international finance, and contributing to the national development effort. WHEREAS, the geographical location, physical and human resources, and other positive factors provide the Philippines with the clear potential to develop as another financial center in Asia; On the other hand, the Foreign Currency Deposit system was created by PD. No. 1035. Its purposes are as follows: WHEREAS, the establishment of an offshore banking system in the Philippines has been authorized under a separate decree; WHEREAS, a number of local commercial banks, as depository bank under the Foreign Currency Deposit Act (RA No. 6426), have the resources and managerial competence to more actively engage in foreign exchange transactions and participate in the grant of foreign currency loans to resident corporations and firms; WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under RA 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed offshore banking units; It is evident from the above [Whereas clauses] that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD No.

1035). It is these deposits that are induced by the two laws and given protection and incentives by them. Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time. Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with respondent China Banking Corporation only for safekeeping during his temporary stay in the Philippines. For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court 6 processes. In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that "in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro." Simply stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that would respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377). It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent. Call it what it may but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a national and victim of a crime? This situation calls for fairness against legal tyranny.

We definitely cannot have both ways and rest in the belief that we have served the ends of justice. IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco and Panganiban, JJ., concur. Padilla, J., took no part. Mendoza and Hermosisima, Jr., JJ., are on leave.

$25,000 damages for the killing of Munro on the 10th day of January, 1888, at or near a station known as Gray Cliff, on the Northern Pacific Railway, in the territory of Montana. The complaint contained the following allegations: [154 U.S. 190, 191] 'That on the said 10th day of January, 1888, the said Hugh M. Munro, now deceased, was in the employ of the said defendant corporation, within the territory of Montana, in the capacity of locomotive engineer, for hire and reward by the said defendant paid, and that the duty of running a locomotive engine upon said defendant's line of railway within said territory was by said defendant assigned to said Hugh M. Munro on the said 10th day of January, 1888, and the defendant directed and ordered the said Hugh M. Munro to run a certain locomotive engine, the property of said defendant, known as engine 'No. 161,' over and upon its said railway in said territory; that prior to and at the time the said orders were so presented to said Munro there had been, and then was, a severe snowstorm in progress, and defendant's line of railway over and upon which said Munro was so ordered to run said engine was covered with drifting snow theretofore accumulated thereon, and then fast accumulating, notwithstanding which the said defendant corporation did willfully, improperly, negligently, and carelessly refuse and neglect to send a snow plow ahead of said engine No. 161 to clear the snow and ice from said defendant's said track, which had accumulated and was accumulating thereon by reason of said storm, so as to render the passage of said engine No. 161 safe and proper. 'That there was attached to the forward part of said engine No. 161 a certain attachment known as a 'pilot plow,' an appliance constructed thereon for the purpose of clearing the railway of snow and ice accumulated thereon, and render safe the passage of the engine to which said plow was attached over and upon said railway of defendant. 'That on the said 10th day of January, 1888, the said defendant corporation knowingly, willfully, negligently, and carelessly allowed to be and remain upon said engine No. 161, attached thereto as aforesaid, a certain pilot plow, the iron braces, bolts, and rods of which were broken, imperfect, and insufficient, by reason of which condition the said plow was loose and insufficiently secured to the pilot of said engine, allowing the said pilot to raise up and ride over obstructing [154 U.S. 190, 192] snow and ice instead of cutting through the same, as was the intention of its construction, rendering the running of said engine upon said railway dangerous; and that the said defendant well knew of the broken, defective, and dangerous condition of said engine No. 161 at the time the said Hugh M. Munro was so ordered to run the same upon and over said railway, notwithstanding which the said defendant corporation did negligently and carelessly furnish to said Hugh M. Munro said engine, with the said broken and imperfect pilot plow attached thereto, to run over and upon its said line of railway. 'That while said Hugh M. Munro was running said engine in performance of his duty as such engineer, and pursuant to the orders of said defendant

U.S. Supreme Court NORTHERN PAC. R. CO. v. BABCOCK, 154 U.S. 190 (1894) 154 U.S. 190 NORTHERN PAC. R. CO. v. BABCOCK. No. 328. May 26, 1894 This was an action by Albert L. Babcock, as administrator of Hugh M. Munro, deceased, against the Northern Pacific Railroad Company, for damages for the death of said Munro. The jury found a verdict for plaintiff, and judgment was entered thereon. Defendant brought error. The plaintiff below, who was the administrator of the estate of Hugh M. Munro, sued in the district court of the fourth judicial district of Minnesota to recover

corporation, and before daylight on said 10th day of January, 1888, near Gray Cliff, in said territory of Montana, the said engine struck an accumulation of snow and ice which said defendant had carelessly and negligently allowed to accumulate upon its said railway track, and the pilot plow of said engine, by reason of its broken, loose, and imperfect condition aforesaid, did ride upon said accumulation of snow and ice, thereby derailing said engine, and throwing the same from said railway track, whereby the said Hugh M. Munro was instantly killed. 'That the law of the territory of Montana governing actions for recovery of damages for causing death was on the 10th day of January, 1888, and now is, sections 13 and 14 of title 2 of said chapter 1 of the first division of Code of Civil Procedure of the territory of Montana; which said sections of said law of said territory are in the words and figures following, viz.: "Sec. 13. A father, or, in case of his death or desertion of his family, the mother, may maintain an action for the injury or death of a child, or a guardian for the injury or death of his ward. "Sec. 14. Where the death of a person not being a minor is caused by the wrongful act or neglect of another, his heirs or personal representatives may maintain an action for [154 U.S. 190, 193] damages against the person causing the death, or if such person be employed by another person who is responsible for his action, then also against such other person. In every action under this and the preceding section such damages may be given as under all the circumstances of the case may be just." The case was removed to the circuit court of the United States for the district of Minnesota, where an answer was filed by the defendant, denying the averments of the complaint, and alleging that the death of Munro was caused solely by his negligence and carelessness, and not by the negligence of the defendant or any of its servants or employes. There was a verdict and judgment below in favor of the plaintiff for $ 10,000. To review that judgment this writ of error is sued out. The errors assigned are as follows: 'First. The court erred in charging the jury as follows: 'Did it fail to discharge any duty which the law imposed upon it for the safety of its employe, the plaintiff's intestate? If it did, and if such negligence was the cause of the death of the engineer, Munro, then the plaintiff is entitled to recover.' 'Second. The court erred further in charging the jury as follows: 'The charge in this complaint is that this death was caused by the derailment of the engine, which took place because the plow was out of repair as described, or, at least, that the defendant had not used reasonable care in

clearing its track; and that when the engineer, in that condition, arrived at this cut, two miles from Gray Cliff, the snow had accumulated to such an extent that the engine was thereby derailed; and that it was this negligence which caused the death.' 'Third. The court erred further in charging the jury as follows: 'Many states have different laws. The law in this state until recently was that only $5,000 could be given in a case of death. It has lately been increased to $10,000.' 'Fourth. The court erred further in charging the jury as follows: 'If you believe from all the evidence in the case that the plaintiff is entitled to recovery, then it is for you to determine what compensation you will give for the death of the plaintiff's intestate. The law of Montana limits it to such an amount as you think would be proper under all circum- [154 U.S. 190, 194] stances of the case, and that is the law which will govern in this case.' 'Fifth. The court erred further in refusing to give to the jury the following request tendered by defendant's counsel: 'You, the jury, are instructed to find a verdict for the defendant.' 'Sixth. The court erred further in refusing to give to the jury the following request, tendered by defendant's counsel: 'The laws of Minnesota limit the amount of damages to be recovered in this case to five thousand dollars.' 'Seventh. The court erred further in refusing to give to the jury the following request, tendered by defendant's counsel: 'The court instructs the jury that, unless they find that it was customary for defendant company to send a snow plow in advance of the trains running east from Livingston during storms of this character, and that unless, further, the accident occurred by reason of the negligent and careless failure of the defendant to send such snow plow in advance, they will find for the defendant.' 'Eighth. The court erred further in refusing to give to the jury the following request, tendered by defendant's counsel: 'The court instructs the jury that, unless they find that the defendant carelessly and negligently furnished to the deceased engineer a plow attached to his engine, the iron bolts and rods of which were broken, imperfect, and insufficient, and that by reason of which condition the said plow was loose and insufficiently secured to the pilot of said engine, and that when the said engine struck the snow at the cut, as testified to, the pilot plow of said engine, by reason of its said broken, loose, and imperfect condition, did ride upon the accumulated snow and ice at said cut, and that thereby the said engine was thrown from the track, the jury will find for the defendant." ... James McNaught, A. H. Garland, and H. J. May, for plaintiff in error. R. C. Benton, for defendant in error.

[154 U.S. 190, 196] Mr. Justice WHITE, after stating the case, delivered the opinion of the court. For convenience, we shall consider the various assignments of error without regard to their numerical order. The third, fourth, and sixth assignments involve the same question, and may be decided upon together. The plaintiff's intestate was an engineer in the employ of the defendant corporation in the territory of Montana, and the accident by which he lost his life occurred there. The law of the territory of Montana at the time provided as follows: 'Where the death of a person not being a minor is caused by the wrongful act or neglect of another his heirs or personal representatives may maintain an action for damages against the person causing the death, or if such person be employed by another person who is responsible for his action, then also [154 U.S. 190, 197] against such other person. In every action under this and the preceding section such damages may be given as under all the circumstances of the case may be just.' Code Civ. Proc. Mont. div. 1, tit. 2, c. 1, 14. Under the law of Minnesota, when the death occurred, the limit of recovery in case of death was $5,000, but at the time of the trial of the case in the court below this limit had been increased to $10,000 by amendment of the Minnesota statutes. The question which those assignments of errors present is, was the amount of damage to be controlled by the law of the place of employment and where the accident occurred, or by the law of the forum in which the suit was pending? In the case of Herrick v. Railway Co., reported in 31 Minn. 11, 16 N. W. 413, which involved the question of whether the courts of Minnesota would enforce and apply to a suit in that state, for a cause of action originating in Iowa, a law of the state of Iowa making railroad corporations liable for damages sustained by its employes in consequence of the neglect of fellow servants, the court said: 'The statute of another state has, of course, no extraterritorial force, but rights acquired under it will always, in comity, be enforced, if not against the public policy of the laws of the former. In such cases the law of the place where the right was acquired, or the liability was incurred, will govern as to the right of action; while all that pertains merely to the remedy will be controlled by the law of the state where the action is brought. And we think ...

the principle is the same whether the right of action be ex contractu or ex delicto. 'The defendant admits the general rule to be as thus stated, but contends that, as to statutory actions like the present, it is subject to the qualification that, to sustain the action, the law of the forum and the law of the place where the right of action accrued must concur in holding that the act done gives a right of action. We admit that some text writers-notably, Rorer on Interstate Law-seem to lay [154 U.S. 190, 198] down this rule, but the authorities cited generally fail to sustain it.

'But it by no means follows that, because the statute of one state differs from the law of another state, therefore it would be held contrary to the policy of the laws of the latter state. Every day our courts are enforcing rights under foreign contracts where the lex loci contractus and the lex fori are altogether different, and yet we construe these contracts and enforce rights under them according to their force and effect under the laws of the state where made. To justify a court in refusing to enforce a right of action which accrued under the law of another state because against the policy of our laws, it must appear that it is against good morals or natural justice, or that, for some other such reason, the enforcement of it would be prejudicial to the general interests of our own citizens. If the state of Iowa sees fit to impose this obligation upon those operating railroads within her bounds, and to make it a condition of the employment of those who enter their service, we see nothing in such a law repugnant either to good morals or natural justice, or prejudicial to the interests of our own citizens.' This opinion of the supreme court of Minnesota is in accord with the rule announced by Chief Justice Marshall in The Antelope, 10 Wheat. 66. In referring to that case in Railroad Co. v. Cox, 145 U.S. 593 , 12 Sup. Ct. 905, the court said: 'The courts of no country execute the penal laws of another. But we have held that that rule cannot be invoked as applied to a statute of this kind, which merely authorizes a civil action to recover damages for a civil injury.' The rule thus enunciated had been adopted in previous cases, and has since been approved by this court. Smith v. Condry, 1 How. 28; The China, 7 Wall. 53, 64; Dennick v. Railroad Co., 103 U.S. 11 ; The Scotland, 105 U.S. 24 , 29; Huntington v. Attrill, 146 U.S. 670 , 13 Sup. Ct. 224. Indeed, in Railroad Co. v. Cox, supra, Mr. Chief Justice Fuller, speaking for the court, said: 'The question, however, is one of general law, and we regard it as settled in Dennick v. Railroad Co.' [154 U.S. 190, 199] The contract of employment was made in Montana, and the accident occurred in that state, while the suit was brought in Minnesota. We think there was no error in holding that the right to recover was governed by the lex loci, and not by the lex fori.

The fifth error assigned is the refusal to instruct the jury to find a verdict for the defendant. The evidence tended to show that Munro was an engineer in the employ of the railroad company at the town of Livingston; that, as such engineer, he was driving engine No. 161 some time in the latter part of December; that while driving the engine he discovered that an appliance known as the 'pilot plow,' which was attached to the engine, was out of order, and in a dangerous condition. The purpose of such a plow is to push the snow from the track; and, if not properly braced, as stated by one of the witnesses, it is likely to 'rise up, and ride over the drift, instead of going through it, and the natural result would be to throw the engine trucks from the tracks.' After Munro discovered that the plow was defective, he called the attention of the foreman of the shop and master mechanic to its condition. On or about the 2d of January, Munro was taken sick, and did not pursue his occupation until January 9th, when he reported for duty. At about 12 o'clock that night, while a severe snowstorm was raging, Munro was sent for, by messenger, to take out a passenger train. The train was delayed in getting away from Livingston, and left that place about 2 o'clock in the morning, drawn by engine No. 161, with Munro in charge as engineer. At a place called Gray Cliff, the engine, in passing through a cut, capsized, and Munro was killed. There was no conflict of evidence as to the fact that the plow was defective some two weeks before the accident, when Munro so stated to the foreman and master mechanic, but there was a conflict upon the question whether or not it had been subsequently repaired. Testimony was adduced by the plaintiff tending to show that the necessary repairs had not been made, and that at midnight on the 9th, when the engineer was called upon to take charge of the engine, the con- [154 U.S. 190, 200] dition of the plow was quite as defective as it had been some two weeks before, when the engineer had made his report of its condition to the foreman. On the other hand the defendant offered testimony which tended to show that the repairs had been made. It was proven that at the time Munro was called upon to take charge of the engine, on the night of the 9th, the roundhouse was so full of steam that the engine could not have been critically examined by him. The presence of this steam was due to the fact that there was no heating apparatus in the roundhouse, and, therefore, steam was allowed to escape therein, in order to prevent the engines from freezing. There was some evidence that the effect of the defective pilot plow would be to throw the train from the track whenever the engine struck an accumulation of snow which had been in any way impacted, the resistance of the snow having the effect of pushing the defective plow up, and thus derailing the engine. On the other hand, there was other evidence that such a result could not have followed from the defect in the plow. Under this condition of proof it is clear that the instruction was rightfully refused. The obligation of the employer to furnish to his employe sound implements is

established. Hough v. Railroad Co., 100 U.S. 213 , 218; Railway Co. v. Snyder, 152 U.S. 684 , 14 Sup. Ct. 756. And the fact that the engineer, when called upon at midnight on the 9th to perform duty, took the engine out under the conditions surrounding it in the roundhouse, implies no assumption by him of the risk of defective machinery. The proof showed, or tended to show, that notification by the engineer to the foreman and master mechanic of the existence of the defect was given some 10 or 12 days before the accident, and that at the time there was an impression created in Munro's mind that it was to be remedied. It also shows that work of this character was usually done in the shops at Livingston, over which the foreman presided, and in which the engine lay whe n the notice was given. From the time of the notice up to the time when the engineer was called upon to use the engine he was not on duty, but was absent on sick leave. As the employe had [154 U.S. 190, 201] given notice of the defect to the proper officer whose duty it was to make the repairs, and the impression had been conveyed to him that these would be made, he had a right to assume that they had been made, and to act upon that assumption. The mere fact of his taking the engine out at midnight, under the circumstances, did not of itself, unsupported by other proof, imply an assumption by him of the risk resulting from the dangerous and defective condition of the attachment to the engine. Hough v. Railroad Co., 100 U.S. 225 . The first assignment of error is, we think, without merit. The language of the charge complained of is: 'Did it [the defendant company] fail to discharge any duty which the law imposed upon it for the safety of its employe, the plaintiff's intestate? If it did, and if such negligence was the cause of the death of the engineer, Munro, then the plaintiff is entitled to recover.' Separated from the context this general language might have misled, but, when considered in proper connection with the rest of the instruction given, it could not have done so. The eighth error assigned was to a refusal of the court to give the following charge: 'The court instructs the jury that, unless they find that the defendant carelessly and negligently furnished to the deceased engineer a plow attached to his engine, the iron bolts and rods of which were broken, imperfect, and insufficient, and that by reason of which condition the said plow was loose and insufficiently secured to the pilot of said engine, and that when the said engine struck the snow at the cut, as testified to, the pilot plow of said engine, by reason of its said broken, loose, and imperfect condition, did ride upon the accumulated snow and ice at said cut, and that thereby the said engine was thrown from the track, the jury will find for the defendant.' The charge which the court gave was substantially as requested, and correctly stated the law. It was as follows: 'The court instructs you that, unless you find that the defendant negligently and carelessly furnished to the deceased engineer a plow attached to his engine, the iron bolts and rods of which were broken, [154 U.S. 190, 202] imperfect, and insufficient, and by reason of said imperfect condition, when the engine struck the snow at the cut, as testified to, the engine and tender were derailed by reason thereof, which caused the accident in question, then the defendant would be entitled to a verdict. The claim is that the

snow had accumulated to such an extent in that cut that when the engine struck it, the plow being in the condition in which it was, it was unable to clear the track, the accumulation of snow being so great, and that, as described by some witnesses, it rode up, and threw the engine off the track, from the fact that the front trucks of the engine could not ride over it. I instruct you that, unless the cause of this derailment and the throwing over of the engine was the imperfect condition of this plow,- that it could not clear the cut from the snow which had accumulated there, but the engine was thrown over, and thereby death ensued,-unless this is found to be true to the satisfaction of the jury, the defendant would be entitled to a verdict.' We can see no material variance between the charge requested and the charge which was given. The seventh error assigned is to the refusal of the court to instruct the jury 'that, unless they find that it was customary for defendant company to send a snow plow in advance of the trains running east from Livingston during storms of this character, and that unless, further, the accident occurred by reason of the negligent and careless failure of the defendant to send such snow plow in advance, they will find for the defendant.' This instruction was, of course, justly refused, because it implied that the defendant was entitled to a verdict, unless, contrary to its custom, it had not sent a snow plow in advance of the train, without reference to the defective condition of the pilot plow, which was the cause of action upon which the plaintiff relied. Indeed, although the complaint charged negligence on the part of the defendant in failing to send a snow plow ahead of the train, the action, as stated in the complaint, was predicated upon the defect in the machinery, or pilot plow; the failure to send the snow plow being alleged as a mere incident, or remote cause of damage. And this distinction was elucidated [154 U.S. 190, 203] with great clearness in the charge of the court. It nowhere indicated that there could be any liability on the part of the defendant arising from the failure to send a snow plow ahead of the train, as a distinct and substantive cause of action. It referred to the failure to send a snow plow ahead of the train merely as the reason why it was necessary to have the pilot plow attached to the engine. The court said: 'The charge in this complaint is that this death was caused by the derailment of the engine, which took place because the plow was out of repair as described, or, at least, that the defendant had not used reasonable care in clearing its tracks, and that when the engineer, with the engine in that condition, arrived at this cut, two miles from Grey Cliff, the snow had accumulated to such an extent that the engine was thereby derailed, and that it was this negligence on the part of the defendant that caused the death.' In other words, throughout the whole charge, the court instructed the jury that the liability, if any, must result from the defective condition of the machinery or pilot plow of the engine; and where it referred to the failure to send a snow plow ahead of the train as an act of negligence, treated it as negligence giving rise only remotely, and not proximately, to the injury; the proximate cause being the defective machinery, and the remote, the accumulation of snow, which rendered the use of the engine unsafe because of the defect in the pilot plow attached thereto.

Judgment affirmed. Mr. Justice JACKSON, not having heard the argument, took no part in the decision of this cause.