SECOND DIVISION

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

BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners,
vs. COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and
AURELIO K. LITONJUA, JR., respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
November 29, 1994 decision of the Court of Appeals[1] and the April 28, 1995 resolution
denying petitioners motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed
a Complaint[2] before the Regional Trial Court of Pasig against the Bank of America NT&SA
and Bank of America International, Ltd. (defendant banks for brevity) alleging that: they
were engaged in the shipping business; they owned two vessels: Don Aurelio and El
Champion, through their wholly-owned corporations; they deposited their revenues from
said business together with other funds with the branches of said banks in the United
Kingdom and Hongkong up to 1979; with their business doing well, the defendant banks
induced them to increase the number of their ships in operation, offering them easy loans
to acquire said vessels;[3] thereafter, the defendant banks acquired, through their
(Litonjuas) corporations as the borrowers: (a) El Carrier[4]; (b) El General[5]; (c) El
Challenger[6]; and (d) El Conqueror[7]; the vessels were registered in the names of their
corporations; the operation and the funds derived therefrom were placed under the
complete and exclusive control and disposition of the petitioners;[8] and the possession the
vessels was also placed by defendant banks in the hands of persons selected and
designated by them (defendant banks).[9]
The Litonjuas claimed that defendant banks as trustees did not fully render an account of
all the income derived from the operation of the vessels as well as of the proceeds of the
subsequent foreclosure sale;[10] because of the breach of their fiduciary duties and/or
negligence of the petitioners and/or the persons designated by them in the operation of
private respondents six vessels, the revenues derived from the operation of all the vessels
declined drastically; the loans acquired for the purchase of the four additional vessels then
matured and remained unpaid, prompting defendant banks to have all the six vessels,
including the two vessels originally owned by the private respondents, foreclosed and sold
at public auction to answer for the obligations incurred for and in behalf of the operation of
the vessels; they (Litonjuas) lost sizeable amounts of their own personal funds equivalent
to ten percent (10%) of the acquisition cost of the four vessels and were left with the
unpaid balance of their loans with defendant banks.[11] The Litonjuas prayed for the
accounting of the revenues derived in the operation of the six vessels and of the proceeds
of the sale thereof at the foreclosure proceedings instituted by petitioners; damages for
breach of trust; exemplary damages and attorneys fees.[12]
Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of
cause of action against them.[13]
On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:
WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby
DENIED. The defendant is therefore, given a period of ten (10) days to file its Answer to the
complaint.

SO ORDERED.[14]
Instead of filing an answer the defendant banks went to the Court of Appeals on a Petition
for Review on Certiorari[15] which was aptly treated by the appellate court as a petition for
certiorari. They assailed the above-quoted order as well as the subsequent denial of their
Motion for Reconsideration.[16] The appellate court dismissed the petition and denied
petitioners Motion for Reconsideration.[17]
Hence, herein petition anchored on the following grounds:
1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE
PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN
CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE
PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE
OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER, SOME
GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF FORUM SHOULD BE
DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL
OF THE COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE APPROPRIATE
AND PROPER.
3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE
PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL BASIS FOR
THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE RESPONDENT. COROLLARY TO
THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING. [18]
As to the first assigned error: Petitioners argue that the borrowers and the registered
owners of the vessels are the foreign corporations and not private respondents Litonjuas
who are mere stockholders; and that the revenues derived from the operations of all the
vessels are deposited in the accounts of the corporations. Hence, petitioners maintain that
these foreign corporations are the legal entities that have the personalities to sue and not
herein private respondents; that private respondents, being mere shareholders, have no
claim on the vessels as owners since they merely have an inchoate right to whatever may
remain upon the dissolution of the said foreign corporations and after all creditors have
been fully paid and satisfied;[19] and that while private respondents may have allegedly
spent amounts equal to 10% of the acquisition costs of the vessels in question, their 10%
however represents their investments as stockholders in the foreign corporations.[20]
Anent the second assigned error, petitioners posit that while the application of the principle
of forum non conveniens is discretionary on the part of the Court, said discretion is limited
by the guidelines pertaining to the private as well as public interest factors in determining
whether plaintiffs choice of forum should be disturbed, as elucidated in Gulf Oil Corp. vs.
Gilbert[21] and Piper Aircraft Co. vs. Reyno,[22] to wit:
Private interest factors include: (a) the relative ease of access to sources of proof; (b) the
availability of compulsory process for the attendance of unwilling witnesses; (c) the cost of
obtaining attendance of willing witnesses; or (d) all other practical problems that make trial
of a case easy, expeditious and inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court congestion; (b) the local interest in having
localized controversies decided at home; (c) the avoidance of unnecessary problems in
conflict of laws or in the application of foreign law; or (d) the unfairness of burdening
citizens in an unrelated forum with jury duty.[23]

In support of their claim that the local court is not the proper forum, petitioners allege the
following:
i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are
based in Hongkong and England. As such, the evidence and the witnesses are not readily
available in the Philippines;

4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992),
against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA
SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA.

ii) The loan transactions were obtained, perfected, performed, consummated and partially
paid outside the Philippines;

and that private respondents alleged cause of action is already barred by the pendency of
another action or by litis pendentia as shown above.[27]

iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels
were part of an offshore fleet, not based in the Philippines;

On the other hand, private respondents contend that certain material facts and pleadings
are omitted and/or misrepresented in the present petition for certiorari; that the prefatory
statement failed to state that part of the security of the foreign loans were mortgages on a
39-hectare piece of real estate located in the Philippines;[28] that while the complaint was
filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by
the private respondents who are Filipinos and therefore under Philippine laws, aside from
the said corporate borrowers being but their alter-egos, they have interests of their own in
the vessels.[29] Private respondents also argue that the dismissal by the Court of Appeals
of the petition for certiorari was justified because there was neither allegation nor any
showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and
adequate remedy in the ordinary course of law from the Order of the trial judge denying
their Motion to Dismiss; that the remedy available to the petitioners after their Motion to
Dismiss was denied was to file an Answer to the complaint;[30] that as upheld by the Court
of Appeals, the decision of the trial court in not applying the principle of forum non
conveniens is in the lawful exercise of its discretion.[31] Finally, private respondents aver
that the statement of petitioners that the doctrine of res judicata also applies to foreign
judgment is merely an opinion advanced by them and not based on a categorical ruling of
this Court;[32] and that herein private respondents did not actually participate in the
proceedings in the foreign courts.[33]

iv) All the loans involved were granted to the Private Respondents foreign CORPORATIONS;
v) The Restructuring Agreements were ALL governed by the laws of England;
vi) The subsequent sales of the mortgaged vessels and the application of the sales
proceeds occurred and transpired outside the Philippines, and the deliveries of the sold
mortgaged vessels were likewise made outside the Philippines;
vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL
deposited to the Accounts of the foreign CORPORATIONS abroad; and
viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in
the Philippines.[24]
Petitioners argue further that the loan agreements, security documentation and all
subsequent restructuring agreements uniformly, unconditionally and expressly provided
that they will be governed by the laws of England;[25] that Philippine Courts would then
have to apply English law in resolving whatever issues may be presented to it in the event
it recognizes and accepts herein case; that it would then be imposing a significant and
unnecessary expense and burden not only upon the parties to the transaction but also to
the local court. Petitioners insist that the inconvenience and difficulty of applying English
law with respect to a wholly foreign transaction in a case pending in the Philippines may be
avoided by its dismissal on the ground of forum non conveniens. [26]
Finally, petitioners claim that private respondents have already waived their alleged causes
of action in the case at bar for their refusal to contest the foreign civil cases earlier filed by
the petitioners against them in Hongkong and England, to wit:
1.) Civil action in England in its High Court of Justice, Queens Bench Division Commercial
Court (1992-Folio No. 2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY
COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e)
PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA
& (h) AURELIO K. LITONJUA.
2.) Civil action in England in its High Court of Justice, Queens Bench Division, Commercial
Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING
COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN LITONJUA.
3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992),
against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA
SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA.

We deny the petition for lack of merit.

It is a well-settled rule that the order denying the motion to dismiss cannot be the subject
of petition for certiorari. Petitioners should have filed an answer to the complaint, proceed
to trial and await judgment before making an appeal. As repeatedly held by this Court:
An order denying a motion to dismiss is interlocutory and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to
file an answer and to interpose as defenses the objections raised in his motion to dismiss,
proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in
due course. xxx Under certain situations, recourse to certiorari or mandamus is considered
appropriate, i.e., (a) when the trial court issued the order without or in excess of
jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or (c)
appeal would not prove to be a speedy and adequate remedy as when an appeal would not
promptly relieve a defendant from the injurious effects of the patently mistaken order
maintaining the plaintiffs baseless action and compelling the defendant needlessly to go
through a protracted trial and clogging the court dockets by another futile case.[34]
Records show that the trial court acted within its jurisdiction when it issued the assailed
Order denying petitioners motion to dismiss. Does the denial of the motion to dismiss
constitute a patent grave abuse of discretion? Would appeal, under the circumstances, not
prove to be a speedy and adequate remedy? We will resolve said questions in conjunction
with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the
complaint on the ground that plaintiffs have no cause of action against defendants since

plaintiffs are merely stockholders of the corporations which are the registered owners of
the vessels and the borrowers of petitioners?
No. Petitioners argument that private respondents, being mere stockholders of the foreign
corporations, have no personalities to sue, and therefore, the complaint should be
dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that
the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a
ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof,
evidently states no cause of action.[35] In San Lorenzo Village Association, Inc. vs. Court of
Appeals,[36] this Court clarified that a complaint states a cause of action where it contains
three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2)
the correlative obligation of the defendant, and (3) the act or omission of the defendant in
violation of said legal right. If these elements are absent, the complaint becomes
vulnerable to a motion to dismiss on the ground of failure to state a cause of action.[37] To
emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of
the complaint but rather the fact that the complaint states no cause of action.[38] Failure
to state a cause of action refers to the insufficiency of allegation in the pleading, unlike lack
of cause of action which refers to the insufficiency of factual basis for the action. Failure to
state a cause of action may be raised at the earliest stages of an action through a motion
to dismiss the complaint, while lack of cause of action may be raised any time after the
questions of fact have been resolved on the basis of stipulations, admissions or evidence
presented.[39]
In the case at bar, the complaint contains the three elements of a cause of action. It alleges
that: (1) plaintiffs, herein private respondents, have the right to demand for an accounting
from defendants (herein petitioners), as trustees by reason of the fiduciary relationship that
was created between the parties involving the vessels in question; (2) petitioners have the
obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the
same.
Petitioners insist that they do not have any obligation to the private respondents as they
are mere stockholders of the corporation; that the corporate entities have juridical
personalities separate and distinct from those of the private respondents. Private
respondents maintain that the corporations are wholly owned by them and prior to the
incorporation of such entities, they were clients of petitioners which induced them to
acquire loans from said petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case,[40]
xxx assuming that the allegation of facts constituting plaintiffs cause of action is not as
clear and categorical as would otherwise be desired, any uncertainty thereby arising should
be so resolved as to enable a full inquiry into the merits of the action.
As this Court has explained in the San Lorenzo case, such a course, would preclude
multiplicity of suits which the law abhors, and conduce to the definitive determination and
termination of the dispute. To do otherwise, that is, to abort the action on account of the
alleged fatal flaws of the complaint would obviously be indecisive and would not end the
controversy, since the institution of another action upon a revised complaint would not be
foreclosed.[41]
Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning the forum is inconvenient,
emerged in private international law to deter the practice of global forum shopping,[42]
that is to prevent non-resident litigants from choosing the forum or place wherein to bring
their suit for malicious reasons, such as to secure procedural advantages, to annoy and

harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue.
Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most convenient or available forum and the parties are not
precluded from seeking remedies elsewhere.[43]
Whether a suit should be entertained or dismissed on the basis of said doctrine depends
largely upon the facts of the particular case and is addressed to the sound discretion of the
trial court.[44] In the case of Communication Materials and Design, Inc. vs. Court of
Appeals,[45] this Court held that xxx [a] Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are met: (1) that the
Philippine Court is one to which the parties may conveniently resort to; (2) that the
Philippine Court is in a position to make an intelligent decision as to the law and the facts;
and, (3) that the Philippine Court has or is likely to have power to enforce its decision.[46]
Evidently, all these requisites are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,
[47] that the doctrine of forum non conveniens should not be used as a ground for a
motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said
doctrine as a ground. This Court further ruled that while it is within the discretion of the
trial court to abstain from assuming jurisdiction on this ground, it should do so only after
vital facts are established, to determine whether special circumstances require the courts
desistance; and that the propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly considered a matter
of defense.[48]
Third issue. Are private respondents guilty of forum shopping because of the pendency of
foreign action?
No. Forum shopping exists where the elements of litis pendentia are present and where a
final judgment in one case will amount to res judicata in the other.[49] Parenthetically, for
litis pendentia to be a ground for the dismissal of an action there must be: (a) identity of
the parties or at least such as to represent the same interest in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the
identity in the two cases should be such that the judgment which may be rendered in one
would, regardless of which party is successful, amount to res judicata in the other.[50]
In case at bar, not all the requirements for litis pendentia are present. While there may be
identity of parties, notwithstanding the presence of other respondents,[51] as well as the
reversal in positions of plaintiffs and defendants[52], still the other requirements necessary
for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were
filed in Hongkong and England without however showing the identity of rights asserted and
the reliefs sought for as well as the presence of the elements of res judicata should one of
the cases be adjudged.
As the Court of Appeals aptly observed:
xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving
the parties herein xxx, failed to provide this Court with relevant and clear specifications
that would show the presence of the above-quoted elements or requisites for res judicata.
While it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72),
after enumerating the various civil actions instituted abroad, did aver that Copies of the
foreign judgments are hereto attached and made integral parts hereof as Annexes B, C, D
and E, they failed, wittingly or inadvertently, to include a single foreign judgment in their
pleadings submitted to this Court as annexes to their petition. How then could We have
been expected to rule on this issue even if We were to hold that foreign judgments could
be the basis for the application of the aforementioned principle of res judicata?[53]

Consequently, both courts correctly denied the dismissal of herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.

No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for
reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the
damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the
reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed
against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion
are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos
C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's 2 decision dated July 10, 1991, on the other hand,
is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants as follows:

G.R. No. 115849

January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the

Philippines)
and
MERCURIO
RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA,
and JOSE JANOLO,respondents.

1. Declaring the existence of a perfected contract to buy and sell over the six (6)
parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101
hectares, more or less, covered by and embraced in Transfer Certificates of Title
Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the
plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five
and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this
decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in
favor of said plaintiffs a deed of absolute sale over the aforementioned six (6)
parcels of land, and to immediately deliver to the plaintiffs the owner's copies of
T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the
same deed and transfer of the six (6) titles in the names of the plaintiffs;

DECISION
PANGANIBAN, J.:

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo
and Demetrio Demetria the sums of P200,000.00 each in moral damages;

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

4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of
P100,000.00 as exemplary damages ;

Simply stated, these are the major questions brought before this Court in the instant
Petition for review oncertiorari under Rule 45 of the Rules of Court, to set aside the
Decision promulgated January 14, 1994 of the respondent Court of Appeals 1 in CA-G.R CV

With costs against the defendants.

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount
of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and
moderate damages in the amount of P20,000.00;

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

Attn.
Mr.
Mercurio
Manager, Property Management Dept.

Rivera

Gentleman:
I have the honor to submit my formal offer to purchase your properties covered by
titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101
hectares, more or less.

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

TCT NO.

AREA

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

T-106932

113,580 sq. m.

T-106933

70,899 sq. m.

T-106934

52,246 sq. m.

T-106935

96,768 sq. m.

T-106936

187,114 sq. m.

T-106937

481,481 sq. m.

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

Q.

The Facts
The facts of this case are summarized in the respondent Court's Decision 3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the
Philippines acquired six parcels of land with a total area of 101 hectares located at
Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T106932 to T-106937. The property used to be owned by BYME Investment and
Development Corporation which had them mortgaged with the bank as collateral
for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to
purchase the property and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME
investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera,
Manager of the Property Management Department of the defendant bank. The
meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16,
1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of
defendant Rivera, made a formal purchase offer to the bank through a letter dated
August 30, 1987 (Exh. "B"), as follows:

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00)

PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.

August 30, 1987

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

Bank

of

the

Philippines
September 1, 1987

BYME lawyer, attended the meeting. Two days later, or on September 30, 1987,
plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):

JP
M-P
142
Charisma
Rosario, Pasig, Metro Manila

St.,

GUTIERREZ
Doa

ENTERPRISES
Andres
II

The
Producers
Paseo
Metro Manila

de

Bank

the

Philippines
Makati

Attention: Mr. Mercurio Rivera

Re:
101
in Sta. Rosa, Laguna

Attention: JOSE O. JANOLO

Dear Sir:

of
Roxas,

Hectares

of

Land

Gentlemen:

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta.
Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed
however that the bank's counter-offer is at P5.5 million for more than 101
hectares on lot basis.
We shall be very glad to hear your position on the on the matter.

Pursuant to our discussion last 28 September 1987, we are pleased to inform you
that we are accepting your offer for us to purchase the property at Sta. Rosa,
Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.

Best regards.
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted
reply, wrote (Exh. "D"):

(6) On October 12, 1987, the conservator of the bank (which has been placed
under conservatorship by the Central Bank since 1984) was replaced by an Acting
Conservator in the person of defendant Leonida T. Encarnacion. On November 4,
1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"):
Attention: Atty. Demetrio Demetria

September 17, 1987

Producers
Paseo
Makati, Metro Manila

de

Dear Sir:

Bank
Roxas

Your proposal to buy the properties the bank foreclosed from Byme investment
Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly
created committee for submission to the newly designated Acting Conservator of
the bank.

Attention: Mr. Mercurio Rivera

For your information.

Gentlemen:

(7) What thereafter transpired was a series of demands by the plaintiffs for
compliance by the bank with what plaintiff considered as a perfected contract of
sale, which demands were in one form or another refused by the bank. As detailed
by the trial court in its decision, on November 17, 1987, plaintiffs through a letter
to defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million
"pursuant to (our) perfected sale agreement." Defendants refused to receive both
the payment and the letter. Instead, the parcels of land involved in the transaction
were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1").
Plaintiffs demanded the execution by the bank of the documents on what was
considered as a "perfected agreement." Thus:

In reply to your letter regarding my proposal to purchase your 101-hectare lot

located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now
propose to buy the said lot at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What
took place was a meeting on September 28, 1987 between the plaintiffs and Luis
Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

This is in connection with the perfected agreement consequent from your offer of
P5.5 Million as the purchase price of the said lots. Please inform us of the date of
documentation of the sale immediately.
Kindly acknowledge receipt of our payment.

Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase
your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT
No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September
1, 1987 of this same lot in the amount of P5.5 million was accepted by our client
thru a letter dated September 30, 1987 and was received by you on October 5,
1987.
In view of the above circumstances, we believe that an agreement has been
perfected. We were also informed that despite repeated follow-up to consummate
the purchase, you now refuse to honor your commitment. Instead, you have
advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3)
days from your receipt hereof. We are ready to remit the agreed amount of P5.5
million at your advice. Otherwise, we shall be constrained to file the necessary
court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the
foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"),
that said letter has been "referred . . . to the office of our Conservator for proper
disposition" However, no response came from the Acting Conservator. On
December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and
"L-1"), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs'
letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC
Check No. 258387 in the amount of P5.5 million as our agreed purchase price of
the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935,
106936 and 106937 and registered under Producers Bank.

(9) The foregoing letter drew no response for more than four months. Then, on
May 3, 1988, plaintiff, through counsel, made a final demand for compliance by
the bank with its obligations under the considered perfected contract of sale
(Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply
letter dated May 12, 1988 (Annex "4" of defendant's answer to amended
complaint), the defendants through Acting Conservator Encarnacion repudiated
the authority of defendant Rivera and claimed that his dealings with the plaintiffs,
particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that
basis, the defendants justified the refusal of the tenders of payment and the noncompliance with the obligations under what the plaintiffs considered to be a
perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages
against the bank, its Manager Rivers and Acting Conservator Encarnacion. The
basis of the suit was that the transaction had with the bank resulted in a perfected
contract of sale, The defendants took the position that there was no such
perfected sale because the defendant Rivera is not authorized to sell the property,
and that there was no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip
Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court,
alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a
substantial interest in resisting the complaint. On July 8, 1991, the trial court
issued an order denying the motion to intervene on the ground that it was filed
after trial had already been concluded. It also denied a motion for reconsideration
filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and
conservator Encarnacion appealed to the Court of Appeals which subsequently
affirmed with modification the said judgment. Henry Co did not appeal the denial
of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in
place of Demetria and Janolo, in view of the assignment of the latters' rights in the matter
in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co
and several other stockholders of the Bank, through counsel Angara Abello Concepcion
Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a "derivative
suit" with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 921606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the
property as unenforceable and to stop Ejercito from enforcing or implementing the sale" 4 In
his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of
the case then pending in the Court of Appeals. During the pre-trial conference in the
Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without
Prejudice. "Private respondent opposed this motion on the ground, among others, that
plaintiff's act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion is still
pending in the Makati RTC.

In their Petition6 and Memorandum7, petitioners summarized their position as follows:

From the foregoing positions of the parties, the issues in this case may be summed up as
follows:

I.
1) Was there forum-shopping on the part of petitioner Bank?
The Court of Appeals erred in declaring that a contract of sale was perfected
between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of
sale between the parties.

2) Was there a perfected contract of sale between the parties?

3) Assuming there was, was the said contract enforceable under the statute of
frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority
of the bank officers and/or to revoke the said contract?

III.
5) Did the respondent Court commit any reversible error in its findings of facts?
The Court of Appeals erred in declaring that the conservator does not have the
power to overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the
evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground 8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the
evidence on record and may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between
Demetria and Janolo (substituted by; respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being
estopped from repudiating the agency and the contract, has no authority to
revoke the contract of sale.
The Issues

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court
promulgated Revised Circular No. 28-91 requiring that a party "must certify under oath . . .
[that] (a) he has not (t)heretofore commenced any other action or proceeding involving the
same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency;
(b) to the best of his knowledge, no such action or proceeding is pending" in said courts or
agencies. A violation of the said circular entails sanctions that include the summary
dismissal of the multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil
Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving
a derivative suit filed by stockholders of petitioner Bank against the conservator and other
defendants but which is the subject of a pending Motion to Dismiss Without Prejudice. 9
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners
are guilty of actual forum shopping because the instant petition pending before this Court
involves "identical parties or interests represented, rights asserted and reliefs sought (as
that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second
Case. In fact, the issues in the two cases are so interwined that a judgement or resolution
in either case will constitute res judicata in the other." 10
On the other hand, petitioners explain

11

that there is no forum-shopping because:

1) In the earlier or "First Case" from which this proceeding arose, the Bank was
impleaded as a defendant, whereas in the "Second Case" (assuming the Bank is
the real party in interest in a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation
under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank
president and attached to the Petition identifies the action as a "derivative suit," it
"does not mean that it is one" and "(t)hat is a legal question for the courts to
decide";

4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law. 12, where
non-resident litigants are given the option to choose the forum or place wherein to bring
their suit for various reasons or excuses, including to secure procedural advantages, to
annoy and harass the defendant, to avoid overcrowded dockets, or to select a more
friendly venue. To combat these less than honorable excuses, the principle of forum non
conveniens was developed whereby a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party
attempts to have his action tried in a particular court or jurisdiction where he feels he will
receive the most favorable judgment or verdict." Hence, according to Words and Phrases14,
"a litigant is open to the charge of "forum shopping" whenever he chooses a forum with
slight connection to factual circumstances surrounding his suit, and litigants should be
encouraged to attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a
choice of venues, as it was originally understood in conflicts of laws, but also to a choice of
remedies. As to the first (choice of venues), the Rules of Court, for example, allow a
plaintiff to commence personal actions "where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for example,
are given a choice of pursuing civil liabilities independently of the criminal, arising from the
same set of facts. A passenger of a public utility vehicle involved in a vehicular accident
may sue on culpa contractual, culpa aquiliana or culpa criminal each remedy being
available independently of the others although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant
actually shops for a forum of his action, This was the original concept of the term
forum shopping.
Eventually, however, instead of actually making a choice of the forum of their
actions, litigants, through the encouragement of their lawyers, file their actions in
all available courts, or invoke all relevant remedies simultaneously. This practice
had not only resulted to (sic) conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly administration of justice. It had
created extreme inconvenience to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept which is unethical
professional legal practice. And this necessitated or had given rise to the
formulation of rules and canons discouraging or altogether prohibiting the
practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a
legitimate device for solving problems has been abused and mis-used to assure scheming
litigants of dubious reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as
already mentioned, promulgated Circular 28-91. And even before that, the Court had
prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck
down in several cases 16 the inveterate use of this insidious malpractice. Forum shopping as
"the filing of repetitious suits in different courts" has been condemned by Justice Andres R.
Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval
Hughes, et al.,"as a reprehensible manipulation of court processes
and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum,
a party seeks a favorable opinion (other than by appeal or certiorari) in another.
The principle applies not only with respect to suits filed in the courts but also in
connection with litigations commenced in the courts while an administrative
proceeding is pending, as in this case, in order to defeat administrative processes
and in anticipation of an unfavorable administrative ruling and a favorable court
ruling. This is specially so, as in this case, where the court in which the second suit
was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum shopping has
been laid dawn in the 1986 case of Buan vs. Lopez 19, also by Chief Justice Narvasa, and
that is, forum shopping exists where the elements of litis pendentia are present or where a
final judgment in one case will amount to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563
identity of parties, or at least such parties as represent the same interests in both
actions, as well as identity of rights asserted and relief prayed for, the relief being
founded on the same facts, and the identity on the two preceding particulars is
such that any judgment rendered in the other action, will, regardless of which
party is successful, amount to res adjudicata in the action under consideration: all
the requisites, in fine, of auter action pendant.
xxx

xxx

xxx

As already observed, there is between the action at bar and RTC Case No. 8636563, an identity as regards parties, or interests represented, rights asserted and
relief sought, as well as basis thereof, to a degree sufficient to give rise to the
ground for dismissal known as auter action pendant or lis pendens. That same
identity puts into operation the sanction of twin dismissals just mentioned. The
application of this sanction will prevent any further delay in the settlement of the
controversy which might ensue from attempts to seek reconsideration of or to
appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which
appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the
same party against whom another action or actions for the alleged violation of the same
right and the enforcement of the same relief is/are still pending, the defense of litis
pendencia in one case is bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. In either case, forum
shopping could be cited by the other party as a ground to ask for summary dismissal of the
two 20 (or more) complaints or petitions, and for imposition of the other sanctions, which
are direct contempt of court, criminal prosecution, and disciplinary action against the erring
lawyer.

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

essentially the same facts, The adoption of this latter recourse renders the
petitioners amenable to disciplinary action and both their actions, in this Court as
well as in the Court a quo, dismissible.

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

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

In the attempt to make the two actions appear to be different, petitioner

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

23

but with the same logic and vigor, we held:

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

Firstly, they are not suing in their personal capacities, for they have no direct personal
interest in the matter in controversy. They are not principally or even subsidiarily liable;
much less are they direct parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders
are bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit
"for and in behalf of the Producers Bank of the Philippines" 24. Indeed, this is the very
essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holdsstock in order to protect or vindicate corporate
rights, whenever the officials of the corporation refuse to sue, or are the ones to
be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the corporation as the real party
in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case,
petitioners, quite strangely, sought to deny that the Second Case was a derivative suit,
reasoning that it was brought, not by the minority shareholders, but by Henry Co et al.,
who not only own, hold or control over 80% of the outstanding capital stock, but also
constitute the majority in the Board of Directors of petitioner Bank. That being so, then
they really represent the Bank. So, whether they sued "derivatively" or directly, there is
undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank
is separate and distinct from its shareholders. But the rulings of this Court are consistent:
"When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the perpetration of knavery or crime,
the veil with which the law covers and isolates the corporation from the members or
stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now
add the instant case, and declare herewith that the corporate veil cannot be used to shield
an otherwise blatant violation of the prohibition against forum-shopping. Shareholders,
whether suing as the majority in direct actions or as the minority in a derivative suit,
cannot be allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending corporate
causes and in using and applying remedies available to it. To rule otherwise would be to
encourage corporate litigants to use their shareholders as fronts to circumvent the
stringent rules against forum shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs sought,
"because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the
other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial
Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to
him, commences a new action against the plaintiff instead of filing a responsive
pleading in the other case setting forth therein, as causes of action, specific
denials, special and affirmative defenses or even counterclaims, Thus, Velhagen's
and King's motion to dismiss Civil Case No. 91-2069 by no means negates the
charge of forum-shopping as such did not exist in the first place. (emphasis
supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could
not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the above-quoted
Court ruling, the defendants did not file anyresponsive pleading in the first case. In other
words, they did not make any denial or raise any defense or counter-claim therein In the
case before us however, petitioners filed a responsive pleading to the complaint as a
result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counterclaims in their responsive
pleadings, the petitioners became plaintiffs themselves in the original case, giving unto
themselves the very remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and parties-litigant by a party who asks
different courts and/or administrative agencies to rule on the same or related causes
and/or to grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the same
issue. In this case, this is exactly the problem: a decision recognizing the perfection and
directing the enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties front enforcing or implementing the said
sale. Indeed, a final decision in one would constitute res judicata in the other 28.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only
sanction possible now is the dismissal of both cases with prejudice, as the other sanctions
cannot be imposed because petitioners' present counsel entered their appearance only
during the proceedings in this Court, and the Petition's VERIFICATION/CERTIFICATION
contained sufficient allegations as to the pendency of the Second Case to show good faith
in observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus
the rudiments of due process prevent us from motu propio imposing disciplinary measures
against them in this Decision. However, petitioners themselves (and particularly Henry Co,
et al.) as litigants are admonished to strictly follow the rules against forum-shopping and
not to trifle with court proceedings and processes They are warned that a repetition of the
same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not merely
because of forum-shopping but also because of the substantive issues raised, as will be
discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the
basis of the facts established, a perfected contract of sale as the ultimate issue. Holding
that a valid contract has been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by
the defendant bank as acquired assets consisting of six (6) parcels of land
specifically identified under Transfer Certificates of Title Nos. T-106932 to T106937. It is likewise beyond cavil that the bank intended to sell the property. As
testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was looking
for buyers of the property. It is definite that the plaintiffs wanted to purchase the
property and it was precisely for this purpose that they met with defendant
Rivera, Manager of the Property Management Department of the defendant bank,
in early August 1987. The procedure in the sale of acquired assets as well as the
nature and scope of the authority of Rivera on the matter is clearly delineated in
the testimony of Rivera himself, which testimony was relied upon by both the
bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me
and then I published it in the form of an inter-office memorandum
distributed to all branches that these are acquired assets for sale. I was
instructed to advertise acquired assets for sale so on that basis, I have to
entertain offer; to accept offer, formal offer and upon having been
offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the
borrower, bid price during the foreclosure, total claim of the bank, the
appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to
buy which the Committee considers and it is the Committee that
evaluate as against the exposure of the bank and it is also the
Committee that submit to the Conservator for final approval and once
approved, we have to execute the deed of sale and it is the Conservator
that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of
buying the property, dealt with and talked to the right person. Necessarily, the
agenda was the price of the property, and plaintiffs were dealing with the bank
official authorized to entertain offers, to accept offers and to present the offer to
the Committee before which the said official is authorized to discuss information
relative to price determination. Necessarily, too, it being inherent in his authority,
Rivera is the officer from whom official information regarding the price, as
determined by the Committee and approved by the Conservator, can be had. And
Rivera confirmed his authority when he talked with the plaintiff in August 1987.
The testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp.
27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio
Rivera, did you ask him point-blank his authority to sell any property?

A: No, sir. Not point blank although it came from him, (W)hen I asked him
how long it would take because he was saying that the matter of pricing
will be passed upon by the committee. And when I asked him how long it
will take for the committee to decide and he said the committee meets
every week. If I am not mistaken Wednesday and in about two week's
(sic) time, in effect what he was saying he was not the one who was to
decide. But he would refer it to the committee and he would relay the
decision of the committee to me.
Q Please answer the question.
A He did not say that he had the authority (.) But he said he would
refer the matter to the committee and he would relay the decision to me
and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which
Luis Co was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the
authority and the duties of Rivera and the bank's internal procedure in the matter
of the sale of bank's assets. As advised by Rivera, the plaintiffs made a formal
offer by a letter dated August 20, 1987 stating that they would buy at the price of
P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was
tasked to convey and accept such offers. Considering an aspect of the official duty
of Rivera as some sort of intermediary between the plaintiffs-buyers with their
proposed buying price on one hand, and the bank Committee, the Conservator
and ultimately the bank itself with the set price on the other, and considering
further the discussion of price at the meeting of August resulting in a formal offer
of P3.5 Million in cash, there can be no other logical conclusion than that when, on
September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counteroffer is at P5.5 Million for more than 101 hectares on lot basis," such counter-offer
price had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs' offer for discussion by the
Committee of such matters as original loan of borrower, bid price during
foreclosure, total claim of the bank, and market value. Tersely put, under the
established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter
(Exh. "E"), the official and definitive price at which the bank was selling the
property.
There were averments by defendants below, as well as before this Court, that the
P5.5 Million price was not discussed by the Committee and that price. As correctly
characterized by the trial court, this is not credible. The testimonies of Luis Co and
Jose Entereso on this point are at best equivocal and considering the gratuitous
and self-serving character of these declarations, the bank's submission on this
point does not inspire belief. Both Co ad Entereso, as members of the Past Due
Committee of the bank, claim that the offer of the plaintiff was never discussed by
the Committee. In the same vein, both Co and Entereso openly admit that they
seldom attend the meetings of the Committee. It is important to note that
negotiations on the price had started in early August and the plaintiffs had already
offered an amount as purchase price, having been made to understand by Rivera,
the official in charge of the negotiation, that the price will be submitted for
approval by the bank and that the bank's decision will be relayed to plaintiffs.
From the facts, the official bank price. At any rate, the bank placed its official,

Rivera, in a position of authority to accept offers to buy and negotiate the sale by
having the offer officially acted upon by the bank. The bank cannot turn around
and later say, as it now does, that what Rivera states as the bank's action on the
matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible
authority, that if a corporation knowingly permits one of its officers, or any other
agent, to do acts within the scope of an apparent authority, and thus holds him
out to the public as possessing power to do those acts, the corporation will, as
against any one who has in good faith dealt with the corporation through such
agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577,
583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court
of Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract
as follows: "(1) Consent of the contracting parties; (2) Object certain which is the subject
matter of the contract; (3) Cause of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the
six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares,
more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There
is, however, a dispute on the first and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed
counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no
counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and
Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings that
there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5
million. We have perused the evidence but cannot find fault with the said Court's findings
of fact. Verily, in a petition under Rule 45 such as this, errors of fact if there be any - are,
as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well)
chose to believe the evidence presented by respondent more than that presented by
petitioners is not by itself a reversible error. In fact, such findings merit serious
consideration by this Court, particularly where, as in this case, said courts carefully and
meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let
us review the question of Rivera's authority to act and petitioner's allegations that the P5.5
million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here,
there are questions of law which could be drawn from the factual findings of the
respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or
apparent. The doctrine of "apparent authority", with special reference to banks, was laid
out in Prudential Bank vs. Court of Appeals31, where it was held that:
Conformably, we have declared in countless decisions that the principal is liable
for obligations contracted by the agent. The agent's apparent representation
yields to the principal's true representation and the contract is considered as
entered into between the principal and the third person (citing National Food
Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the
bank or in the course of dealings of the officers in their representative

capacity but not for acts outside the scape of their authority (9 C.J.S., p.
417). A bank holding out its officers and agents as worthy of confidence
will not be permitted to profit by the frauds they may thus be enabled to
perpetrate in the apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds even though no
benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the
particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other person,
for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752,
204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a
fiduciary relationship with the public and their stability depends on the confidence
of the people in their honesty and efficiency. Such faith will be eroded where
banks do not exercise strict care in the selection and supervision of its employees,
resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has
apparent or implied authority to act for the Bank in the matter of selling its acquired
assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material
to this case, Manager of the Property Management Department of the Bank". By
his own admission, Rivera was already the person in charge of the Bank's acquired
assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the
Bank. And during the initial meeting between the buyers and Rivera, the latter
suggested that the buyers' offer should be no less than P3.3 million (TSN, April 26,
1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million
(TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property
for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers'
proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the
final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September
28, 1994, during which the Bank's offer of P5.5 million was confirmed by Rivera
(TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and
officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's

counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p.
35);
(h) In its newspaper advertisements and announcements, the Bank referred to
Rivera as the officer acting for the Bank in relation to parties interested in buying
assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in
the Bank's advertisements offering for sale the property in question (cf. Exhs. "S"
and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32, the
Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held
that the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is
borne out by similar circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through
documents and testimony which seek to establish Rivera's actual authority. These pieces of
evidence, however, are inherently weak as they consist of Rivera's self-serving testimony
and various inter-office memoranda that purport to show his limited actual authority, of
which private respondent cannot be charged with knowledge. In any event, since the issue
is apparent authority, the existence of which is borne out by the respondent Court's
findings, the evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned 33.
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their
"law firm" had once acted for the Bank in three criminal cases, they should be charged with
actual knowledge of Rivera's limited authority. But the Court of Appeals in its Decision (p.
12) had already made a factual finding that the buyers had no notice of Rivera's actual
authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in
respect to any acquired assets; on the other hand, respondent has proven that Demetria
and Janolo merely associated with a loose aggrupation of lawyers (not a professional
partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter
dated September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed
the respondent Court's finding that "there was a meeting of minds when on 30 September
1987 Demetria and Janolo through Annex "L" (letter dated September 30, 1987) "accepted"
Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17,
1987)", citing the late Justice Paras35, Art. 1319 of the Civil Code 36 and related Supreme
Court rulings starting with Beaumont vs. Prieto 37.
However, the above-cited authorities and precedents cannot apply in the instant case
because, as found by the respondent Court which reviewed the testimonies on this point,
what was "accepted" by Janolo in his letter dated September 30, 1987 was the Bank's offer
of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and
Co during their meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera
and Co that the September 28, 1987 meeting "was meant to have the offerors improve on
their position of P5.5. million." 38However, both the trial court and the Court of Appeals
found petitioners' testimonial evidence "not credible", and we find no basis for changing
this finding of fact.

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

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million
during the meeting of 28 September 1987, and it was this verbal offer that
Demetria and Janolo accepted with their letter of 30 September 1987, the contract
produced thereby would be unenforceable by action there being no note,
memorandum or writing subscribed by the Bank to evidence such contract.
(Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the
plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves,
formal contracts of sale. They are however clear embodiments of the fact that a
contract of sale was perfected between the parties, such contract being binding in
whatever form it may have been entered into (case citations omitted). Stated
simply, the banks' letter of September 1, 1987, taken together with plaintiffs'
letter dated September 30, 1987, constitute in law a sufficient memorandum of a
perfected contract of sale.

We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's

authority and action, particularly the latter's counter-offer of P5.5 million, as being
"unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months after
Janolo' acceptance. Such delay, and the absence of any circumstance which might have
justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as
nothing more than a last-minute attempt on the Bank's part to get out of a binding
contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission
on the part of the petitioners that the written offer made on September 1, 1987 was carried
through during the meeting of September 28, 1987. This is the conclusion consistent with
human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was
raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points
of law, theories, issues of fact and arguments not adequately brought to the
attention of the trial court need not be, and ordinarily will not be, considered by a
reviewing court, as they cannot be raised for the first time on appeal (Santos vs.
IAC, No. 74243, November 14, 1986, 145 SCRA 592). 40
. . . It is settled jurisprudence that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for the
first time on appeal as it would be offensive to the basic rules of fair play, justice
and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425
[1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August
30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private
respondent was not given an opportunity in the trial court to controvert the same through
opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue
anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat
that, on the basis of the evidence already in the record and as appreciated by the lower
courts, the inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
42

The petition alleged :

The respondent Court could have added that the written communications commenced not
only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that,
taken together, these letters constitute sufficient memoranda since they include the
names of the parties, the terms and conditions of the contract, the price and a description
of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September
28, 1987 did constitute a "new" offer which was accepted by Janolo on September 30,
1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to
object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence,
petitioners by such utter failure to object are deemed to have waived any defects of
the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article
1403, are ratified by the failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation
of the counter-offer of P5.5 million is a plenty and the silence of petitioners all
throughout the presentation makes the evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because Atty.
Demetria told me to accompany him we were able to meet Luis Co at the Bank.
xxx

xxx

xxx

Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?

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

A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which
offer we accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached
by the Committee and it is not within his power to reduce this amount. What can
you say to that statement that the amount of P5.5 million was reached by the
Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co
and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September
28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by the Central
Bank of the Philippines during the time that the negotiation and perfection of the contract
of sale took place. Petitioners energetically contended that the conservator has the power
to revoke or overrule actions of the management or the board of directors of a bank, under
Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a non-bank
financial intermediary performing quasi-banking functions is in a state of
continuing inability or unwillingness to maintain a state of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board
may appoint a conservator to take charge of the assets, liabilities, and the
management of that institution, collect all monies and debts due said institution
and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the
power to overrule or revoke the actions of the previous management and board of
directors of the bank or non-bank financial intermediary performing quasi-banking
functions, any provision of law to the contrary notwithstanding, and such other
powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate
the perfected contract of sale was raised for the first time in this Petition as this was not
litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised
and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised for
the first time on appeal as it would be offensive to the basic rules of fair play, justice and
due process."43
In the second place, there is absolutely no evidence that the Conservator, at the time the
contract was perfected, actually repudiated or overruled said contract of sale. The Bank's
acting conservator at the time, Rodolfo Romey, never objected to the sale of the property
to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30,

1987 (Annex V, petition) which unilaterally repudiated not the contract but the
authority of Rivera to make a binding offer and which unarguably came months after the
perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your
clients nor perfected a "contract to sell and buy" with any of them for the
following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and
approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank
Senior Manager Perfecto M. Pascua detailed the functions of Property Management
Department (PMD) staff and officers (Annex A.), you will immediately read that
Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or
right to make any alleged counter-offer. In short, your lawyer-clients did not deal
with the authorized officers of the bank.

Please be advised accordingly.

Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching
powers to the conservator of a bank, it must be pointed out that such powers must be
related to the "(preservation of) the assets of the bank, (the reorganization of) the
management thereof and (the restoration of) its viability." Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the
Constitution 44. If the legislature itself cannot revoke an existing valid contract, how can it
delegate such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts
that are, under existing law, deemed to be defective i.e., void, voidable, unenforceable
or rescissible. Hence, the conservator merely takes the place of a bank's board of directors.
What the said board cannot do such as repudiating a contract validly entered into under
the doctrine of implied authority the conservator cannot do either. Ineluctably, his power
is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority
would be only to bring court actions to assail such contracts as he has already done so in
the instant case. A contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank
to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?

Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates
Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as
amended), only the Board of Directors/Conservator may authorize the sale of any
property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by any
of the bank conservators (starting January, 1984) to sell the aforesaid property to
any of your clients. Apparently, what took place were just preliminary
discussions/consultations between him and your clients, which everyone
knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as
the same is patently violative of corporate and banking laws. We believe that this
is more than sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are
official, legal and in accordance with law. We also have no personal interest in any
of the properties of the Bank.

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court,
findings of fact by the Court of Appeals are not reviewable by the Supreme Court. In Andres
vs. Manufacturers Hanover & Trust Corporation, 45, we held:
. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in
Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the
Supreme Court in cases brought to it from the Court of Appeals is limited to
reviewing and revising the errors of law imputed to it, its findings of the fact being
conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA
737, reiterating a long line of decisions]. This Court has emphatically declared that
"it is not the function of the Supreme Court to analyze or weigh such evidence all
over again, its jurisdiction being limited to reviewing errors of law that might have
been committed by the lower court" (Tiongco v. De la Merced, G. R. No. L-24426,
July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28,
1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February

20, 1984, 127 SCRA 596). "Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of discretion, such findings
must stand, for this Court is not expected or required to examine or contrast the
oral and documentary evidence submitted by the parties" [Santa Ana, Jr. vs.
Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144145.]
Likewise, in Bernardo vs. Court of Appeals

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

46

, we held:
xxx

The resolution of this petition invites us to closely scrutinize the facts of the case,
relating to the sufficiency of evidence and the credibility of witnesses presented.
This Court so held that it is not the function of the Supreme Court to analyze or
weigh such evidence all over again. The Supreme Court's jurisdiction is limited to
reviewing errors of law that may have been committed by the lower court. The
Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 47:
The Court has consistently held that the factual findings of the trial court, as well
as the Court of Appeals, are final and conclusive and may not be reviewed on
appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference made is
manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee. After
a careful study of the case at bench, we find none of the above grounds present to
justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and
Insurance Company Inc. vs.Hon. Court of Appeals, et al. 48 is equally applicable to the
present case:
We see no valid reason to discard the factual conclusions of the appellate court, . .
. (I)t is not the function of this Court to assess and evaluate all over again the
evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court on
the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings
and conclusions which were not only contrary to the evidence on record but have no bases
at all," specifically the findings that (1) the "Bank's counter-offer price of P5.5 million had
been determined by the past due committee and approved by conservator Romey, after
Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale
down the price and start negotiations anew, but a meeting on the already determined price
of P5.5 million" Hence, citing Philippine National Bank vs. Court of Appeals 49, petitioners
are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals

50

, thus:

xxx

xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff, during

the meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the
senior vice-president of the bank, where the topic was the possible lowering of the
price, the bank official refused it and confirmed that the P5.5 Million price had
been passed upon by the Committee and could no longer be lowered (TSN of April
27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point,
characterizing it as "not credible" and "at best equivocal and considering the gratuitous
and self-serving character of these declarations, the bank's submissions on this point do
not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator
Rodolfo Romey to testify on their behalf, as he would have been in the best position to
establish their thesis. Under the rules on evidence 51, such suppression gives rise to the
presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was
deemed insufficient by both the trial court and the respondent Court, and instead, it was
respondent's submissions that were believed and became bases of the conclusions arrived
at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by
the lower courts are valid and correct. But the petitioners are now asking this Court to
disturb these findings to fit the conclusion they are espousing, This we cannot do.

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

contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous
proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the
Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner
Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of
the same or similar acts will be dealt with more severely. Costs against petitioners.
SO ORDERED.

Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of
issues for the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5
million and the conservator's powers to repudiate contracts entered into by the Bank's
officers] which per se could justify the dismissal of the present case. We did not limit
ourselves thereto, but delved as well into the substantive issues the perfection of the
contract of sale and its enforceability, which required the determination of questions of
fact. While the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Court's decisions and resolutions, we did so just
the same, if only to find out whether there is reason to disturb any of its factual findings,
for we are only too aware of the depth, magnitude and vigor by which the parties through
their respective eloquent counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating
abnormally under a government-appointed conservator and "there is need to rehabilitate
the Bank in order to get it back on its feet . . . as many people depend on (it) for
investments, deposits and well as employment. As of June 1987, the Bank's overdraft with
the Central Bank had already reached P1.023 billion . . . and there were (other) offers to
buy the subject properties for a substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the Court
cannot emotionally close its eyes to overriding considerations of substantive and
procedural law, like respect for perfected contracts, non-impairment of obligations and
sanctions against forum-shopping, which must be upheld under the rule of law and blind
justice.
This Court cannot just gloss over private respondent's submission that, while the subject
properties may currently command a much higher price, it is equally true that at the time
of the transaction in 1987, the price agreed upon of P5.5 million was reasonable,
considering that the Bank acquired these properties at a foreclosure sale for no more than
P3.5 million 54. That the Bank procrastinated and refused to honor its commitment to sell
cannot now be used by it to promote its own advantage, to enable it to escape its binding
obligation and to reap the benefits of the increase in land values. To rule in favor of the
Bank simply because the property in question has algebraically accelerated in price during
the long period of litigation is to reward lawlessness and delays in the fulfillment of binding

G.R. No. 162894

February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner,

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

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

In an Order14 dated 13 September 2000, the RTC denied petitioners omnibus motion. The
trial court held that the factual allegations in the complaint, assuming the same to be
admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled
that the principle of forum non conveniens was inapplicable because the trial court could
enforce judgment on petitioner, it being a foreign corporation licensed to do business in the
Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioners motion.
Thus, it filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a
writ of certiorari and a writ of injunction to set aside the twin orders of the trial court dated
13 September 2000 and 31 July 2001 and to enjoin the trial court from conducting further
proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the
petition for certiorari for lack of merit. It also denied petitioners motion for reconsideration
in the assailed Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the
allegations in the complaint and should have also considered evidence aliunde in resolving
petitioners omnibus motion, it found the evidence presented by petitioner, that is, the
deposition of Walter Browning, insufficient for purposes of determining whether the
complaint failed to state a cause of action. The appellate court also stated that it could not
rule one way or the other on the issue of whether the corporations, including petitioner,
named as defendants in the case had indeed merged together based solely on the
evidence presented by respondent. Thus, it held that the issue should be threshed out
during trial.23 Moreover, the appellate court deferred to the discretion of the trial court
when the latter decided not to desist from assuming jurisdiction on the ground of the
inapplicability of the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino
Padua Law Office, counsel on record for respondent, manifested that the lawyer handling
the case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the
filing of the instant petition and that it could no longer find the whereabouts of Atty.
Karagdag or of respondent despite diligent efforts. In a Resolution25 dated 20 November
2006, the Court resolved to dispense with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI included
a valid choice of law clause, that is, that the contract shall be governed by the laws of the
State of Connecticut. It also mentions the presence of foreign elements in the dispute
namely, the parties and witnesses involved are American corporations and citizens and the
evidence to be presented is located outside the Philippines that renders our local courts
inconvenient forums. Petitioner theorizes that the foreign elements of the dispute
necessitate the immediate application of the doctrine of forum non conveniens.

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved
in judicial resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and
recognition and enforcement of judgments. Thus, in the instances27 where the Court held
that the local judicial machinery was adequate to resolve controversies with a foreign
element, the following requisites had to be proved: (1) that the Philippine Court is one to
which the parties may conveniently resort; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that the Philippine Court
has or is likely to have the power to enforce its decision.28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a
Philippine court and where the court has jurisdiction over the subject matter, the parties
and the res, it may or can proceed to try the case even if the rules of conflict-of-laws or the
convenience of the parties point to a foreign forum. This is an exercise of sovereign
prerogative of the country where the case is filed.29
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution
and the law30 and by the material allegations in the complaint, irrespective of whether or
not the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.31
Civil Case No. 1192-BG is an action for damages arising from an alleged breach of contract.
Undoubtedly, the nature of the action and the amount of damages prayed are within the
jurisdiction of the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein
respondent (as party plaintiff) upon the filing of the complaint. On the other hand,
jurisdiction over the person of petitioner (as party defendant) was acquired by its voluntary
appearance in court.32
That the subject contract included a stipulation that the same shall be governed by the
laws of the State of Connecticut does not suggest that the Philippine courts, or any other
foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction and
choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is fair to both
parties.33 The choice of law stipulation will become relevant only when the substantive
issues of the instant case develop, that is, after hearing on the merits proceeds before the
trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.34 Petitioners averments
of the foreign elements in the instant case are not sufficient to oust the trial court of its
jurisdiction over Civil Case No. No. 1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered as a
matter of defense. While it is within the discretion of the trial court to abstain from
assuming jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the courts desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its
conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign
elements. In the same manner, the Court defers to the sound discretion of the lower courts
because their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause
of action against petitioner. Failure to state a cause of action refers to the insufficiency of

allegation in the pleading.36 As a general rule, the elementary test for failure to state a
cause of action is whether the complaint alleges facts which if true would justify the relief
demanded.37
The complaint alleged that petitioner had combined with BMSI and RUST to function as one
company. Petitioner contends that the deposition of Walter Browning rebutted this
allegation. On this score, the resolution of the Court of Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well as other documents
produced in the hearing shows that these evidence aliunde are not quite sufficient for us to
mete a ruling that the complaint fails to state a cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs
that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of
defendant Rust International in the Makar Port Project in General Santos City, after Rust
International ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly conclude that Raytheon
International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined
into one company, so much so that Raytheon International, Inc., the surviving company (if
at all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid
commissions. Neither these documents clearly speak otherwise.38
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI
and RUST merged together requires the presentation of further evidence, which only a fullblown trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.

Dr. Climaco continuously served as the company physician, performing all the
duties stipulated in the Retainer Agreement and the Comprehensive Medical
Plan. By 1992, his salary was increased to P7,500.00 per month.[14]
Meantime, Dr. Climaco inquired with the Department of Labor and Employment
and the SSS whether he was an employee of the company. Both agencies replied
in the affirmative.[15] As a result, Dr. Climaco filed a complaint[16] before the
National Labor Relations Commission (NLRC), Bacolod City. In his complaint, he
sought recognition as a regular employee of the company and demanded
payment of his 13th month pay, cost of living allowance, holiday pay, service
incentive leave pay, Christmas bonus and all other benefits.[17]
COCA-COLA BOTTLERS (PHILS.), INC. AND ERIC MONTINOLA V. SOCIAL SECURITY
COMMISSION AND DR. DEAN CLIMACO, GR NO. 159323
DECISION

During the pendency of the complaint, the company terminated its Retainer
Agreement with Dr. Climaco. Thus, Dr. Climaco filed another complaint[18] for
illegal dismissal against the company before the NLRC Bacolod City. He asked
that he be reinstated to his former position as company physician of its Bacolod
Plant, without loss of seniority rights, with full payment of backwages, other
unpaid benefits, and for payment of damages.[19]

REYES, R.T., J.:

WE are confronted with triple remedial issues on prejudicial question, forum

shopping, and litis pendentia.
We review on certiorari the Decision[1] of the Court of Appeals (CA) upholding
the order of the Social Security Commission (SSC),[2] denying petitioners motion
to dismiss respondent Climacos petition for compulsory coverage with the Social
Security System (SSS).
The Facts
Petitioner Coca-Cola Bottlers (Phils.), Inc. is a corporation engaged in the
manufacture and sale of softdrink beverages.[3] Co-petitioner Eric Montinola
was the general manager of its plant in Bacolod City.[4] Respondent Dr. Dean
Climaco was a former retainer physician at the companys plant in Bacolod City.
[5]
In 1988, petitioner company and Dr. Climaco entered into a Retainer
Agreement[6] for one year, with a monthly compensation of P3,800.00,[7] where
he may charge professional fees for hospital services rendered in line with his
specialization.[8] The agreement further provided that either party may
terminate the contract upon giving thirty (30)-day written notice to the other.[9]
In consideration of the retainers fee, Dr. Climaco agrees to perform the duties
and obligations[10] enumerated in the Comprehensive Medical Plan,[11] which
was attached and made an integral part of the agreement.
Explicit in the contract, however, is the provision that no employee-employer
relationship shall exist between the company and Dr. Climaco while the contract
is in effect.[12] In case of its termination, Dr. Climaco shall be entitled only to
such retainer fee as may be due him at the time of termination.[13]

The Labor Arbiter, in each of the complaints, ruled in favor of petitioner

company.[20] The first complaint was dismissed after Labor Arbiter Jesus N.
Rodriguez, Jr. found that the company did not have the power of control over Dr.
Climacos performance of his duties and responsibilities. The validity of the
Retainer Agreement was also recognized. Labor Arbiter Benjamin Pelaez likewise
dismissed the second complaint in view of the dismissal of the first complaint.
On appeal, the NLRC, Fourth Division, Cebu City, affirmed the Arbiter disposition.
[21] On petition for review before the CA, the NLRC ruling was reversed.[22] The
appellate court ruled that using the four-fold test, an employer-employee
relationship existed between the company and Dr. Climaco. Petitioners elevated
the case through a petition for review on certiorari[23] before this Court.
Meantime, on November
Climaco filed with the SSC
that petitioner Coca-Cola
compulsory social security

9, 1994, while the NLRC cases were pending, Dr.

in Bacolod City, a petition[24] praying, among others,
Bottlers (Phils.), Inc. be ordered to report him for
coverage.

On April 12, 1995, petitioners moved for the dismissal of the petition on the
ground of lack of jurisdiction. They argued that there is no employer-employee
relationship between the company and Dr. Climaco; and that his services were
engaged by virtue of a Retainer Agreement.[25]
Dr. Climaco opposed the motion.[26] According to Dr. Climaco, [t]he fact that the
petitioner [i.e., respondent Dr. Climaco] does not enjoy the other benefits of the
company is a question that is being raised by the petitioner in his cases filed
with the National Labor Relations Commission (NLRC), Bacolod City, against the
respondent [i.e., petitioner company].[27]
On July 24, 1995, the SSC issued an order stating among others, that the
resolution of petitioner companys motion to dismiss is held in abeyance pending
reception of evidence of the parties.[28]

In view of the statements of Dr. Climaco in his opposition to the companys

motion to dismiss, petitioners again, on March 1, 1996, moved for the dismissal
of Dr. Climacos complaint, this time on the grounds of forum shopping and litis
pendentia.[29]

III.
THE PETITION SHOULD HAVE ALSO BEEN DISMISSED OUTRIGHT ON THE GROUND
OF LITIS PENDENTIA, AS THERE ARE OTHER ACTIONS PENDING BETWEEN THE
SAME PARTIES FOR THE SAME CAUSE OF ACTION.[34] (Underscoring supplied)

SSC and CA Dispositions

Our Ruling

On January 17, 1997, the SSC denied petitioners motion to dismiss, disposing as
follows:

The petition fails.

WHEREFORE, PREMISES CONSIDERED, the respondents Motion to Dismiss is

hereby denied for lack of merit.
Accordingly, let this case be remanded to SSS Bacolod Branch Office for
reception of evidence of the parties pursuant to the Order dated July 24, 1995.
SO ORDERED.[30]
Petitioners motion for reconsideration[31] received the same fate.[32]
On April 29, 1997, the company filed a petition for certiorari before the CA. On
March 15, 2002, the CA dismissed the petition, with a fallo reading:
WHEREFORE, under the premises, the Court holds that public respondent Social
Security Commission did not act with grave abuse of discretion in issuing the
disputed orders, and the herein petition is therefore DISMISSED for want of
merit.

The Court notes that petitioners, in their petition, averred that the appeal from
the NLRC and CA dispositions on the illegal dismissal of respondent Climaco is
still pending with this Court. Upon verification, however, it was unveiled that the
said case had already been decided by this Courts First Division on February 5,
2007.

While we deplore the failure of petitioners and counsel in updating the Court on
the resolution of the said related case, We hasten to state that it did not operate
to moot the issues pending before Us. We take this opportunity to address the
questions on prejudicial question, forum shopping, and litis pendentia.
No prejudicial question exists.

Hence, the present recourse.

Petitioners allege that Dr. Climaco previously filed separate complaints before
the NLRC seeking recognition as a regular employee. Necessarily then, a just
resolution of these cases hinge on a determination of whether or not Dr. Climaco
is an employee of the company.[35] The issue of whether Dr. Climaco is entitled
to employee benefits, as prayed for in the NLRC cases, is closely intertwined
with the issue of whether Dr. Climaco is an employee of the company who is
subject to compulsory coverage under the SSS Law. Hence, they argue, said
regularization/illegal dismissal case is a prejudicial question.

Issues

The argument is untenable.

Petitioners raise the following issues for Our consideration:

Our concept of prejudicial question was lifted from Spain, where civil cases are
tried exclusively by civil courts, while criminal cases are tried exclusively in
criminal courts. Each kind of court is jurisdictionally distinct from and
independent of the other. In the Philippines, however, courts are invariably
tribunals of general jurisdiction. This means that courts here exercise
jurisdiction over both civil and criminal cases. Thus, it is not impossible that the
criminal case, as well as the civil case in which a prejudicial question may rise,
may be both pending in the same court. For this reason, the elements of
prejudicial question have been modified in such a way that the phrase pendency
of the civil case in a different tribunal has been eliminated.[36]

SO ORDERED.[33]

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN

RENDERING THE ASSAILED RESOLUTIONS, HAVING DECIDED A QUESTION OF
SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT, CONSIDERING THAT:
I.
THE PREVIOUS COMPLAINT FOR REGULARIZATION AND/OR ILLEGAL DISMISSAL,
WHICH IS NOW PENDING RESOLUTION BEFORE THE SUPREME COURT, POSES A
PREJUDICIAL QUESTION TO THE SUBJECT OF THE PRESENT CASE.
II.
GIVEN THE ATTENDANT CIRCUMSTANCES, RESPONDENT CLIMACO IS GUILTY OF
FORUM SHOPPING, WHICH THEREBY CALLED FOR THE OUTRIGHT DISMISSAL OF
HIS PETITION BEFORE THE SOCIAL SECURITY COMMISSION.

The rule is that there is prejudicial question when (a) the previously instituted
civil action involves an issue similar or intimately related to the issue raised in
the subsequent criminal action, and (b) the resolution of such issue determines
whether or not the criminal action may proceed.[37] It comes into play generally
in a situation where a civil action and a criminal action both pend and there
exists in the former an issue which must be preemptively resolved before the
criminal action may proceed. This is so because howsoever the issue raised in

the civil action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case.[38]
Here, no prejudicial question exists because there is no pending criminal case.
[39] The consolidated NLRC cases cannot be considered as previously instituted
civil action. In Berbari v. Concepcion,[40] it was held that a prejudicial question
is understood in law to be that which must precede the criminal action, that
which requires a decision with which said question is closely related.
Neither can the doctrine of prejudicial question be applied by analogy. The issue
in the case filed by Dr. Climaco with the SSC involves the question of whether or
not he is an employee of Coca-Cola Bottlers (Phils.), Inc. and subject to the
compulsory coverage of the Social Security System. On the contrary, the cases
filed by Dr. Climaco before the NLRC involved different issues. In his first
complaint,[41] Dr. Climaco sought recognition as a regular employee of the
company and demanded payment of his 13th month pay, cost of living allowance,
holiday pay, service incentive leave pay, Christmas bonus and all other benefits.
[42] The second complaint[43] was for illegal dismissal, with prayer for
reinstatement to his former position as company physician of the companys
Bacolod Plant, without loss of seniority rights, with full payment of backwages,
other unpaid benefits, and for payment of damages.[44] Thus, the issues in the
NLRC cases are not determinative of whether or not the SSC should proceed. It is
settled that the question claimed to be prejudicial in nature must be
determinative of the case before the court.[45]

x x x forum shopping originated as a concept in private international law, where

non-resident litigants are given the option to choose the forum or place wherein
to bring their suit for various reasons or excuses, including to secure procedural
advantages, to annoy and harass the defendant, to avoid overcrowded dockets,
or to select a more friendly venue. To combat these less than honorable excuses,
the principle of forum non conveniens was developed whereby a court, in
conflicts of law cases, may refuse impositions on its jurisdiction where it is not
the most convenient or available forum and the parties are not precluded from
seeking remedies elsewhere.
xxxx
In the Philippines, forum shopping has acquired a connotation encompassing not
only a choice of venues, as it was originally understood in conflicts of laws, but
also to a choice of remedies. As to the first (choice of venues), the Rules of
Court, for example, allow a plaintiff to commence personal actions where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Rule 4,
Sec. 2[b]). As to remedies, aggrieved parties, for example, are given a choice of
pursuing civil liabilities independently of the criminal, arising from the same set
of facts. A passenger of a public utility vehicle involved in a vehicular accident
may sue on culpa contractual, culpa aquiliana or culpa criminal each remedy
being available independently of the others although he cannot recover more
than once.

There is no forum shopping.

Anent the second issue, petitioners posit that since the issues before the NLRC
and the SSC are the same, the SSC cannot make a ruling on the issue presented
before it without necessarily having a direct effect on the issue before the NLRC.
It was patently erroneous, if not malicious, for Dr. Climaco to invoke the
jurisdiction of the SSC through a separate petition.[46] Thus, petitioners
contend, Dr. Climaco was guilty of forum shopping.
Again, We turn down the contention.
Forum shopping is a prohibited malpractice and condemned as trifling with the
courts and their processes.[47] It is proscribed because it unnecessarily burdens
the courts with heavy caseloads. It also unduly taxes the manpower and financial
resources of the judiciary. It mocks the judicial processes, thus, affecting the
efficient administration of justice.[48]
The grave evil sought to be avoided by the rule against forum shopping is the
rendition by two (2) competent tribunals of two (2) separate and contradictory
decisions. Unscrupulous litigants, taking advantage of a variety of competent
tribunals, may repeatedly try their luck in several different fora until a favorable
result is reached.[49]
It is well to note that forum shopping traces its origin in private international
law on choice of venues, which later developed to a choice of remedies. In First
Philippine International Bank v. Court of Appeals,[50] the Court had occasion to
outline the origin of the rule on forum shopping. Said the Court:

In either of these situations (choice of venue or choice of remedy), the litigant

actually shops for a forum of his action. This was the original concept of the
term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their
actions, litigants, through the encouragement of their lawyers, file their actions
in all available courts, or invoke all relevant remedies simultaneously. This
practice had not only resulted to (sic) conflicting adjudications among different
courts and consequent confusion enimical (sic) to an orderly administration of
justice. It had created extreme inconvenience to some of the parties to the
action.
Thus, forum-shopping had acquired a different concept which is unethical
professional legal practice. And this necessitated or had given rise to the
formulation of rules and canons discouraging or altogether prohibiting the
practice.
What therefore started both in conflicts of laws and in our domestic law as a
legitimate device for solving problems has been abused and misused to assure
scheming litigants of dubious reliefs.[51]
Thus, in order to prevent forum shopping, the 1997 Rules of Civil Procedure now
provide:
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim

for relief, or in a sworn certification annexed thereto and simultaneously filed

therewith: (a) that he has not theretofore commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-judicial agency
and, to the best of his knowledge, no such other action or claim is pending
therein; (b) if there is such other pending action or claim, a complete statement
of the present status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.[52]
Forum shopping is not only strictly prohibited but also condemned. So much so
that [f]ailure to comply with the foregoing requirements shall not be curable by
mere amendment of the initiatory pleading but shall be cause for the dismissal
of the case without prejudice. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and
criminal actions. If the acts of the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt as well as a cause for
administrative sanctions.[53]

There is forum shopping when one party repetitively avails of several judicial
remedies in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in, or
already resolved adversely, by some other court.[54] In short, forum shopping
exists where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.[55]
There is res judicata when (1) there is a final judgment or order; (2) the court
rendering it has jurisdiction over the subject matter and the parties; (3) the
judgment or order is on the merits; and (4) there is between the two cases
identity of parties, subject matter and causes of action.[56]
Measured by the foregoing yardstick, Dr. Climaco is not guilty of forum shopping.
While it is true that the parties are identical in the NLRC and in the SSC, the
reliefs sought and the causes of action are different.
Admittedly, Dr. Climacos basis in filing the cases before the NLRC and the SSC is
his Retainer Agreement with the company. This does not mean, however, that his
causes of action are the same:
x x x Some authorities declare the distinction between demands or rights of
action which are single and entire and those which are several and distinct to be
that the former arise out of one and the same act or contract and the latter out
of different acts or contracts. This rule has been declared to be unsound,
however, and as evidence of its unsoundness, reference has been made to the
fact that several promissory notes may, and often do, grow out of one and the
same transaction, and yet they do not constitute an entire demand. The better
rule is that the bare fact that different demands spring out of the same or
contract does not ipso facto render a judgment on one a bar to a suit on another,
however distinct. It is clear that the right of a plaintiff to maintain separate

actions cannot be determined by the fact that the claims might have been
prosecuted in a single action. A plaintiff having separate demands against a
defendant may, at his election, join them in the same action, or he may
prosecute them separately, subject of the power of the court to order their
consolidation. There may be only one cause of action although the plaintiff is
entitled to several forms and kinds of relief, provided there is not more than one
primary right sought to be enforced or one subject of controversy presented for
adjudication.[57] (Underscoring supplied)
As the SSC and the CA correctly observed, different laws are applicable to the
cases before the two tribunals. The Labor Code and pertinent social legislations
would govern the cases before the NLRC, while the Social Security Law would
govern the case before the SSC. Clearly, as the issues pending before the NLRC
and the SSC are diverse, a ruling on the NLRC cases would not amount to res
judicata in the case before the SSC.
The elements of litis pendentia are absent.
Lastly, petitioners contend that the petition of Dr. Climaco before the SSC is
defective because there were pending actions between the same parties and
involving the same issues in different fora.[58]
For litis pendentia to exist, there must be (1) identity of the parties or at least
such as representing the same interests in both actions; (2) identity of the rights
asserted and relief prayed for, the relief founded on the same facts; and (3)
identity of the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other.[59]
In the case under review, there is no litis pendentia to speak of. As previously
explained, although the parties in the cases before the NLRC and the SSC are
similar, the nature of the cases filed, the rights asserted, and reliefs prayed for
in each tribunal, are different.
As a last attempt, however, petitioners invoke Rule 16, Section 1(e) of the 1997
Rules of Civil Procedure. Petitioners contend that the petition Dr. Climaco lodged
with the SSC is another action prohibited by the Rule.[60]
In Solancio v. Ramos,[61] the issue centered on whether the pending
administrative case before the Bureau of Lands is another action, which would
justify the dismissal of the complaint of plaintiff against defendants before the
then Court of First Instance (now RTC) of Cagayan. Ruling in the negative, the
Court noted that both parties as well as the trial court have missed the extent or
meaning of the ground of the motion to dismiss as contemplated under the Rules
of Court.[62] Mr. Justice Regala, who wrote the opinion of the Court, explained
the phrase another action in this wise:
This is not what is contemplated under the law because under Section 1(d), Rule
16 (formerly Rule 8) of the Rules of Court, [now Rule 1, Section 16(e) of the
Rules of Court, supra] one of the grounds for the dismissal of an action is that
there is another action pending between the same parties for the same cause.
Note that the Rule uses the phrase another action. This phrase should be
construed in line with Section 1 of Rule 2, which defines the word action, thus

Action means an ordinary suit in a court of justice, by which one party

prosecutes another for the enforcement or protection of a right, or the
prevention or redress of a wrong. Every other remedy is a special proceeding.
[63]

Evidently, there is no another action pending between petitioners and Dr.

Climaco at the time when the latter filed a petition before the SSC.
WHEREFORE, the petition is DENIED and the appealed decision AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. L-34259

March 21, 1931

Intestate Estate of the late E. Randolph Hix.

ANNIE COUSINS HIX, petitioner-appellant,
vs.
A. W. FLUEMER, opponent-appellee.
Harvey and O'Brien and Gibbs and McDonough for appellant.
C. A. Sobral for appellee.
VILLA-REAL, J.:

The petitioner, Annie Cousins Hix, appeals from the order issued by the Court of First
Instance of Manila in the course of the intestate proceedings of E. Randolf Hix, the
dispositive part of which reads as follows:
In view of the foregoing considerations, the court holds: (1) That the divorce decree
granted by the Circuit Court of Randolph County of the State of West Virginia awarding the
deceased Hix a divorce from his wife, Annie Cousins Hix, is valid in this jurisdiction; (2) that
since the latter is legally divorced from her late husband, she is not entitled to the pension
she asks as his widow; and (3) that the motion for reconsideration filed by her counsel on
September 24, 1929 asking for an allowance for support must be denied.
The appellant assigns the following alleged errors as committed by the court below in said
order, to wit:
1. The trial court erred in assuming that E. Randolph Hix was a bona fide resident of the
State of West Virginia at the time he instituted an action for divorce against his wife in the
Circuit Court of Randolf County, West Virginia, in the year 1925.
2. The trial court erred in not finding that E. Randolph Hix was domiciled in, and resident of,
the City of Manila, Philippine Islands, he having arrived here in 1910 and died here in 1929,
during which period of time he had established his home and had engaged in business
here.
3. The trial court erred in recognizing the decree of divorce secured by E. Randolph Hix
from the Circuit Court of Randolph County, West Virginia.
4. The trial court erred in refusing to apply to this case the jurisprudence laid down by this
Honorable Court in the cases of Ramirez vs. Gmur (42 Phil., 855) and Gorayeb vs. Hashim
(50 Phil., 22).
5. The trial court erred in misapplying section 306 of the Code of Civil Procedure and in not
construing the same in relation with sections 309 and 312 of the same Code.
The relevant facts necessary to decide the questions raised in this appeal are the following:
E. Randolph Hix was born in the year 1866 in Union, South Carolina, where he lived with his
parents until the age of 15. They then removed to Rye, Westchester County, New York. A
few years later, he was sent to the University of Lehigh, and to the Massachusetts Institute
of Technology, leaving the latter before graduating, to accept employment with the Edison
Company where he worked for about three years. After resigning from his position he
opened an office and engaged in private work as consulting engineer and contractor until
the year 1895, when he removed to Wheeling, West Virginia, to engage in the general
engineering business as a member of the firm of Hogg & Hix, surveyors.
After fifteen years of residence in Wheeling, he took an examination and received an
appointment as coal expert for the Philippine Government, arriving at Manila some time
during the year 1910. While E. Randolph Hix was living in Manila in 1912, he met the
appellant and married her in Shanghai, China, on or about June 24, 1913, returning to
Manila where they established their domicile. A son was born of this union in Boston,
Massachusetts, on July 1, 1915, named Preston Randolph Hix, while she was in the United
States where she had gone on the month of May of the same year to visit her family and
the mother and sister of her husband. The appellant returned to Manila in November, 1916,
and continued to live with the deceased as husband and wife.
On March 16, 1919, the appellant left for Canada, where she remained with their child until
February, 1921, when she returned to Manila in a very precarious condition of health and

was given medical treatment in the St. Paul's Hospital at the expense of her husband. After
she regained her health, she lived apart from her husband by mutual consent.
On December 7, 1922, the appellant instituted an action in the Court of First Instance of
Manila against her husband, E. Randolph Hix, for the purpose of compelling him to provide
adequate support for herself and her son, Preston Randolf Hix. In that case and in open
court the following stipulation was entered into between the parties:
It is stipulated and agreed that the defendant and plaintiff are both residents of the City of
Manila; that they were married on the 24th day of June, 1913, in Shanghai, China; the
plaintiff is the lawful wife of defendant; that one son named Preston R. Hix was born on July
1, 1915, of the said marriage, who is still living; the plaintiff and defendant are now and
have been, since about the middle of December, 1921, living separate and apart from each
other by mutual consent, though the greater part of the time since December, 1921, up to
November, 1922, they took their meals together; that by mutual consent they will continue
to live apart from each other; that as long as the child will remain in the Philippine Islands,
the father will have the opportunity to see him twice a week, this without prejudice of Mrs.
Hix taking the child to the States. In this case, she will keep the father informed as to the
condition of the child by writing him once a month.
The trial court adjudicated the case in her favor and ordered the defendant E. Randolph Hix
to pay her the sum of P500 in advance on or before the 5th day of each month for the
maintenance of herself and her son. The case was appealed to this court, and on February
27, 1924, the judgment of the court below was affirmed.1 During the month of December,
1922, while the proceedings in said case were pending, the office held by E. Randolph Hix
in the Government was abolished, and he went into private practice, acting as coal expert
for the Manila Electric Company and other private concerns until March, 1924, when he left
for West Virginia, leaving his wife and child in Manila, and his business in the hands of his
employee, A. W. Fluemer, the opponent and appellee, for the purpose of residing there and
suing for a divorce.
In the month of May, 1925, that is, one year after his arrival at Elkins, West Virginia, the
deceased filed a complaint for a divorce with the Circuit Court of Randolph County, West
Virginia, alleging, among other things, that he was a citizen of the United States of
America, and of the State of West Virginia, and had been for more than one year prior to
the date of the institution of the suit, an actual bona fide citizen and resident of Randolph
County, West Virginia; that Annie cousins Hix was a resident of the City of Peking, China;
that on December 1, 1921, his wife had abandoned and deserted him, taking up a separate
residence and declining to live or have anything to do with him; that he, Hix, freely,
voluntarily, and adequately supported his wife and child, paying her the sum of $175 per
month; that he intended to reside permanently in the United States, and that it was with
such intention that he had returned to West Virginia; that he and his wife had been living
apart for three years, and that she had rejected his offer of reconciliation. As the appellant
was not a resident of the State of West Virginia, she was summoned upon the complaint for
divorce by publication, and not having entered an appearance in the case, either
personally or by counsel within the term fixed, the Circuit Court of Randolph County, West
Virginia, rendered judgment against her in 1925 declaring her marriage with the plaintiff
dissolved. Having procured the divorce, E. Randolph Hix returned to Manila in 1927, where
he continued to live and engaged in business up to the time of his death in the year 1929.
The first question to decide in this appeal, raised by the first two assignments of error is,
whether the Circuit Court of Randolph County in West Virginia acquired jurisdiction to take
cognizance of the complaint for divorce filed by E .Randolph Hix and to render a valid and
binding judgment against the petitioner and appellant, Annie Cousins Hix.
The pertinent part of section 306 of the Code of Civil Procedure provides as follows:

SEC. 306. Effect of Judgment. The effect of a judgment or final order in an action or
special proceeding before a court or judge of the Philippine Islands or of the United States,
or of any State or Territory of the United States, having jurisdiction to pronounce the
judgment or order, may be as follows:
1. In case of a judgment or order against a specific thing, or in respect to the probate of a
will, or the administration of the estate of a deceased person, or in respect to the personal,
political, or legal condition or relation of a particular person, the judgment or order in
conclusive upon the title of the thing, the will or administration, or the condition or relation
of the person: . . . .
Section 334, No. 15, of said Code states:
SEC. 334. Disputable Presumptions. The following presumptions are satisfactory, if
uncontradicted, but they are disputable, and may be contradicted by other evidence:
xxx

xxx

xxx

15. That a court, or judge acting as such, whether in the Philippine Islands or elsewhere,
was acting in the lawful exercise of his jurisdiction.
These provisions show that in order that a judgment of a court or judge of any state of the
American Union with respect to the personal or legal condition of a particular person may
be conclusive and constitute res judicata, it is essential that the court have jurisdiction, and
such jurisdiction is presumed in the absence of evidence to the contrary.
Section 312 of the Code of Civil Procedure provides:
SEC. 312. How Judicial Record May be Impeached. Any judicial record may be impeached
by evidence of a want of jurisdiction in the court or judicial officer, of collusion between the
parties, or of fraud in the party offering the record, in respect to the proceedings.
One of the conditions for the validity of a decree of absolute divorce is that the court
granting it has acquired jurisdiction over the subject matter, and to this end the plaintiff
must be domiciled in good faith, and for the length of time fixed by the law, in the state in
which it was granted. E. Randolph Hix was domiciled in the City of Manila where he lived
apart from his wife and child, by mutual consent, and here he had his business. He
removed to the State of West Virginia leaving his aforesaid wife and child and his business
behind, for the purpose of obtaining an absolute divorce, which he did in 1925, returning in
the year 1927 to reside in the City of Manila, and continuing his business.
Although the opponent and appellee attempted to show that E. Randolph Hix went to West
Virginia with the intention of residing there permanently, as allege in the complaint for
divorce, such an intention was contradicted by the fact that before leaving the City of
Manila, he did not liquidate his business but placed it under the management of said
opponent, and once having obtained his divorce, he returned to the City of Manila to take
up his residence and to continue his aforesaid business, and that his purpose in going to
West Virginia was to obtain a divorce.
In Gorayeb vs. Hashim (50 Phil., 22) this court laid down the following doctrine:
3. ID.; ID.; ID.; ID.; NULLITY OF DIVORCE. Doctrine of Ramirez vs. Gmur (42 Phil., 855)
followed, to the effect that the court of a country in which neither of the spouses is
domiciled and to which one or both of them may resort merely for the purpose of obtaining

a divorce has not jurisdiction to determine their matrimonial status, and the divorce
granted by such a court is not entitled to recognition here.
4. ID.; ID.; ID.; ID.; ID.; PHILIPPINE RESIDENTS WHO HAVE BEEN MARRIED ABROAD. the
foregoing rule is applicable to married people who are domiciled in the Philippine Islands
although they may have contracted marriage elsewhere.
This ruling has not been weakened in the present case by the fact that E. Randolph Hix was
a citizen of the United States and of the State of West Virginia, since it is not the citizenship
of the plaintiff for divorce which confers jurisdiction upon a court, but his legal residence
within the State where he applies for a divorce. That E. Randolph Hix himself believed he
had relinquished his former legal residence in West Virginia, of which he was a citizen, upon
establishing his marriage domicile in the City of Manila, Philippine Islands, is shown by the
fact that he had to reestablish his residence in said State for the length of time fixed by the
law in order to be able to file his complaint for a divorce.
Since E. Randolph Hix was not a bona fide resident of the State of West Virginia, the divorce
decree he obtained from the Circuit Court of Randolph County, is null and void, said court
having failed to acquire jurisdiction over the subject matter.
But even if his residence had been taken up in good faith, and the court had acquired
jurisdiction to take cognizance of the divorce suit, the decree issued in his favor is not
binding upon the appellant; for the matrimonial domicile of the spouses being the City of
Manila, and no new domicile having been acquired in West Virginia, the summons made by
publication, she not having entered an appearance in the case, either personally or by
counsel, did not confer jurisdiction upon said court over her person.
In Haddock vs. Haddock (201 U. S., 562), the United States Supreme Court laid down the
following doctrine:
The husband and wife being domiciled in New York, the husband left the wife, acquired, in
good faith, after a lapse of years, a domicile in Connecticut, and obtained in that State, and
in accordance with its laws, a judgment of divorce based on constructive, and not actual,
service of process, on the wife, who meanwhile remained domiciled in New York and never
appeared in the action. The wife subsequently sued for divorce in New York and obtained
personal service in that State on the husband who pleaded the Connecticut judgment.
Held,
Without questioning the power of the State of Connecticut to enforce the decree within its
own borders, and without intimating any doubt that the State of New York might give it
such a degree of efficacy that it might be entitled to in view of the public policy of the
State, that the Connecticut decree, rendered as it was without being based on personal
service of the process on, and therefore without personal jurisdiction of the court over, the
wife, was not entitled to obligatory enforcement in the State of New York by virtue of the
full faith and credit clause of the Federal Constitution.
A suit for divorce brought in a State other than that of domicile or matrimony against a wife
who is still domiciled therein is not a proceeding in rem justifying the court to enter a
decree as to the res; or marriage relation entitled to be enforced outside of the territorial
jurisdiction of the court.
Without deciding whether or not clause IV of the Constitution of the United States, with
reference to the full faith and credit to be given to judgments of the courts of the States of
the American Union is applicable to the Philippine Islands, we may say that the ruling has
the same force and scope as that of international comity, which must in any case be taken

into account in considering the recognition to be given in the Philippine Islands to

judgments of foreign courts. (Section 311, Act No. 190.)
The divorce decree issued by the Circuit Court of Randolph County, West Virginia, may also
be impeached by evidence of fraud, according to section 312 of the Code of Civil
Procedure, quoted above.
E. Randolph Hix alleged in his complaint for a divorce filed with the aforementioned court,
that on December 1, 1921 his wife had abandoned and deserted him, living separately and
declining to live or have anything to do with him; that she was a resident of the City of
Peking, China; and that he freely and voluntarily provided adequately for her and their son,
paying her $175 per month. These allegations, being false, tended to deceive and did in
fact deceive the aforesaid Circuit Court of Randolph County in West Virginia into granting
the decree of divorce applied for, because, had he alleged in his complaint that his wife
lived apart from him by mutual consent, as was a fact, said court would not have granted
the divorce, since in the case of Bacon vs. Bacon (68 W. Va., 747; 70 S. E., 762), the
Supreme Court of West Virginia laid down the doctrine that separation by mutual consent
does not constitute desertion or abandonment before the law. (See also Corpus Juris, vol.
19, page 64.)
For the foregoing considerations, we are of opinion and so hold: (1) That the residence
acquired in a state of the American Union by a husband, who, for the purpose of obtaining
a divorce, abandons the country wherein are his matrimonial domicile and his wife, who is
living apart from him by mutual consent, and then returns to said matrimonial domicile
after obtaining a divorce, continues residing, therein and engaging in business, is not bona
fide residence, and does not confer jurisdiction upon the court even if he alleges in the
complaint for divorce that he intends to reside permanently in said state; (2) that the
summons by publication in a complaint for divorce, filed in a state by the husband who has
gone to said state, abandoning his matrimonial domicile where his wife continues to reside,
does not confer jurisdiction upon the court over the person of said wife when she has not
entered an appearance in the case, and the decree issued by said court dissolving the
marriage is not binding upon her; and (3) that a decree of divorce issued by a court of any
state or territory of the American Union, or of a foreign country, may be impeached in
another case for lack of jurisdiction in said court over the subject matter, or over the
person of the defendant, or for fraud in obtaining it on the part of the person procuring it.
Wherefore, the judgment appealed from is reversed, and it is held that the decree of
divorce issued by the Circuit Court of Randolph County, West Virginia, is null and void in
this jurisdiction, with costs against the appellee. So ordered.

Daen, in the amount of P10,000.00; Katherine Woodward, P2,000; Beulah Fox, P4,000; and
Elizabeth Hastings, P2,000;
January 30, 1960
G.R. No. L-12105
TESTATE ESTATE OF C. O. BOHANAN, deceased.
PHILIPPINE TRUST CO., executor-appellee,
vs.
MAGDALENA C. BOHANAN, EDWARD C. BOHANAN, and MARY LYDIA BOHANAN,
oppositors-appellants.
Jose D. Cortes for appellants.
Ohnick, Velilla and Balonkita for appellee.
LABRADOR, J.:
Appeal against an order of the Court of First Instance of Manila, Hon. Ramon San Jose,
presiding, dismissing the objections filed by Magdalena C. Bohanan, Mary Bohanan and
Edward Bohanan to the project of partition submitted by the executor and approving the
said project.
On April 24, 195 0, the Court of First Instance of Manila, Hon. Rafael Amparo, presiding,
admitted to probate a last will and testament of C. O. Bohanan, executed by him on April
23, 1944 in Manila. In the said order, the court made the following findings:
According to the evidence of the opponents the testator was born in Nebraska and
therefore a citizen of that state, or at least a citizen of California where some of his
properties are located. This contention in untenable. Notwithstanding the long residence of
the decedent in the Philippines, his stay here was merely temporary, and he continued and
remained to be a citizen of the United States and of the state of his pertinent residence to
spend the rest of his days in that state. His permanent residence or domicile in the United
States depended upon his personal intent or desire, and he selected Nevada as his
homicide and therefore at the time of his death, he was a citizen of that state. Nobody can
choose his domicile or permanent residence for him. That is his exclusive personal right.
Wherefore, the court finds that the testator C. O. Bohanan was at the time of his death a
citizen of the United States and of the State of Nevada and declares that his will and
testament, Exhibit A, is fully in accordance with the laws of the state of Nevada and admits
the same to probate. Accordingly, the Philippine Trust Company, named as the executor of
the will, is hereby appointed to such executor and upon the filing of a bond in the sum of
P10,000.00, let letters testamentary be issued and after taking the prescribed oath, it may
enter upon the execution and performance of its trust. (pp. 26-27, R.O.A.)
It does not appear that the order granting probate was ever questions on appeal. The
executor filed a project of partition dated January 24, 1956, making, in accordance with the
provisions of the will, the following adjudications: (1) one-half of the residuary estate, to
the Farmers and Merchants National Bank of Los Angeles, California, U.S.A. in trust only for
the benefit of testator's grandson Edward George Bohanan, which consists of several
mining companies; (2) the other half of the residuary estate to the testator's brother, F.L.
Bohanan, and his sister, Mrs. M. B. Galbraith, share and share alike. This consist in the
same amount of cash and of shares of mining stock similar to those given to testator's
grandson; (3) legacies of P6,000 each to his (testator) son, Edward Gilbert Bohana, and his
daughter, Mary Lydia Bohanan, to be paid in three yearly installments; (4) legacies to Clara

It will be seen from the above that out of the total estate (after deducting administration
expenses) of P211,639.33 in cash, the testator gave his grandson P90,819.67 and one-half
of all shares of stock of several mining companies and to his brother and sister the same
amount. To his children he gave a legacy of only P6,000 each, or a total of P12,000.
The wife Magadalena C. Bohanan and her two children question the validity of the
testamentary provisions disposing of the estate in the manner above indicated, claiming
that they have been deprived of the legitimate that the laws of the form concede to them.
The first question refers to the share that the wife of the testator, Magdalena C. Bohanan,
should be entitled to received. The will has not given her any share in the estate left by the
testator. It is argued that it was error for the trial court to have recognized the Reno divorce
secured by the testator from his Filipino wife Magdalena C. Bohanan, and that said divorce
should be declared a nullity in this jurisdiction, citing the case of Querubin vs. Querubin, 87
Phil., 124, 47 Off. Gaz., (Sup, 12) 315, Cousins Hiz vs. Fluemer, 55 Phil., 852, Ramirez vs.
Gmur, 42 Phil., 855 and Gorayeb vs. Hashim, 50 Phil., 22. The court below refused to
recognize the claim of the widow on the ground that the laws of Nevada, of which the
deceased was a citizen, allow him to dispose of all of his properties without requiring him to
leave any portion of his estate to his wife. Section 9905 of Nevada Compiled Laws of 1925
provides:
Every person over the age of eighteen years, of sound mind, may, by last will, dispose of
all his or her estate, real and personal, the same being chargeable with the payment of the
testator's debts.
Besides, the right of the former wife of the testator, Magdalena C. Bohanan, to a share in
the testator's estafa had already been passed upon adversely against her in an order dated
June 19, 1955, (pp. 155-159, Vol II Records, Court of First Instance), which had become
final, as Magdalena C. Bohanan does not appear to have appealed therefrom to question its
validity. On December 16, 1953, the said former wife filed a motion to withdraw the sum of
P20,000 from the funds of the estate, chargeable against her share in the conjugal
property, (See pp. 294-297, Vol. I, Record, Court of First Instance), and the court in its said
error found that there exists no community property owned by the decedent and his former
wife at the time the decree of divorce was issued. As already and Magdalena C. Bohanan
may no longer question the fact contained therein, i.e. that there was no community
property acquired by the testator and Magdalena C. Bohanan during their converture.
Moreover, the court below had found that the testator and Magdalena C. Bohanan were
married on January 30, 1909, and that divorce was granted to him on May 20, 1922; that
sometime in 1925, Magdalena C. Bohanan married Carl Aaron and this marriage was
subsisting at the time of the death of the testator. Since no right to share in the inheritance
in favor of a divorced wife exists in the State of Nevada and since the court below had
already found that there was no conjugal property between the testator and Magdalena C.
Bohanan, the latter can now have no longer claim to pay portion of the estate left by the
testator.
The most important issue is the claim of the testator's children, Edward and Mary Lydia,
who had received legacies in the amount of P6,000 each only, and, therefore, have not
been given their shares in the estate which, in accordance with the laws of the forum,
should be two-thirds of the estate left by the testator. Is the failure old the testator to give
his children two-thirds of the estate left by him at the time of his death, in accordance with
the laws of the forum valid?

The old Civil Code, which is applicable to this case because the testator died in 1944,
expressly provides that successional rights to personal property are to be earned by the
national law of the person whose succession is in question. Says the law on this point:
Nevertheless, legal and testamentary successions, in respect to the order of succession as
well as to the extent of the successional rights and the intrinsic validity of their provisions,
shall be regulated by the national law of the person whose succession is in question,
whatever may be the nature of the property and the country in which it is found. (par. 2,
Art. 10, old Civil Code, which is the same as par. 2 Art. 16, new Civil Code.)
In the proceedings for the probate of the will, it was found out and it was decided that the
testator was a citizen of the State of Nevada because he had selected this as his domicile
and his permanent residence. (See Decision dated April 24, 1950, supra). So the question
at issue is whether the estementary dispositions, especially hose for the children which are
short of the legitime given them by the Civil Code of the Philippines, are valid. It is not
disputed that the laws of Nevada allow a testator to dispose of all his properties by will
(Sec. 9905, Complied Nevada Laws of 1925, supra). It does not appear that at time of the
hearing of the project of partition, the above-quoted provision was introduced in evidence,
as it was the executor's duly to do. The law of Nevada, being a foreign law can only be
proved in our courts in the form and manner provided for by our Rules, which are as
follows:
SEC. 41. Proof of public or official record. An official record or an entry therein, when
admissible for any purpose, may be evidenced by an official publication thereof or by a
copy tested by the officer having the legal custody of he record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer
has the custody. . . . (Rule 123).
We have, however, consulted the records of the case in the court below and we have found
that during the hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for
withdrawal of P20,000 as her share, the foreign law, especially Section 9905, Compiled
Nevada Laws. was introduced in evidence by appellant's (herein) counsel as Exhibits "2"
(See pp. 77-79, VOL. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said
laws presented by the counsel for the executor and admitted by the Court as Exhibit "B"
during the hearing of the case on January 23, 1950 before Judge Rafael Amparo (se
Records, Court of First Instance, Vol. 1).
In addition, the other appellants, children of the testator, do not dispute the above-quoted
provision of the laws of the State of Nevada. Under all the above circumstances, we are
constrained to hold that the pertinent law of Nevada, especially Section 9905 of the
Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of such
law having been offered at the hearing of the project of partition.
As in accordance with Article 10 of the old Civil Code, the validity of testamentary
dispositions are to be governed by the national law of the testator, and as it has been
decided and it is not disputed that the national law of the testator is that of the State of
Nevada, already indicated above, which allows a testator to dispose of all his property
according to his will, as in the case at bar, the order of the court approving the project of
partition made in accordance with the testamentary provisions, must be, as it is hereby
affirmed, with costs against appellants.

. . . In like manner, when a right is claimed upon acts occurring in another country, courts
look to the law of that country, not to extend the binding force of a foreign law beyond the
territorial limits of the sovereignty to which it belongs, but to ascertain whether the right
claimed exists or not. It is not the foreign law, but the rights acquired under it, which are
enforced by the courts of another country; and this is true whether the question be one of
contract, tort, or status." MacDonald v. Railway,71 N.H. 448, 450, 451.
"If there is a conflict between the lex loci and the lex fori, the former governs in torts the
same as in contracts, in respect to the legal effect and incidents of acts. . . . Therefore,
whatever would be a defence to this action if it had been brought in the state of Maine is a
defence here, although it would not be if the cause of action had arisen in this state."
Beacham v. Portsmouth Bridge, 68 N.H. 382.

GRAY V. GRAY
ELSERCE A. GRAY V. FRANK M. GRAY. SUPREME COURT OF NEW HAMPSHIRE
CARROLL. DECIDED SEPTEMBER 4, 1934.
If there is no ground of action in the sovereignty where a tort is alleged to have occurred,
there is none anywhere. Whatever would be a bar to an action for tort if brought in the
state of its occurrence is a bar in this state although the matter pleaded would not be a bar
if the cause of action had arisen here. A New Hampshire wife injured by the negligence of
her husband while driving with him in Maine is barred from recovery against him in this
state because under Maine law a wife has no cause of action for negligence against her
husband. Persons having the status of husband and wife take that status with them into a
sister state but the incidents of that status are those prescribed by the law of the place
where transactions take place. The theory of a foreign vested right or obligatio as a test for
the enforcement of an alleged foreign tort is not based upon the idea that a sovereignty is
under legal compulsion to recognize the foreign cause of action but such recognition has
resulted from the idea that it was the just and politic course to follow. The foreign law is
enforced because the law of the forum is that the foreign law shall govern the transactions
in question and thus for the purposes of the case the foreign law becomes the local law.
Where no evidence is presented that the lex loci includes the doctrine of renvoi the foreign
domestic law should be applied; if the doctrine of renvoi were a part of the foreign law the
question whether it should be applied would demand determination.
CASE, TO RECOVER DAMAGES FOR PERSONAL INJURIES ALLEGED TO HAVE BEEN CAUSED
BY THE DEFENDANT'S NEGLIGENCE. THE PARTIES ARE HUSBAND AND WIFE, RESIDENTS OF
NEW HAMPSHIRE AND THE ACCIDENT HAPPENED IN MAINE. THE DEFENDANT FILED A
SPECIAL PLEA THAT "UNDER THE LAWS OF SAID STATE OF MAINE, THE PLAINTIFF BEING
THE WIFE OF SAID DEFENDANT IS BARRED FROM MAINTAINING THIS ACTION." THE
PLAINTIFF'S DEMURRER TO THIS PLEA WAS OVERRULED BY SAWYER, C. J., WHO
TRANSFERRED THE CASE UPON EXCEPTION TO THAT RULING.
Coulombe Coulombe and Crawford D. Hening (Mr. Hening orally), for the plaintiff.
Gay Gleason (of Massachusetts) and Bernard Jacobs (Mr. Jacobs orally), for the defendant.
*8383
PEASLEE, C. J.
I. "If there is no ground of action in the sovereignty where the tort is alleged to have
occurred, there is none anywhere. . . . To ascertain the rights resulting from acts done or
omitted, attention must be paid to the circumstances under which the events took place;
and one of the governing circumstances is the law of the place which characterizes the act.

For more than a hundred years this theory of the law has been followed in this state,
whenever there has been occasion to apply it, or any part of it. Wilson v. Rich, 5 N.H. 455;
French v. Hall, 9 N.H. 137; Henry v. Sargeant, 13 N.H. 321; Laird v. Railroad, 62 N.H. 254;
Leazotte v. Railroad, 70 N.H. 5; Kimball v. Kimball, 75 N.H. 291; Young v. Company,76 N.H.
582; Hill v. Railroad, 77 N.H. 151; Stinson v. Railroad,81 N.H. 473; Marshall v. Railroad, 81
N.H. 548; Lee v. Chamberlin,84 N.H. 182; Precourt v. Driscoll, 85 N.H. 280; Small v.
Railroad,85 N.H. 330; Richards v. Richards, 86 N.H. 273; Blanchette v. Sargent, ante, 15.
It has the final approval of the American Law Institute, Restatement, Conflict of Laws, s.
382 et seq. It is supported by all our eminent text writers upon the subject. Story, Conflict
of Laws, s. 558; Dicey, Conflict of Laws, 21; Beale, Conflict of Laws, 112; Goodrich, Conflict
of Laws, 189; Wharton, Conflict of Laws, s. 478 b; Minor, Conflict of Laws, s. 194. The
American decisions are almost uniformly to the same effect. They are collected in 12 C. J.
452, and cross references. In three recent cases the precise question here involved has
been decided adversely to the plaintiff. Buckeye v. Buckeye, 203 Wis. 248; Dawson v.
Dawson, 224 Ala. 13; Howard v. Howard, 200 N.C. 574. *8484
Against this array of authority it is strenuously argued that the decided cases are
distinguishable; that much which has been said is dicta; that the theory is contrary to the
English law, unsound in principle, unworkable in many situations and criticized by a group
of present day writers.
It is true that none of our decisions involve the precise facts here presented, but several of
them are indistinguishable in principle. In Beacham v. Portsmouth Bridge, 68 N.H. 382, the
defendant was a wrongdoer, and by New Hampshire law the plaintiff was free from
contributory fault. But since by Maine law his driving contrary to the Sunday law barred a
recovery, he had no remedy here for an accident happening there.
In Lee v. Chamberlin, 84 N.H. 182, Richards v. Richards, 86 N.H. 273 and Blanchette v.
Sargent, ante, 15 the defendants were held not to be accountable for ordinary negligence
towards guest passengers, although they would be by the law of this state. The different
law as to the incidents attaching to their status in Massachusetts and Vermont was held to
determine the rights of the parties as to events occurring in those jurisdictions.
In Precourt v. Driscoll, 85 N.H. 280, the plaintiff was called upon to prove her own freedom
from fault, in accordance with the law of Vermont, although by New Hampshire law she
would have made a case by merely showing the defendant's negligence.
It is sought to distinguish the present case upon the ground that the act complained of was
a delict, in the sense that it was not made innocent by Maine law; and the only reason a
recovery could not be had in Maine is the spousal relation of the parties. As the parties are
residents of New Hampshire, where spousal incapacity to sue has been abolished, it is

argued that the wife's complaint for acts done in Maine may be brought into this state and
suit upon it maintained here.
The argument fails to distinguish between status and the incidents which local law attaches
to the status. The parties are husband and wife. That status they took with them into
Maine. But the incidents of that status are those prescribed by the law of the place where
transactions take place. As before pointed out, this rule has frequently been applied in tort
actions where other relations were involved.
The guest passenger in an automobile remains such after crossing the state line into
Massachusetts. But his recovery here for injuries caused by his host's ordinary negligence
depends upon which side of the state line the accident occurred. If it happened in
Massachusetts, *8585 there could be no recovery, even though the parties are residents
here and the suit is in this jurisdiction. Lee v. Chamberlin, supra; Richards v. Richards,
supra; Blanchette v. Sargent, supra.
Every argument urged in favor of this plaintiff is applicable to these decided cases. The
defendant's act is a delict by the lex loci. It would have been actionable if committed here;
and, as to persons in general, it is actionable there. But because of the particular relation
of the parties, the law there is that there is no cause of action in the special instance. The
plaintiff fails here, as those plaintiffs failed, because there is no cause of action at the place
where the acts complained of were done.
It should be observed that much of the plaintiff's argument is based upon the assertion
that inability to recover in Maine is merely because suits between husband and wife are
forbidden. Hence it is urged that recovery may be had by resort to a jurisdiction where
such suits are allowed. But an examination of the Maine law shows that the rule is much
broader. The theory adopted there is not merely that there is a prohibition of suit, but that
the acts complained of do not give rise to any cause of action. There has been no breach of
legal duty.
A suit for false imprisonment during coverture was brought by a divorced wife against her
former husband. The court said: "The theory upon which the present action is sought to be
maintained is, that coverture merely suspends and does not destroy the remedy of the wife
against her husband. But the error in the proposition is the supposition that a cause of
action or a right of action ever exists in such a case. There is not only no civil remedy but
there is no civil right, during coverture, to be redressed at any time. There is, therefore,
nothing to be suspended. Divorce cannot make that a cause of action which was not a
cause of action before divorce. The legal character of an act of violence by husband upon
wife and of the consequences that flow from it, is fixed by the condition of the parties at
the time the act is done. If there be no cause of action at the time, there never can be any."
Abbott v. Abbott, 67 Me. 304, 306, cited with approval in Sacknoff v. Sacknoff, 131 Me. 280.
In the latter case a wife was denied recovery from the employer of her husband for injuries
caused by the negligence of that employee.
II. The claim that the American rule is opposed to the practice in England is well founded.
But the English law upon the subject is by no means clearly defined. All that is here
claimed for it is that in a suit for a foreign tort recovery may be had according to English
*8686 law, unless the lex loci has made the act complained of innocent. This seems to be a
splitting of the rule of accountability. The foreign law is noted and applied, in so far as
treating the act as innocent is concerned; but if that obstacle is passed, the English law is
then used, or may be, to supplement the foreign and give a cause of action. This theory
never attained any recognition in this country. "No case in this country has been found
where recovery in tort has been allowed for what was not the basis of an action by the lex
loci delicti." Goodrich, Conflict of Laws, 190.

III. Much objection has been made, both by some recent writers and in argument here,
against any theory of vested right or obligatio. If such theory were based upon the idea
that a sovereignty is under legal compulsion to recognize the foreign cause of action, there
might be force in the argument. While the proposition may sometimes have been stated in
that extreme form, the common theory is that such recognition has resulted from the idea
that it was the just and politic course to follow. It has been developed under the impulses of
neighborliness and orderliness. It has become an accepted rule precisely as liability for
negligence, once unknown, became a part of the common law.
Wrong theories for the rule may have been advanced. But the destruction of such men of
straw does not affect the validity of the line of procedure they were supposed to defend. It
stands upon its own intrinsic merits. No one denies that the parties may have vested
rights, or obligations, in the jurisdiction where the transaction occurred. But because
another sovereignty adopts the rule that it will enforce the right or deny recovery as the
event would be according to the lex loci, it by no means follows that it is the law of the
forum that such course is obligatory upon such sovereignty.
In reaching the conclusions stated in Beacham v. Portsmouth Bridge,68 N.H. 382, it was not
deemed essential to enter into a discussion of the territoriality of law, of the concept of it
spatially, or of the claims of parties as vested rights, accrued in a foreign jurisdiction. The
situation was a practical one. The problem was "one of judicial expediency" (Saloshin v.
Houle, 85 N.H. 126, 130). Forty odd separate jurisdictions had given rise to pressing
questions as to how rights and wrongs originating in one should be dealt with in another. A
few simple ideas were sufficient to indicate the course to be taken. Local conduct should be
governed by local law. Rules of conduct have no force to regulate acts done outside the
jurisdiction which made the rules, save as their operation is enforced by control over
parties found within the jurisdiction. In the great *8787 majority of cases complaints of
conduct are adjusted in the jurisdiction where the conduct took place. It is desirable that
the remedy be the same, wherever the action is brought.
IV. It is contended that there is unpardonable inconsistency in enforcing foreign rights,
whether of prosecution or defence, and at the same time declaring that the foreign law is
not in force here. The ground has been gone over many times. The local law is that the
foreign rights will be enforced. What those rights are depends upon the facts, and a part of
the facts consists in the law under which the transactions took place.
But if it is still insisted that a proper designation of the process is that we thus enforce
foreign law (Saloshin v. Houle, 85 N.H. 126), it does not affect the soundness of the
procedure. We enforce the foreign law because it is our law that the foreign law shall
govern the transactions in question. "For the purposes of the case the foreign law becomes
the local law." Saloshin v. Houle, supra, 130. It has been concluded that it shall so govern
for the reasons before stated. This is not importing foreign law. It is only giving to it the
legitimate effect upon transactions occurring where it is in force. The logical alternative is
not found in the application of local law to a foreign transaction, but in a refusal to deal
with that transaction at all. If it is to be justiciable here, it should be upon the basis of what
it is there.
The other view, that to some indefinite degree our law should govern the foreign
transaction, would export our law into foreign territory. The reasonable conclusion which
has been reached is that there should be neither export nor import, that, generally
speaking, the law is territorial, conceived of spatially as governing within the jurisdiction,
and creating there rights and obligations which will be respected and enforced elsewhere.
Judge Cardozo sums the matter up in a sentence. "The plaintiff owns something and we
help him to get it." Louks v. Company,224 N.Y. 99, 110.

V. The critics of the American rule affect to find much inconsistency in the suggested
refusal (Goodrich, Conflict of Laws, 24; Am. Law Inst., Restat., Conflict of Laws, s. 7) to
follow the lex loci as to the applicability of foreign law to local transactions. The proposition
advanced here is that if by the lex loci the plaintiff could recover there if he would have
that right by the law of his domicil, though not if domesticated, he should recover in other
jurisdictions, if they profess to apply the lex loci. This is upon the theory that the whole or
none of the lex loci should be applied. *8888
It being the rule in some jurisdictions that in a suit by a non-resident upon a cause arising
locally his capacity to sue will be determined by looking to the law of his domicil rather
than to the local law, it is urged that this feature (called the doctrine of renvoi) should be
treated the same as the rest of the lex loci. If that law looks beyond local limitations to
broader or otherwise different rules of the party's domicil, it is argued that the same course
should be followed by the court in another jurisdiction when called upon to adjudicate
disputes which arose under such circumstances. That is, in determining the applicability of
foreign law, the court should be governed by that foreign law as to the applicability of
foreign law. This idea is urged as calling for the recognition of renvoi under such
circumstances. It has not as yet met with judicial approval.
We do not understand it is claimed that the doctrine of renvoi ought to be adopted. One of
the authors upon whose reasoning the plaintiff relies says: "The renvoi doctrine is,
therefore, no part of the Conflict of Laws of the United States. Its introduction into our law
would be most unfortunate on account of the uncertainty and confusion to which it would
give rise in the administration of justice and its demoralizing effect upon the future
development of the Conflict of Laws." The Renvoi Theory (Lorenzen), 10 Col. Law Rev. 344.
It is advanced in argument here as a feature of existing law, in some foreign jurisdictions,
and its recognition where existing is urged as a logical part of the vested right theory, and
as showing that, thus encumbered, that theory should be rejected. It is unnecessary to
determine the validity of the argument. If its soundness were assumed, and recognition of
renvoi should be treated as a part of our rule applying the lex loci, there would be two
sufficient answers here. The plea demurred to states "that under the laws of the State of
Maine, the plaintiff being the wife of said defendant is barred from maintaining this action."
This leaves no room for speculation upon the matter. Beyond this, it is conceded in the
plaintiff's argument that there is no decision in Maine bearing upon the doctrine of renvoi.
Nor is there any claim that it is a part of a generally prevailing common-law doctrine. If the
matter were open for consideration, the plaintiff would fail for lack of proof that the
doctrine prevails in Maine.
But it will be said that these conclusions do not meet the whole issue. The argument that
consideration of renvoi should be a part of any theory of applying the lex loci, and that the
theory thus embarrassed is unworkable, has not been answered. The conclusion sought to
be drawn from these propositions is that they show that *8989 the whole theory of
applying the lex loci is unsound and should therefore be abandoned, and actions for foreign
torts should be decided according to local law.
One answer to this is that the rule that the lex loci shall apply is so firmly established that it
should be followed, unless very grave defects therein call for reform. We see no such
defects. Whether it should include renvoi or not is a matter to be decided when a case
arises which presents that question. In the instant case there is no occasion to go further
than to inquire whether the obstacle proposed is insuperable. If it does not appear to be so,
we need not be apprehensive that adherence to the present line of procedure will unduly
embarrass the court of the future when called upon to decide the propounded problem.
It is undoubtedly true that following the doctrine of renvoi to a logical extreme can, in some
situations, result in an endless reference back and forth. The dilemma thus presented is
something of an answer to the theorists who justify the application of the lex loci upon the

idea of a vested right. The writers relied upon by the plaintiff have used it largely for this
limited purpose. They recognize the desirability of a general application of the lex loci in
actions for torts. Their quarrel has been with the theory of those who would account for
such procedure upon the basis of a vested right or obligatio.
Once the doctrine of obligation is disregarded, and recognition of the lex loci is put upon its
true foundation, there is no difficulty. The lex loci is applied because this is deemed to be
the sensible course to pursue. When a point is reached where further application is futile
and ridiculous the process is cut short.
No rule or set of rules has yet been devised which will make the conflict of laws a logical
whole. There are places where logic has to give way to evident facts. In these places horse
sense has prevailed over the deductions of the schoolmen. It should continue to do so.
Whether, upon the issue of applying foreign law we should follow our own views entirely, or
adopt those expressed in the lex loci which are pertinent, is, like most of the questions
involved in this case, a matter of what is sound policy. That problem will no doubt be solved
in the future, and some definite rules will be evolved, as there have been already on the
main issue of following the lex loci.
As before stated, there is no occasion here to determine whether we should apply a Maine
doctrine of renvoi, since there is no evidence that such a doctrine exists.
VI. The novel complaint is made that the foregoing conclusions *9090 upon the application
of the lex loci set up fixed rules. The proposal is that instead thereof the whole matter be
left to the discretion of the court to apply either the foreign or the domestic law to the
individual case as "reason, justice and expediency" require. That might well be taken as the
guide for determining what should be done in the first stages of the development of the
law. But as the law progresses definite rules are evolved in the course of the frequent
application of those tests. That is the situation here. It has become settled that reason,
justice and expediency require that causes of action for foreign torts be dealt with as
hereinbefore indicated.
Exception overruled.
All concurred.

1. Negligence of fellow-Servant not cause of action against master at common-law.

Underthe common-law, both in Alabama and Mississippi, the master is not liable for an
injury inflicted through the negligence of a fellow-servant.
2. Section 2590 of the Code has no extra territorial operation.There can be no recovery in
Alabama for injuries to the person sustained in another State, unless actionable by the law
of the State where received, and this rule is not varied because the negligence which
produced the casualty transpired in Alabama, where the common-law liability of the master
is modified, nor by the facts that both master and employee reside in this State and
services were required of the employee in both States.
3. Section 2590 imposes no contractual obligations. The liability of the employer under
Section 2590 of the Code, does not spring from the contract of employment, the only office
of which is to establish the relation of master and servant, and it is alone upon the
incidents of that relation that the statute operates. Hence, a servant injured in another
State by the negligence of a fellow-servant, under such circumstances as would create no
right of action against the master in that State, cannot recover against the latter in
Alabama, although the contract was entered into and the services partly performed here
Appeal from City Court of Birmingham. Tried before Hon. H. A. SHARPE.
J. W. FEWELL, and A. G. SMITH, for appellant.
That the action is not for breach of contract, nor for breach of duty growing out of
contract.-R. R. Go. v. Doyle, 60 Miss. 977; A .T. & R. R. v. :Moore, 11 Am. & Eng. R. R. cases
243; LeForest v. Tolman, 19 Am. Rep. 400; McMaster v. R. R. Co., 65 Miss. 264; Davis v. N. Y.
R. R. 143 Mass. 301; 33 Kan. 83; 98 N. Y. 377; 61 Iowa 441; 61 Tex. 432; 72 Ind. 220; 10
Ohio St. 121; E. T. V. & G. Rwy. v. Lewis, 14 S. W. Rep. 603; 23 N. Y. 465; 5 Am. & Eng.
Encyc. 127; 3 lb. 522; 10 S. Rep. 661; 2 Thomp. on Neg. p. 1282.
BROOKS & BROOKS, for appellee, as to jurisdiction, cited Denw1ck v. R. R. Go. 103 U. S. 18;
Knight v. R. R. Co. 108 Pa. St. 38; Am. Rep. 492; A. G. S. v. Thomas, 89 Ala. 293.
That the law is part of the contract, Hanrick v. Andrews, 9 Port. 9; McDougald v. Rutherford,
30 Ala. 253; Walker v Forbes, 31 Ala. 9; Brouqhton v. Bradley, 36 Ala. 689; Cubbedge v.
Napier, 62 Ala. 518; 100 U . S . 213; 116 lb. 647; 3 Am. & Eng. Encyc. 545.
McCLELLAN, J.
11 So. 803
97 Ala. 126 - 1892
Alabama Great Southern Rail Road Co.
v.
Carroll.
[126] Action by Employe for Injuries Sustained in Another State.

The plaintiff W. D. Carroll is, and was [127] at the time of being injured in that service, a
citizen of Alabama. The defendant is an Alabama corporation operating a railroad
extending from Chattanooga in the State of Tennessee through Alabama to Meridian in the
State Mississippi. At the time of the casualty complained of, plaintiff was in the service of
the defendant in the capacity of brakeman on freight trains running from Birmingham,
Alabama, to Meridian, Mississippi, under a contract which was made in the state of
Alabama. The injury was caused by the breaking of a link between two cars in a freight
train which was proceeding from Birmingham to Meridian. The point at which the link broke
and the injury was suffered was in the State of Mississippi. The evidence tended to show
that the link which broke was a defective link and that it was in a defective condition when
the train left Birmingham. It was shown that this link, had come to the defendant's road at
Chattanooga, Tennessee, with a car which belonged to and came to that point over a road

which was foreign to the A.G.S. road. That at Chattanooga, this foreign car was coupled
into a train of the defendant by means of this link, the destination of the car next in rear of
it being Birmingham, and the destination of the second car in the rear of it, which belonged
to defendant, being Meridian, to which point the foreign car was also bound. At Birmingham
the car between this foreign car and the A.G.S. car which were billed to Meridian was cut
out, and these two were coupled together by means of the link which had come to the
defendant with the foreign car. The evidence went also to show that the defect in this link
consisted in or resulted from its having been bent while cold, that this tended to weaken
the iron and in this instance had cracked the link somewhat on the outer curve of the bend,
and that the link broke at the point of this crack. It was shown to be the duty of certain
employees of defendant stationed along its line to inspect the links attached to cars to be
put in trains or forming the couplings between cars in trains at Chattanooga, Birmingham,
and some points between Birmingham and the place where this link broke, and [128] also
that it was the duty of the conductor of freight trains and the other train-men to maintain
such inspection as occasion afforded throughout the runs or trips of such trains; and the
evidence affords ground for inference that there was a negligent omission on the part of
such employees to perform this duty, or if performed, the failure to discover the defect in
and to remove this link was the result of negligence..

links of adequate strength, and supplying them to these inspectors and to trains gene rally;
or that there was any necessity for the continued use of this link upon a discovery of its
defective condition; but on the contrary it is affirmatively shown that the defend ant
purchased and supplied its trains and employees with all necessary links of good quality
and perfect condition to be used in its trains, to supply the places of links which be came
defective from use, and to substitute for defective links coming to this road with foreign
cars. The only negligence, in other words and in short, which finds support by direction or
inference in any tendency of the evidence, is that of per sons whose duty it was to inspect
the links of the train, and remove such as were defective and replace them with others
which were not defective. This was the negligence not of the master, the defendant, but of
fellow-servants of the plaintiff, for which at common-law the defendant is not liable. Thus it
is said in McKinney on Fellow-Servants, 127 : "It is a very common thing for train hands to
receive injury through the negligence of persons employed by the company to inspect their
cars to discover defects and repair them. The weight of authority, perhaps, is to the effect
that the negligence of such employees in the performance of such duties cannot be
attributed to the company, and it is consequently not liable for it." Citing among other
cases Smith v. Potter, 46 Mich. 258; s. c. 2 Am. & Eng. R. R. Cas. 140; Mackin v. Railroad
Co., 135 Mass. 201; s. c.

The foregoing statement of facts, either proved or finding lodgment in the tendencies of
the evidence, together with. the evidence of the law of Mississippi, as to the master's
liability for injuries sustained by an employee in his service, will suffice for the
consideration and determination of the question which is of chief importance in this case,
namely, whether the defendant is liable at all on the facts presented by this record for an
injury sustained by the defendant in the State of Mississippi. The affirmative of this inquiry
is sought to be rested and maintained upon two distinct propositions. In the first place, it is
insisted that the. negligence which one aspect of the evidence tends to establish Is that of
the defendant m respect of a duty which the law imposes upon the master and which
whether performed or undertaken to be performed in the particular instance by the hand of
the master or by the hand of one to whom he had delegated its performance is yet to be
taken as being performed or attempted to be performed by the master himself, in such sort
that the employer is responsible for its misperformance or non-performance whereby injury
results to one of his employees under the doctrine of the common-law and wholly
irrespective of statutory provisions. These doctrines are presumed, and also shown by the
evidence in this case, to obtain in the State of Mississippi; and the defendant being an
Alabama corporation it can not be questioned that an action may be maintained in this
State to recover damages for an injury sustained in Mississippi, by one of its servants, if the
facts present a good cause of action under the law of that State. It is manifest beyond
adverse inference on the evidence, conceding the link, the breaking of which caused the
accident, to have been in a defective condition when it came to defendant's road at
Chattanooga attached to, and intended to be used in the further transportation, of the
foreign car, that it was so used from that point to the place of the accident, that this
defective condition of the link was patent to such observation as should have been
bestowed upon it and that the defect in it was the proximate cause of the injury to the
plaintiff, it [129] is, we say clear upon every aspect of the testimony, conceding all this to
be true, that the use of that link in coupling the foreign car to the defendant's train and
also in its use throughout the voyage from Chattanooga into Mississippi was due to the
negligence of employees of the defendant who were charged by it with the duty of
inspecting the link before and at the time of incorporating the foreign car into this train and
at the several points in Alabama where inspectors were stationed as shown by the
evidence, and also of the train-men charged with the duty of inspection as the train was en
route. There is no pretense that the defendant had not been sufficiently careful in the
selection of these inspectors or that they were incompetent. It is not pretended that they
were insufficient in number or stationed at points too widely separated along the line.
There is no such idea advanced as that the defendant was negligent in the purchasing of

15 Am. & Eng. R. R. Cas. 196; Railroad Co. v. Webb, 12 Ohio St. 475; Railroad Co. v. Rice, 11
So. West Rep. (Ark.) 699; Kidwell v. Railroad Co. 3 Wood (U. S.) 313; and our own case
[130] of Smoot v. Mobile & Montgomery R. R. Co. 67 Ala. 13; and these and other cases are
cited to the same proposition in 7 Am. & En. Encyc. of Law p. 864, note.
There are cases which hold to the contrary, but the law is and has long been settled in this
State as we have stated it, the case of Smoot v. Mobile (t Montgomery R. R. Co. supra,
being directly in point.Mobile & Ohio R. R. Co. v. Thomas, 42 Ala. 672, 720 et seq; Mobile
& Montgomery Ry. Co. v. Smith, 59 Ala. 245; Louisville & Nashville R. R. Co. v. A.llen, 78 Ala.
494.
This being the common-law applicable to the premises as understood and declared in
Alabama, it will be presumed in our courts as thus declared to be the common-law of
Mississippi, unless the evidence shows a different rule to have been announced by the
Supreme Court of the State as being the common-law thereof. The evidence adduced here
fails to show any such thing; but to the contrary it is made to appear from the testimony of
Judge Arnold and by the decisions of the Supreme Court of Mississippi which were
introduced on the trial below that that court is in full accord with this one in this respect.
Indeed, if any thing, those decisions go further than this court has ever gone in applying
the doctrine of fellow-servants to the exemption of railway companies from liability to one
servant for injuries resulting from the negligence of another, holding in one case that a
hostler whose only duty it was to supply an engine with sufficient sand before turning it
over to the engineer to go on the road is a fellow-servant of the engineer for whose
negligent failure to supply the same the company would not be liable.L. & N. R. R. Co. v.
Petty, 67 Miss. 255; in another, that a section foreman and a laborer working under him
were fellow-servants in such sort that their common master would not be liable for the
negligence of the former in attempting to repair a fishbar which he ought to have discarded
and applied for a new one.Lagrave v. Mobile & Ohio R. R. Co. 67 Miss. 532; and in yet
another case, that a section foreman and train-man are fellow-servants in respect of the
Ifegligence of the former unknown to the company in failing to keep the track in repair, and
that an engineer on a passing train who was injured in consequence could not recover
against common employer.N. 0. J. & G. N. R. R. Co. v. Hughes, 49 Miss. 258; and the
doctrine of this case is said by Mr. McKinney to be "substantially the rule recognized by the

English common-law decisions." McKinney on Fellow-servants, p. 82 29. See also

McMaster v. Illinois Central R. R. Co. 65 Miss. 264.
[131] Proceeding therefore on the presumptions we are authorized to indulge and also on
the evidence adduced in this case as to the law of Mississippi in this connection, and upon
the testimony most favorable to the plaintiff as to the cause of his injuries, we feel entirely
safe in declaring that plaintiff has shown no cause of action under the common-law as it is
understood and applied both here and in Mississippi.
It is, however, further contended that the plaintiff, if his evidence be believed, has made
out a case for the recovery sought under the Employer's Liability Act of Alabama, it being
clearly shown that there is no such, or similar law of force in the State of Mississippi.
Considering this position in the abstract, that is dissociated from the facts of this particular
case which are supposed to exert an important influence upon it, there can not be two
opinions as to its being unsound and untenable. So looked at, we do not understand
appellee's counsel even to deny either the proposition or its application to this case, that
there can be no recovery in one State for injuries to the person sustained in another unless
the infliction of the injuries is actionable under the law of the State in which they were
received. Certainly this is the well established rule of law subject in some jurisdictions to
the qualification that the infliction of the injuries would also support an action in the State
where the suit is brought, had they been received within that State. 3 Am. & Eng. Encyc. of
Law, p. 508-9; Hydes Admr. v. Wabash, St. Louis & Pacfic Ry. Co. 61 Iowa, 441; East Tenn.
Va. & Gu. R. R. Co. v. Lewis., 14 S. W. Rep. 603; Buckles v. Ellers, 72 Incl. 220; Willis v. Mo.
Pac. Ry. Co. 61 Texas, 432; Woodward v. M.S. & N. I R. R. Co. 10 Ohio St. 121; Whitford v.
Panama Railroad Co. 23 N. Y. 465; Debovois v. .N. Y. L. E. & W. R. R. Co. 98 N. Y. 377; N C. &
St. L. Ry. Co..v. Foster, 11 Amer. & Eng. R. R. Cas. 180; 2 Rover on Railroads, p. 1149 ; Kahl
v. M & C. R. R. Co. 95 Ala. 337; C. St. L. & JJio. R. R. Co. v. Doyle, 60 Miss. 977; Davis 1'. N. Y.
& N E. R. R. Co. 143 Mass. 301; LeForest v. Tolman, 117 Mass. 109; s. c. 19 Amer. Rep. 400;
Lime killer v. H. & St. J. R. R. Co. 33 Kan. 83; The Scotland, 105 U. S. 24; The Santa Cruz, 1
C. Rob. 50; A. '1'. & S. F. R. R. Co. v. Moore, 11 Am. & Eng. R. R. Cas. 243.
But it is claimed that the facts of this ease take it out of the general rule which the
authorities cited above abundantly support, and authorize the courts of Alabama to subject
the defendant to the payment of damages under section 2590 of the Code, although the
injuries counted on were sustained in Mississippi under circumstances which involved no
liability on the defendant by the laws of that State.
[132] This insistence is in the first instance based on that aspect of the evidence which
goes to show that the negligence which produced the casualty transpired in Alabama, and
the theory that wherever the consequence of that negligence manifested itself, a recovery
can be had in Alabama. We are referred to no authority in support of this proposition, and
exhaustive investigation on our part has failed to disclose close any. There are at least two
well considered cases against it, one of which involved an effort to recover for personal
injuries sustained in Alabama under circumstances which afforded no cause of action in
Alabama in the courts of Tennessee where the causal negligence occurred and where also
had the negligence manifested itself in the results complained of there, the plaintiff would
have been entitled to recover. The accident happened on a train going from Nashville to
Chattanooga, in Tennessee, on a railway which runs for a comparatively short distance
through Alabama. The negligence relied on consisted in the failure of employees of the
defendant charged in that behalf to discover and remedy a defective brake before the train
left Nashville as well as during its passage through Tennessee. While the train was running
through Alabama, a brakeman was killed in consequence of the defect in this brake. All this
is precisely on all fours with our case in those of its aspects most favorable to the plaintiff.
That plaintiff, the court conceded, would have had a good cause o action under the law of

Tennessee, the place of the negligence, if his intestate had been injured within its limits. So
here, the plaintiff on one aspect of the evidence would have had a good cause for ac ion in
Alabama, the place of the negligence, had he been injured in Alabama. But it was found in
that case that the law of Alabama gave no cause of action for the negligent failure to
inspect the appliances used in operating a train, but held the brakeman and the inspectors
to be fellow-servants in respect thereto, just as here the laws of Mississippi afforded no
redress for the consequence of such negligence, though our statutes have since the
Tennessee decision provided therefor; and it was held on the authority of Mobile & Ohio R.
R. Co. v. Thomas, 42 Ala. 672, that there could have been no recovery in Alabama and that
of consequence no cause of action existed in Tennessee, the court saying: 'There is no
question but the laws of Alabama controlled the rights of the parties in this case, and
whether there was error in this part of the charge (referring to an instruction as to
defendant's liability on the negligence shown) as given, or the refusal of the specific
instructions asked for (substantial-[133]-ly that the negligence of a car inspector from
which a brakeman suffers injury is no ground for action against their common employer,)
depends wholly upon the laws of that State. Nashville, Chattanooga & St. Louis By. Co. v.
Foster, 10 Lea, 352 ; s. o. 11 Amer. & Eng. E. E. Ca's. 180. In the other case the precise
point here under consideration was brought before the Supreme Court of Mississippi, in an
action instituted in that State sounding in damages for fatal injuries inflicted upon plaintiff's
intestate in the State of Tennessee. It was insisted that inasmuch as the death of the
deceased resulted from the negligent failure of a train dispatcher in Mississippi to give
requisite orders to the trainmen at a certain point in Tennessee, the rights of the parties
were de terminable by the laws of Mississippi the place of the disastrous negligent
omission. But the court held to the contrary, saying: "The right of the appellee is
determinable by the laws of Tennessee, in which State the killing of her husband occurred.
The view that no recovery could be had here, except for a result traceable to an omission
of duty in Mississippi is unfounded. Physical force proceeding from this State and inflicting
injury in another State might give rise to an action in either State, and vice versa but the
omission of duty in Mississippi cannot transfer a consequence of it manifested physically in
another State to Mississippi. The cases of injuries commenced in one jurisdiction and
completed in another illustrate our views on this subject. The true view is that the legal
entity called the corporation is omni-present on its railroad, and the presence or absence of
negligence with respect to an occurrence at any point of the line is not to be resolved by
the place at which an officer or employe was stationed for duty. The question is as to duty
operating effectually at the place where its alleged failure caused harm to result. The
locality of the collision was in Tennessee. It was there, if any where, that the company was
remiss in duty, for there is where its proper caution should have been used."Chicago, St.
Louis & New Orleans R. R. Co. v. Doyle, 60 Miss. 977, 984. If this doctrine was properly
applied to the facts of that case where the act to be performed, the failure to perform
which caused the in jury, could only be performed at a point in Mississippi and by an
employe who was stationed and remained at that place, it would seem to address itself
with more force to the case at bar where it appears the corporation was in fact present with
the train and with the defective link every inch of the journey from Birmingham to the point
of the accident in the person of the conductor and other trainmen who were charg-[134]-ed
with the duty all along the line of discovering and removing the unsafe appliances.
The position of the Mississippi court appears to us to be eminently sound in principle and
upon logic. It is admitted, or at least cannot be denied, that negligence of duty
unproductive of damnifying results will not authorize or support a recovery. Up to the time
train passed out of Alabama no injury had resulted. For all that occurred in Alabama,
therefore, no cause of action whatever arose. The face which created the right to sue, the
injury without which confessedly no action would lie anywhere, transpired in the State of
Mississippi. It was in that State, therefore, necessarily that the cause of action, if any,
arose; and whether a cause of action arose and existed at all or not must in all reason be
determined by the law which obtained at the time and place when and where the fact

which is relied on to justify a recovery transpired. Section 2590 of the Code of Alabama had
no efficiency beyond the lines of Alabama. It cannot be allowed to operate upon facts
occurring in another State so as to evolve out of them rights and liabilities which do not
exist under the law of that State which is of course paramount in the premises. where the
facts occur in Alabama and a liability becomes fixed in Alabama, it may be enforced in
another State having like enactments, or whose policy is not opposed to the spirit of such
enactments, but this is quite a different matter. This is hut enforcing the statute upon facts
to which it is applicable all of which occur within the territory for the government of which
it was enacted. Section 2590 of the Code, in other words is to be interpreted in the light of
universally recognized principles of private international or interstate law, as if its operation
had been expressly limited to this State and as if its first line read as follows: ''When a
personal injury is received in Alabama by a servant or employee," &c., &c. The negligent
infliction of an injury here under statutory circumstances creates a right of action here,
which, being transitory, may be enforced in any other State or country the comity of which
admits of it; but for an injury inflicted elsewhere than in Alabama our statute gives no right
of recovery, and the aggrieved party must look to the local law to ascertain what his rights
are. Under that law this plaintiff had no cause of action, as we have seen, and hence he has
no rights which our courts can enforce, unless it be upon a consideration to be presently
adverted to. We have not been inattentive to the suggestions of counsel in this connection,
which are based upon that rule of the statutory and common crim-[135]-inal law under
which a murderer is punishable where the fatal blow is delivered, regardless of the place
where death ensues.Green v. State, 66 Ala. 40. This principle is patently without
application here. There would be some analogy if the plaintiff had been stricken in Alabama
and suffered in Mississippi, which is not the fact. I here is, however, an analogy which is
afforded by the criminal law, but which points away from the conclusion appellee's counsel
desire us to reach. This is found in that well established doctrine of criminal law, that where
the unlawful act is committed in one jurisdiction or State and takes effect-produces the
result which it is the purpose of the law to prevent, or, it having ensued, punish for-in
another jurisdiction or State, the crime is deemed to have been committed and is punished
in that jurisdiction or State in which the result is manifested, and not where the act was
committed. 1 Bish. Cr. Law, 110 et seq.; 1 Bish. Cr. Pro. 53 et seq.
Another consideration-that referred to above-it is insisted, entitles this plaintiff to recover
here under the Employer's Liability Act for an injury inflicted beyond the territorial
operation of that act. This is claimed upon the fact that at the time :plaintiff was injured he
was in the dis charge of duties which rested on him by the terms of a contract between him
and defendant which had been entered into in Alabama, and, hence, was an Alabama
contract, in connection with the facts that plaintiff was and is a citizen of this State, and the
defendant is an Alabama corporation. These latter facts-of citizenship and domicile
respectively of plaintiff and defendantare of no importance in this connection, it seems to
us, further than this: they may tend to show that the contract was made here, which is not
controverted, and if the plaintiff has a cause of action at all, he, by reason of them, may
prosecute it in our courts. They have no bearing on the primary question of existence of a
cause of action, and as that is the question before us, we need not further advert to the
fact of plaintiff's citizenship or defendant's domicile.
The contract was that plaintiff should serve the defendant in the capacity of a brakeman on
its freight train between Birmingham, Alabama, and Meridian, Mississippi, and should
receive as compensation a stipulated sum for each trip from Birmingham to Meridian and
return. The theory is that the Employer's Liability Act became a part of this contract; that
the duties and liabilities which It prescribes became contractual duties and liabilities, or
duties and liabilities springing out of the contract, and that these duties [136] attended
upon the execution whenever its performance was requiredin Mississippi as well as in
Alabamaand that the liability prescribed for a failure to perform any of such duties
attached upon such failure and consequent injury wherever it occurred, and was

enforceable here because imposed by an Alabama contract notwithstanding the remission

of duty and the resulting injury occurred in Mississippi, under whose laws no liability was
incurred by such remission. The argument is that a contract for service is a condition
precedent to the application of the statute, and that "as soon as the contract is made the
rights and obligations of the parties, under the Employer's Act, became vested and fixed,"
so that "no subsequent repeal of the law could deprive the injured party of his rights nor
discharge the master from his liabilities," &c., &c. I this argument is sound, and it is sound
if the duties and liabilities pre scribed by the act can be said to be contractual duties and
obligations at all, it would lead to conclusions the possibility of which has not hitherto been
suggested by any court or law writer, and which, to say the least, would be astounding to
the profession. For instance: If the act of 1885 becomes a part of every contract of service
entered into since its passage, just "as if such law were in so many words expressly
included in the contract as a part thereof," as counsel insist it did, so as to make the
liability of the master to pay damages from injuries to a fellow-servant of his negligent
employe, a contractual obligation, no reason can be conceived why the law existing in this
regard prior to the pas sage of that act did not become in like manner a part of every
contract of service then entered into, so that every such contract would be deemed to
contain stipulations for the non-liability of the master for injuries flowing from the
negligence of a fellow-servant, and confining the injured servant's right to damage to a
claim against his negligent fellow-servant-the former, in other words, agreeing to look
alone to the latter. There were many thousands of such contracts existing in this country
and England at the time when statutes similar to section 2590 of our Code were enacted,
there were indeed many thousands of such contracts existing in Alabama when that
section became the law of this State. Each of these contracts, if the position of plaintiff as
to our statute being embodied into the terms of his contract so that its duties were
contractual duties, and its liabilities contractual obligations to pay money can be
maintained, involved the assurances of organic provisions, State and Federal, of the
continued non-liability of the master for the [137] negligence of his servants,
notwithstanding the passage of such statutes. Yet these statutes were passed, and they
have been applied to servants under pre-existing contracts as fully as to servants under
subsequent contracts, and there has never been a suggestion even in any part of the
commonlaw world that they were not rightly so applied. If plaintiff's contention is well
taken, many a judgment has gone on the rolls in this State, and throughout the country,
and has been satisfied, which palpably overrode vested rights without the least suspicion
on the part of court or counsel that one of the most familiar ordinances of the fundamental
law was being violated. Nay more, another result not heretofore at all contemplated would
ensue. Contracts for serving partly in Alabama might be now entered into in adjoining
States where the common-law rule still obtains, as in Mississippi, for instance, where the
servant has no right to recover for the negligence of his fellow, and the assumption of this
risk under the law becoming, according to the argument of counsel, a contractual
obligation to bear it, such contracts would be good in Alabama and as to servants entering
into them, our statute would have no operation even upon negligence and resulting injury
within its terms occurring wholly in Alabama. And on the other hand, if this defendant is
under a contractual obligation to pay the plaintiff the dam ages sustained by him because
of the injury inflicted in Mississippi, the contract could be of course enforced in Mississippi
and damages there awarded by its courts, not withstanding the law of that State provides
that there can be no recovery under any circumstances whatever by one servant for the
negligence of his fellow employe. We do not suppose that such a proposition ever has been
or ever will be made in the courts of Mississippi. Yet that it should be made and sustained is
the. natural and necessary sequence of the position advanced in this case. These
considerations demonstrate the infirmity of plaintiff's position in this connection, and serve
to show the necessity and propriety of the conclusion we propose to announce on this part
of the case. That conclusion is, that the duties and liabilities incident to the relation
between the plaintiff and the defendant which are involved in this case, are not imposed by
and do not rest in or spring from the contract between the parties. The only office of the
contract, under section 2590 of the Code, is the establishment of a relation between them,

that of master and servant; and it is upon that relation, that incident or consequence of the
contract, and not upon the rights of the parties under the contract, that our statute
operates. The law is not con-[138]-cerned with the contractual stipulations, except in so far
as to determine from them that the relation upon which it is to operate exists. Finding this
relation the statute imposes certain duties and liabilities on the parties to it wholly
regardless of the stipulations of the contract as to the rights of the parties under it, and, it
may be, in the teeth of. such stipulations. It is the purpose of the statute and must be the
limit of its operation to govern persons standing in the relation of master and servants to
each other in respect of their conduct in certain particulars within the State of Alabama.
Mississippi has the same right to establish govern mental rules for such persons within her
borders as Alabama; and she has established rules which are different from those of our
law. And the conduct of such persons toward each other is, when its legality is brought in
question, to he adjudged by the rules of the one or the other States as it falls territorially
within the one or the other. The doctrine is like that which prevails in respect of other
relations, as that of man and wife. Marriage is a contract. The entering into this contract
raises up certain duties and imposes certain liabilities in all civilized countries. What these
duties and liabilities are at the place of the contract are determinable by the law of that
place ; but when the parties go into other jurisdictions, the relation created by the contract
under the laws of the place of its execution will he recognized, but the personal duties,
obligations and liabilities incident to the relation are such as exist under the law of the
jurisdiction in which an act is done or omitted as to the legality, effect or consequence of
which the question arises. It might as well he said where there is a marriage in Alabama
and the parties remove to Mississippi, and the wife there makes a contract which is void in
Mississippi but valid under our statute, and subsequently they return to Alabama, that our
courts will enforce that contract, or if such husband while in Mississippi does an act which
is innocuous and lawful in that State, but which if done here would entail liability upon him,
and the parties afterwards return here, that the liability imposed by our laws could be
enforced here, because the parties entered into the contract here, as that a master is liable
here for conduct towards his servant which was proper, or at least involved no liability,
where it took place, simply because the contract which created the relation was entered
into in this State. The whole argument is at fault. The only true doctrine is that each
sovereignty, state or nation, has the exclusive power to finally determine and declare what
acts or [139] omission in the conduct of one to another, whether they be strangers or
sustain relations to each other which the law recognizes, as parent and child, husband and
wife, master and servant, and the like, shall impose a liability in damages for the
consequent injury, and the courts of no other sovereignty can impute a damnifying quality
to an act or omission which afforded no cause of action where it transpired. These
propositions find illustration and support in the case of Whitford v. The Panama R. R. Co., 23
N.Y. 465, where the relation involved was that of carrier and passenger, a relation which
had been created by a contract made in New York, between a corporation and a citizen
thereof for carriage, commencing in that State and ending in San Francisco, via Panama
and over the Panama railroad. The passenger was killed through the fault of the
corporation's servants while being transported along this railroad. The law of New York
gave to the personal representative of a person whose death was caused by the wrongful
act or omission of another, a right of action therefor in all cases where the deceased, had
the injury fallen short of death, could have recovered. It did not appear that the laws of
New Granada where the injury was inflicted, authorized any recovery on the facts alleged
and proved. It was urged, as here, that the domicile of the parties and the fact that they
contracted in New York took the case out of general rules as to territorial limitations upon
the operation of statutes, but the plaintiff was non-suited, it being held in effect that the
laws of New Granada where controlling as to the duties and liabilities incident to the
relation which existed between them, while the contract of carriage was being performed
in that country, and that the carrier so far as care and diligence were concerned owed the
passenger no duties there except such as were imposed upon the relation by the local law,
and that no liability for negligence and its results not prescribed by that law rested on the
company. And the court, inter alia, said: 'Suppose the government of New Granada to have

enacted that the proprietors of a railroad company should not be responsible for the
negligence of its servants, provided there was no want of due care in selecting them; it
could not be pretended that its will could be set at naught by prosecuting the corporation
in the courts of another State where the law was different. . . . The true theory is, that no
suit whatever respecting this injury could be sustained in the courts of this State, except
pursuant to the law of international comity. By that law foreign contracts and foreign
transactions, out of which liabilities have arisen, [140] may be prosecuted in our tribunals
by the implied assent of the government of this State ; but in all such cases, we administer
the foreign law as from the proofs we find it to be, or as without proofs, we presume it to
be." So, in the case of Gray v. Jackson & Co., 51 N. H., 9, there was a contract of
affreightment by the terms of which goods were to be carried out of one State into and
through other States. They were lost in a State other than that in which the con tract was
made and the carriage commenced. By the law of the place of the contract the carrier was
liable for the loss under the circumstances shown in evidence had it occurred in that State.
By the law of the State where the loss occurred, however, the carrier was not liable. In an
action for the loss prosecuted in the State of the contract, the law, not of that State, but of
the place of the loss which operated as to the particular transaction on the relation of
shipper and carrier and prescribed the duties and liabilities incident to that relation in that
State, regardless of the place where the contract creating the relation was entered into,
was applied and made to determine the rights of the parties to be other than they were
under the law of the place of the contract which was also, as here, the place of the forum.
The foregoing views will suffice to indicate the grounds of our opinion that the rights of this
plaintiff are determinable solely by the law of the State of Mississippi, and of our conclusion
that upon no aspect or tendency of the evidence as to the circumstances under which the
injury was sustained and as to the laws of Mississippi obtaining in the premises was the
plaintiff entitled to recover.
The general affirmative charge requested for defendant should have been given. The other
very numerous assignments of error need not be considered.
For the error in refusing to instruct the jury to find for the defendant if they believed the
evidence, the judgment is reversed and the cause will be remanded.

ALASKA PACKERS ASS'N v. INDUSTRIAL ACCIDENT COMMISSION OF CALIFORNIA

et al.

294 U.S. 532 (55 S.Ct. 518, 79 L.Ed. 1044)

ALASKA PACKERS ASS'N v. INDUSTRIAL ACCIDENT COMMISSION OF CALIFORNIA
et al.
No. 465.
Argued: Feb. 811, 1935.
Decided: March 11, 1935.
opinion, STONE [HTML]
Messrs. Francis Gill and Frank D. Madison, both of San Francisco, Cal., for appellant.
Argument of Counsel from pages 533-536 intentionally omitted
Messrs. Everett A. Corten and George C. Faulkner, both of San Francisco, Cal., for appellees.
TOP
Mr. Justice STONE delivered the opinion of the Court.
This is an appeal under section 237 of the Judicial Code (28 USCA 344) from a judgment
of the Supreme Court of California, 34 P.(2d) 716, upholding an award of compensation, by
the state Industrial Accident Commission, to appellee Palma against appellant, his
employer, and holding that the award does not infringe prohibitions of the Federal
Constitution. The award was made in conformity to the statutes of California, where the
contract of employment was entered into, rather than those of Alaska, where the injury
occurred.
On May 13, 1932, Palma, a nonresident alien, and appellant, doing business in California,
executed at San Francisco a written contract of employment. Palma agreed to work for
appellant in Alaska during the salmon canning season; the appellant agreed to transport
him to Alaska, and, at the end of the season, to return him to San Francisco where he was
to be paid his stipulated wages, less advances. The contract recited that appellant had
elected to be bound by the Alaska Workmen's Compensation Law 1 and stipulated that the
parties should be subject to and bound by the provisions of that statute. Section 58 of the
California Workmen's Compensation Act (St. Cal. 1917, p. 870, 58) 2 was then in force,
which provides:
'The commission shall have jurisdiction over all controversies arising out of injuries suffered
without the territorial limits of this state in those cases where the injured employee is a
resident of this state at the time of the injury and the contract of hire was made in this
state. * * *'
At that time the California Supreme Court had held in Quong Ham Wah Co. v. Industrial
Accident Commission, 184 Cal. 23, 3644, 192 P. 1021, 12 A.L.R. 1190 (writ of error
dismissed, 255 U.S. 445, 41 S.Ct. 373, 65 L.Ed. 723), that this section was applicable to
nonresidents of California, since the privileges and immunities clause of the Federal
Constitution prevented giving any effect to the requirement that the employee be a
resident. The California Workmen's Compensation Act also provides, section 27(a), St. Cal.
1923, p. 855, 27(a), as amended by St. Cal. 1931, p. 1950:
'No contract, rule or regulation shall exempt the employer from liability for the
compensation fixed by this act. * * *'

In August, 1932, after his return from Alaska to California, the employee applied for and
later received an award by the California Commission in compensation for injuries received
by him in the course of his employment in Alaska. On petition for review by the state
Supreme Court, appellant assailed the California statute, as he does here, as invalid under
the due process and the full faith and credit clauses of the Federal Constitution. In so far as
the California statute denies validity to the agreement that the parties should be bound by
the Alaska Workmen's Compensation Act, and attempts to give a remedy for injuries
suffered by a nonresident employee without the state, it is challenged as a denial of due
process. Petitioner also insists that as the Alaska statute affords, in Alaska, an exclusive
remedy for the injury which occurred there, the California courts denied full faith and credit
to the Alaska statute by refusing to recognize it as a defense to the application for an
award under the California statute.
In refusing to set aside the award of the state commission, the Supreme Court of California
ruled, as in Quong Ham Wah Co. v. Industrial Accident Commission, supra, that section 58
of the California compensation act was applicable to Palma, although a nonresident alien;
that, as the contract of employment was entered into within the state, the stipulation that
the Alaska act should govern was invalid under section 27(a). It concluded that the Alaska
statute afforded a remedy to the employee in Alaska and held that by setting up the
defense of the Alaska statute in California the two statutes were brought into conflict, and
that in the circumstances neither the due process clause nor the full faith and credit clause
denied to the state the power to apply its own law, to the exclusion of the Alaska act in
fixing and awarding compensation for the injury.
1. The question first to be considered is whether a state, which may constitutionally impose
on employer and employee a system of compensation for injuries to the employee in the
course of his employment within the state, New York Certral R. Co. v. White, 243 U.S. 188,
37 S.Ct. 247, 61 L.Ed. 667, L.R.A. 1917D, 1, Ann. Cas. 1917D, 629; Mountain Timber Co. v.
Washington, 243 U.S. 219, 37 S.Ct. 260, 61 L.Ed. 685, Ann. Cas. 1917D, 642, is precluded
by the due process clause, in the special circumstances of this case, from imposing liability
for injuries to the employee occurring in Alaska.
The California statute does not purport to have any extraterritorial effect, in the sense that
it undertakes to impose a rule for foreign tribunals, nor did the judgment of the state
Supreme Court give it any. The statute assumes only to provide a remedy to be granted by
the California Commission for injuries, received in the course of employment entered into
within the state, wherever they may occur. Compare Bradford Electric Light & Power Co. v.
Clapper, 286 U.S. 145, 153, 52 S.Ct. 571, 76 L.Ed. 1026, 82 A.L.R. 696. We assume that in
Alaska the employee had he chosen to do so, could have claimed the benefits of the Alaska
statute, and that if any effect were there given to the California statute, it would be only by
comity or by virtue of the full faith and credit clause. Bradford Electric Light & Power Co. v.
Clapper, supra.
The due process clause denies to a state any power to restrict or control the obligation of
contracts executed and to be performed without the state, as an attempt to exercise power
over a subject matter not within its constitutional jurisdiction. New York Life Insurance Co.
v. Head, 234 U.S. 149, 162164, 34 S.Ct. 879, 58 L.Ed. 1259; New York Life Insurance Co.
v. Dodge, 246 U.S. 357, 377, 38 S.Ct. 337, 62 L.Ed. 772, Ann. Cas. 1918E, 593; Home
Insurance Co. v. Dick, 281 U.S. 397, 407, 408, 50 S.Ct. 338, 74 L.Ed. 926, 74 A.L.R. 701;
compare National Union Fire Insurance Co. v. Wanberg, 260 U.S. 71, 75, 43 S.Ct. 32, 67
L.Ed. 136. Similarly, a state may not penalize or tax a contract entered into and to be
performed outside the state, although one of the contracting parties is within the state.
Allgeyer v. Louisiana, 165 U.S. 578, 17 S.Ct. 427, 41 L.Ed. 832; St. Louis Cotton Compress
Co. v. Arkansas, 260 U.S. 346, 348, 43 S.Ct. 125, 67 L.Ed. 297; Compania General de
Tabacos de Filipinas v. Collector, 275 U.S. 87, 48 S.Ct. 100, 72 L.Ed. 177.

But where the contract is entered into within the state, even though it is to be performed
elsewhere, its terms, its obligation, and its sanctions are subject, in some measure, to the
legislative control of the state. The fact that the contract is to be performed elsewhere
does not of itself put these incidents beyond reach of the power which a state may
constitutionally exercise. Selover, Bates & Co. v. Walsh, 226 U.S. 112, 123, 33 S.Ct. 69, 57
L.Ed. 146; Mutual Life Insurance Co. v. Liebing, 259 U.S. 209, 214, 42 S.Ct. 467, 66 L.Ed.
900; Manhattan Life Insurance Co. v. Cohen, 234 U.S. 123, 136, 34 S.Ct. 874, 58 L.Ed.
1245; compare AEtna Life Insurance Co. v. Dunken, 266 U.S. 389, 397400, 45 S.Ct. 129,
69 L.Ed. 342.
While similar power to control the legal consequences of a tortious act committed
elsewhere has been denied, Western Union Telegraph Co. v. Brown, 234 U.S. 542, 547, 34
S.Ct. 955, 58 L.Ed. 1457; Western Union Telegraph Co. v. Chiles, 214 U.S. 274, 278, 29 S.Ct.
613, 53 L.Ed. 994; compare Western Union Telegraph Co. v. Commercial Milling Co., 218
U.S. 406, 31 S.Ct. 59, 54 L.Ed. 1088, 36 L.R.A.(N.S.) 220, 21 Ann.Cas. 815, the liability
under Workmen's Compensation Acts is not for a tort. It is imposed as an incident of the
employment relationship, as a cost to be borne by the business enterprise, rather than as
an attempt to extend redress for the wrongful act of the employer. See Bradford Electric
Light & Power Co. v. Clapper, supra, pages 157, 158 of 286 U.S., 52 S.Ct. 571. The
California court has declared: 'The contract creates a relationship under the sanction of the
law and the same law attaches as an incident thereto an obligation to compensate for
injuries sustained abroad, amounting to a sort of compulsory insurance.' Quong Ham Wah
Co. v. Industrial Accident Commission, supra, page 36 of 184 Cal., 192 P. 1021, 1025.
Obviously, the power of a state to effect legal consequences is not limited to occurrences
within the state if it has control over the status which gives rise to those consequences.
That it has power, through its own tribunals, to grant compensation to local employees,
locally employed, for injuries received outside its borders, and likewise has power to forbid
its own courts to give any other form of relief for such injury, was fully recognized by this
Court in Bradford Electric Light & Power Co. v. Clapper, supra, page 156 of 286 U.S., 52
S.Ct. 571. Objections which are founded upon the Fourteenth Amendment must, therefore,
be directed, not to the existence of the power to impose liability for an injury outside state
borders, but to the manner of its exercise as being so arbitrary or unreasonable as to
amount to a denial of due process.
We cannot say that the statutory requirement of California, that the provisions for
compensation shall extend to injuries without the state when the contract for employment
was entered into within it, is given such an unreasonable application in the present case as
to transcend constitutional limitations. The employee, an alien more than 2,000 miles from
his home in Mexico, was, with fifty-three others, employed by petitioner in California. The
contract called for their transportation to Alaska, some 3,000 miles distant, for seasonal
employment of between two and three months, at the conclusion of which they were to be
returned to California, and were there to receive their wages.
The meager facts disclosed by the record suggest a practice of employing workers in
California for seasonal occupation in Alaska, under such conditions as to make it
improbable that the employees injured in the course of their employment in Alaska would
be able to apply for compensation there. It was necessary for them to return to California in
order to receive their full wages. They would be accompanied by their fellow workers, who
would normally be the witnesses required to establish the fact of the injury and its nature.
The probability is slight that injured workmen, once returned to California, would be able to
retrace their steps to Alaska, and there successfully prosecute their claims for
compensation. Without a remedy in California, they would be remediless, and there was
the danger that they might become public charges, both matters of grave public concern to
the state.

California, therefore, had a legitimate public interest in controlling and regulating this
employer-employee relationship in such fashion as to impose a liability upon the employer
for an injury suffered by the employee, and in providing a remedy available to him in
California. In the special circumstances disclosed, the state had as great an interest in
affording adequate protection to this class of its population as to employees injured within
the state. Indulging the presumption of constitutionality which attaches to every state
statute, we cannot say that this one, as applied, lacks a rational basis or involved any
arbitrary or unreasonable exercise of state power.
It is unnecessary to consider what effect should be given to the California statute if the
parties were domiciled in Alaska or were their relationship to California such as to give it a
lesser interest in protecting the employee by securing for him an adequate and readily
available remedy.
In providing a remedy for a liability which the state was authorized to impose, California
was not required by the Fourteenth Amendment to prescribe the Alaska remedy rather
than its own. Only the full faith and credit clause (article 4, 1) imposes on the courts of
one state the duty so to enforce the laws of another.
Nor did the state of California exceed its constitutional power by prohibiting any stipulation
exempting the employer from liability for the compensation prescribed by the California
statute. Legislation otherwise within the scope of acknowledged state power, not
unreasonably or arbitrarily exercised, cannot be condemned because it curtails the power
of the individual to contract. Hardware Dealers Mutual Fire Insurance Co. v. Glidden Co.,
284 U.S. 151, 157, 158, 52 S.Ct. 69, 76 L.Ed. 214. As the state had the power to impose the
liability in pursuance of state policy, it was a rational, and therefore a permissible, exercise
of state power to prohibit any contract in evasion of it. Chicago, Burlington & Quincy R. Co.
v. McGuire, 219 U.S. 549, 571, 31 S.Ct. 259, 55 L.Ed. 328; see Second Employers' Liability
Cases (Mondou v. New York, N.H. & H.R. Co., 223 U.S. 1, 52, 32 S.Ct. 169, 56 L.Ed. 327, 38
L.R.A. (N.S.) 44; Philadelphia, Baltimore & Washington R. Co. v. Schubert, 224 U.S. 603,
609, 32 S.Ct. 589, 56 L.Ed. 911).
2. Even though the compensation acts of either jurisdiction may, consistently with due
process, be applied in either, the question remains whether the California court has failed
to accord full faith and credit to the Alaska statute in refusing to allow it as a defense to the
award of the California Commission. Appellant contends that as the provisions of the Alaska
statute conflict with those of the California statutes, the full faith and credit clause and R.S.
905, 906, U.S.C., title 28, 687, 688 (28 USCA 687, 688), requiring that full faith and
credit be accorded to territorial statutes, see Atchison, Topeka & Santa Fe Ry. Co. v. Sowers,
213 U.S. 55, 64, 65, 29 S.Ct. 397, 53 L.Ed. 695, compel recognition of the Alaska statute as
a defense to the proceedings before the California Commission; that the award of the
Commission should accordingly be set aside, leaving the employee to his remedy under the
Alaska statute in California, if California provides the remedy, or remitting the parties to
their proceeding in Alaska under the territorial statute.
Both statutes are compensation acts, substituting for the common-law recovery for
negligence a right to recover compensation at specified rates for injuries to employees in
the course of their employment. The California act is compulsory, section 6(a), St. Cal.
1917, p. 834, as amended by St. 1929, p. 430; the Alaska act is similarly effective, unless
the employer or employee elects not to be bound by it, sections 1, 31, 35, which in this
case they have not done. The California act is administered by a Commission; the Alaska
act provides for recovery by suit in the courts of the territory, brought in the Judicial
division where the injury occurs (sections 24, 25). Each act provides that the liability
imposed and the remedy given by it are in lieu of all others for the injury suffered. Sections
6(a), 27(a) of the California act; sections 1, 10, 28 of the Alaska act. While section 58 of the
California statute authorizes the Commission to make an award for injuries suffered without

the state, when the contract of employment is entered into within, it does not purport to
provide, by regulation of the contract of employment or otherwise, that the parties may not
resort, without the state, to other remedies given by the statutes in force at the place of
injury. Compare Bradford Electric Light & Power Co. v. Clapper, supra, page 153 of 286 U.S.,
52 S.Ct. 571. The Alaska act, section 25, provides that no action shall be brought under the
statute in any court outside the territory, except in the case where it is not possible to
obtain service of process on the defendant within the territory; it is conceded that
appellant may there be served.
Petitioner, in relying on the Alaska statute as a defense in California, points out that it
makes no distinction between residents and nonresidents, but gives a remedy to every
employee injured in the course of his employment in Alaska, and invokes the rule, often
followed in this Court, that suits to recover for personal injury are transitory, and that the
jurisdiction creating the right may not, by restricting the venue, preclude recovery in any
court outside the state having jurisdiction. See Atchison, Topeka & Santa Fe Ry. Co. v.
Sowers, supra, page 70 of 213 U.S., 29 S.Ct. 397; Tennessee Coal, Iron & R. Co. v. George,
233 U.S. 354, 34 S.Ct. 587, 58 L.Ed. 997. The Supreme Court of California, accepting this
view, nevertheless refused to give effect to the Alaska statute because of its conflict with
the California compensation act. Since each statute provides a different remedy, the court
recognized that, by setting up the Alaska statute as a defense to the award of the
Commission, the two statutes were brought into direct conflict. It resolved the conflict by
holding that the courts of California were not bound by the full faith and credit clause to
apply the Alaska statute instead of its own.
To the extent that California is required to give full faith and credit to the conflicting Alaska
statute, it must be denied the right to apply in its own courts a statute of the state, lawfully
enacted in pursuance of its domestic policy. We assume, as did the state court, that the
remedy provided in the Alaska statute is one which could also be applied by the California
courts, except for the conflict. We also assume, as the parties concede, that by R.S., 905,
906, the command of the full faith and credit clause is made applicable to territorial
statutes with the same force and effect as that of the constitutional provision with respect
to statutes of the states, see Embry v. Palmer, 107 U.S. 3, 810, 2 S.Ct. 25, 27 L.Ed. 346;
Atchison, Topeka & Santa Fe Ry. v. Sowers, supra pages 64, 65 of 213 U.S., 29 S.Ct. 397. 3
The subject of our inquiry is therefore whether the full faith and credit clause requires the
state of California to give effect to the Alaska statute rather than its own.
It has often been recognized by this Court that there are some limitations upon the extent
to which a state will be required by the full faith and credit clause to enforce even the
judgment of another state, in contravention of its own statutes or policy. See State of
Wisconsin v. Pelican Insurance Co., 127 U.S. 265, 8 S.Ct. 1370, 32 L.Ed. 239; Huntington v.
Attrill, 146 U.S. 657, 13 S.Ct. 224, 36 L.Ed. 1123; Finney v. Guy, 189 U.S. 335, 22 S.Ct. 558,
47 L.Ed. 839; see, also, Clarke v. Clarke, 178 U.S. 186, 20 S.Ct. 873, 44 L.Ed. 1028; Hood v.
McGehee, 237 U.S. 611, 35 S.Ct. 718, 59 L.Ed. 1144; compare Gasquet v. Fenner, 247 U.S.
16, 38 S.Ct. 416, 62 L.Ed. 956.
In the case of statutes, the extra-state effect of which Congress has not prescribed, where
the policy of one state statute comes into conflict with that of another, the necessity of
some accommodation of the conflicting interests of the two states is still more apparent. A
rigid and literal enforcement of the full faith and credit clause, without regard to the statute
of the forum, would lead to the absurd result that, wherever the conflict arises, the statute
of each state must be enforced in the courts of the other, but cannot be in its own. Unless
by force of that clause a greater effect is thus to be given to a state statute abroad than
the clause permits it to have at home, it is unavoidable that this Court determine for itself
the extent to which the statute of one state may qualify or deny rights asserted under the
statute of another. See Olmsted v. Olmsted, 216 U.S. 386, 30 S.Ct. 292, 54 L.Ed. 530, 25

L.R.A.(N.S.) 1292; AEtna Life Insurance Co. v. Dunken, supra, page 393 of 266 U.S., 45 S.Ct.
129.
The necessity is not any the less whether the statute and policy of the forum is set up as a
defense to a suit brought under the foreign statute or the foreign statute is set up as a
defense to a suit or proceedings under the local statute. In either case, the conflict is the
same. In each, rights claimed under one statute prevail only by denying effect to the other.
In both the conflict is to be resolved, not by giving automatic effect to the full faith and
credit clause, compelling the courts of each state to subordinate its own statutes to those
of the other, but by appraising the governmental interests of each jurisdiction, and turning
the scale of decision according to their weight.
The enactment of the present statute of California was within state power and infringes no
constitutional provision. Prima facie every state is entitled to enforce in its own courts its
own statutes, lawfully enacted. One who challenges that right, because of the force given
to a conflicting statute of another state by the full faith and credit clause, assumes the
burden of showing, upon some rational basis, that of the conflicting interests involved
those of the foreign state are superior to those of the forum. It follows that not every
statute of another state will override a conflicting statute of the forum by virtue of the full
faith and credit clause; that the statute of a state may sometimes override the conflicting
statute of another, both at home and abroad; and, again, that the two conflicting statutes
may each prevail over the other at home, although given no extraterritorial effect in the
state of the other.
This was fully recognized by this Court in Bradford Electric Light & Power Co. v. Clapper,
supra, pages 157162 of 286 U.S., 52 S.Ct. 571. There, upon an appraisal of the
governmental interests of the two states, Vermont and New Hampshire, it was held that the
compensation act of Vermont, where the status of employer and employee was
established, should prevail over the conflicting statute of New Hampshire, where the injury
occurred and the suit was brought. In reaching that conclusion, weight was given to the
following circumstances: That liability under the Vermont act was an incident of the status
of employer and employee created within Vermont, and, as such, continued in New
Hampshire where the injury occurred; that it was a substitute for a tort action, which was
permitted by the statute of New Hampshire; that the Vermont statute expressly provided
that it should extend to injuries occurring without the state and was interpreted to preclude
recovery by proceedings brought in any other state; and that there was no adequate basis
for saying that the compulsory recognition of the Vermont statute by the courts of New
Hampshire would be obnoxious to the public policy of that state. 4
If, for the reasons given, the Vermont statute was held to override the New Hampshire
statute in the courts of New Hampshire, it is hardly to be supposed that the Constitution
would require it to be given any less effect in Vermont, even though the New Hampshire
statute were set up as a defense to proceedings there. Similarly, in the present case, only if
it appears that, in the conflict of interests which have found expression in the conflicting
statutes, the interest of Alaska is superior to that of California, is there rational basis for
denying the the courts of California the right to apply the laws of their own state. While in
Bradford Electric Light & Power Co. v. Clapper, supra, it did not appear that the
subordination of the New Hampshire statute to that of Vermont, by compulsion of the full
faith and credit clause, would be obnoxious to the policy of New Hampshire, the Supreme
Court of California has declared it to be contrary to the policy of the state to give effect to
the provisions of the Alaska statute and that they conflict with its own statutes.
There are only two differences material for present purposes, between the facts of the
Clapper Case and those presented in this case: The employee here is not a resident of the
place in which the employment was begun, and the employment was wholly to be
performed in the jurisdiction in which the injury arose. Whether these differences, with a

thirdthat the Vermont statute was intended to preclude resort to any other remedy even
without the stateare, when taken with the differences between the New Hampshire and
Alaska compensation laws, sufficient ground for withholding or denying any effect to the
California statute in Alaska, we need not now inquire. But it is clear that they do not lessen
the interest of California in enforcing its compensation act within the state, or give any
added weight to the interest of Alaska in having its statute enforced in California. We need
not repeat what we have already said of the peculiar concern of California in providing a
remedy for those in the situation of the present employee. Its interest is sufficient to justify
its legislation and is greater than that of Alaska, of which the employee was never a
resident and to which he may never return. Nor should the fact that the employment was
wholly to be performed in Alaska, although temporary in character, lead to any different
result. It neither diminishes the interest of California in giving a remedy to the employee,
who is a member of a class in the protection of which the state has an especial interest, nor
does it enlarge the interest of Alaska whose temporary relationship with the employee has
been severed.
The interest of Alaska is not shown to be superior to that of California. No persuasive
reason is shown for denying to California the right to enforce its own laws in its own courts,
and in the circumstances the full faith and credit clause does not require that the statutes
of Alaska be given that effect.
Affirmed.

Messrs. David Rumsey and Mark W. Maclay, both of New

York City, for appellants.
Messrs. John Neethe and H. C. Hughes, both of Galveston, Tex., for appellees.
Argument of Counsel from pages 400-401 intentionally omitted
TOP
Mr. Justice BRANDEIS delivered the opinion of the Court.
Dick, a citizen of Texas, brought this action in a court of that state against Compania
General Anglo-Mexicana de Seguros S. A., a Mexican corporation, to recover on a policy of
fire insurance for the total loss of a tug. Jurisdiction was asserted in rem through
garnishment, by ancillary writs issued against the Home Insurance Company and Franklin
Fire Insurance Company, which reinsured, by contracts with the Mexican corporation, parts
of the risk which it had assumed. The garnishees are New York corporations. Upon them,
service was effected by serving their local agents in Texas appointed pursuant to Texas
statutes, which require the appointment of local agents by foreign corporations seeking
permits to do business within the state.
The controversy here is wholly between Dick and the garnishees. The defendant has never
been admitted to do business in Texas; has not done any business there; and has not
authorized any one to receive service of process or enter an appearance for it in this cause.
It was cited by publication, in accordance with a Texas statute; attorneys were appointed
for it by the trial court; and they filed on its behalf an answer which denied liability. But
there is no contention that thereby jurisdiction in personam over it was acquired. Dick's
claim is that, since the obligation of a reinsurer to pay the original insurer arises upon the
happening of the loss, and is not conditional upon prior payment of the loss by the insurer,
Allemannia Fire Insurance Co. v. Firemen's Insurance Co., 209 U. S. 326, 28 S. Ct. 544, 52 L.
Ed. 815, 14 Ann. Cas. 948; Hicks v. Poe, 269 U. S. 118, 46 S. Ct. 29, 70 L. Ed. 187, the New
York companies are indebted to the Mexican company, and these debts are subject to
garnishment in a proceeding against the latter quasi in rem, even though it is not suable in
personam. The garnishees concede that inability to sue the Mexican corporation in Texas,
in personam, is not material, if a cause of action against it existed at the time of
garnishment and there was within the state a res belonging to it. But they deny the
existence of the cause of action or of the res.

HOME INS. CO. et al. v. DICK et al.

281 U.S. 397 (50 S.Ct. 338, 74 L.Ed. 926)
HOME INS. CO. et al. v. DICK et al.
No. 232.
Argued: Feb. 27, 1930.
Decided: May 5, 1930.
opinion, BRANDEIS [HTML]
Argument of Counsel from pages 397-399 intentionally omitted

Their defense rests upon the following facts: This suit was not commenced till more than
one year after the date of the loss. The policy provided: 'It is understood and agreed that
no judicial suit or demand shall be entered before any tribunal for the collection of any
claim under this policy, unless such suits or demands are filed within one year counted as
from the date on which such damage occurs.' This provision was in accord with the
Mexican law to which the policy was expressly made subject. 1 It was issued by the
Mexican company in Mexico to one Bonner, of Tampico, Mexico, and was there duly
assigned to Dick prior to the loss. It covered the vessel only in certain Mexican waters. The
premium was paid in Mexico; and the loss was 'payable in the City of Mexico in current
funds of the United States of Mexico, or their equivalent elsewhere.' 2 At the time the
policy was issued, when it was assigned to him, and until after the loss, Dick actually
resided in Mexico, although his permanent residence was in Texas. The contracts of
reinsurance were effected by correspondence between the Mexican company in Mexico
and the New York companies in New York. Nothing thereunder was to be done, or was in
fact done, in Texas.

In the trial court, the garnishees contended that, since the insurance contract was made
and was to be performed in Mexico, and the one-year provision was valid by its laws, Dick's
failure to sue within one year after accrual of the alleged cause of action was a complete
defense to the suit on the policy; that this failure also relieved the garnishees of any
obligation as reinsurers, the same defense being open to them, New York State Marine Ins.
Co. v. Protection Ins. Co., 1 Story, 458, 460, Fed. Cas. No. 10,216; and that they,
consequently, owed no debt to the Mexican company subject to garnishment. 3 To this
defense Dick demurred, on the ground that article 5545 of the Texas Revised Civil Statutes
(1925) provides: 'No person, firm, corporation, association or combination of whatsoever
kind shall enter into any stipulation, contract, or agreement, by reason whereof the time in
which to sue thereon is limited to a shorter period than two years. And no stipulation,
contract, or agreement for any such shorter limitation in which to sue shall ever be valid in
this State.'
The trial court sustained Dick's contention and entered judgment against the garnishees.
On appeal, both in the Court of Civil Appeals (8 S.W.(2d) 354) and in the Supreme Court of
the state (15 S.W.(2d) 1028), the garnishees asserted that, as construed and applied, the
Texas statute violated the due process clause of the Fourteenth Amendment and the
contract clause. Both courts treated the policy provision as equivalent to a foreign statute
of limitation; held that article 5545 related to the remedy available in Texas courts;
concluded that it was validly applicable to the case at bar; and affirmed the judgment of
the trial court. The garnishees appealed to this Court on the ground that the statute, as
construed and applied, violated their rights under the Federal Constitution. Dick moved to
dismiss the appeal for want of jurisdiction. Then the garnishees filed, also, a petition for a
writ of certiorari. Consideration of the jurisdiction of this Court on the appeal, and of the
petition for certiorari, was postponed to the hearing of the case on the merits.
First. Dick contends that this Court lacks jurisdiction of the action, because the errors
assigned involve only questions of local law and of conflict of laws. The argument is that,
while a provision requiring notice of loss within a fixed period is substantive because it is a
condition precedent to the existence of the cause of action, the provision for liability only in
case suit is brought within the year is not substantive because it relates only to the remedy
after accrual of the cause of action; that, while the validity, interpretation, and
performance of the substantive provisions of a contract are determined by the law of the
place where it is made and is to be performed, matters which relate only to the remedy are
unquestionably governed by the lex fori; and that, even if the Texas court erred in holding
the statute applicable to this contract, the error is one of state law or of the interpretation
of the contract, and is not reviewable here.
The contention is unsound. There is no dispute as to the meaning of the provision in the
policy. It is that the insurer shall not be liable unless suit is brought within one year of the
loss. Whether the provision be interpreted as making the commencement of a suit within
the year a condition precedent to the existence of a cause of action, or as making failure to
sue within the year a breach of a condition subsequent which extinguishes the cause of
action, is not of legal significance here. 4 Nor are we concerned with the question whether
the provision is properly described as relating to remedy or to substance. However
characterized, it is an express term in the contract of the parties by which the right of the
insurer and the correlative obligation of the insurer are defined. If effect is given to the
clause, Dick cannot recover from the Mexican corporation, and the garnishees cannot be
compelled to pay. If, on the other hand, the statute is applied to the contract, it admittedly
abrogates a contractual right and imposes liability, although the parties have agreed that
there should be none.
The statute is not simply one of limitation. It does not merely fix the time in which the aid
of the Texas courts may be invoked. Nor does it govern only the remedies available in the
Texas courts. It deals with the powers and capacities of persons and corporations. It

expressly prohibits the making of certain contracts. As construed, it also directs the
disregard in Texas of contractual rights and obligations wherever created and assumed;
and it commands the enforcement of obligations in excess of those contracted for.
Therefore, the objection that, as applied to contracts made and to be performed outside of
Texas, the statute violates the Federal Constitution, raises federal questions of substance;
and the existence of the federal claim is not disproved by saying that the statute, or the
one-year provision in the policy, relates to the remedy and not to the substance.
That the federal questions were not raised in the trial court is immaterial. For the Court of
Civil Appeals and the Supreme Court of the State considered the questions as properly
raised in the appellate proceedings, and passed on them adversely to the federal claim.
Chicago, Rock Island & Pacific Ry. Co. v. Perry, 259 U. S. 548, 551, 42 S. Ct. 524, 66 L. Ed.
1056; Sully v. American National Bank, 178 U. S. 289, 298, 20 S. Ct. 935, 44 L. Ed. 1072.
The case is properly here on appeal. The motion to dismiss the appeal is overruled; and the
petition for certiorari is therefore denied.
Second. The Texas statute as here construed and applied deprives the garnishees of
property without due process of law. A state may, of course, prohibit and declare invalid
the making of certain contracts within its borders. Ordinarily, it may prohibit performance
within its borders, even of contracts validly made elsewhere, if they are required to be
performed within the state and their performance would violate its laws. But, in the case at
bar, nothing in any way relating to the policy sued on, or to the contracts of reinsurance,
was ever done or required to be done in Texas. All acts relating to the making of the policy
were done in Mexico. All in relation to the making of the contracts of reinsurance were done
there or in New York. And, likewise, all things in regard to performance were to be done
outside of Texas. Neither the Texas laws nor the Texas courts were invoked for any purpose,
except by Dick in the bringing of this suit. The fact that Dick's permament residence was in
Texas is without significance. At all times here material he was physically present and
acting in Mexico. Texas was therefore without power to affect the terms of contracts so
made. Its attempt to impose a greater obligation than that agreed upon and to seize
property in payment of the imposed obligation violates the guaranty against deprivation of
property without due process of law. Compania General De Tabacos v. Collector of Internal
Revenue, 275 U. S. 87, 48 S. Ct. 100, 72 L. Ed. 177; AEtna Life Ins. Co. v. Dunken, 266 U. S.
389; New York Life Ins. Co. v. Dodge, 246 U. S. 357, 38 S. Ct. 337, 62 L. Ed. 772, Ann. Cas.
1918A, 593. Compare Modern Woodmen of America v. Mixer, 267 U. S. 544, 551, 45 S. Ct.
389, 69 L. Ed. 783, 41 A. L. R. 1384. 5
The cases relied upon, in which it was held that a state may lengthen its statute of
limitations, are not in point. See Atchafalaya Land Co. v. Williams Cypress Co., 258 U. S.
190, 42 S. Ct. 284, 66 L. Ed. 559; National Surety Co. v. Architectural Decorating Co., 226
U. S. 276, 33 S. Ct. 17, 57 L. Ed. 221; Vance v. Vance, 108 U. S. 514, 2 S. Ct. 854, 27 L. Ed.
808. In those cases, the parties had not stipulated a time limit for the enforcement of their
obligations. It is true that a state may extend the time within which suit may be brought in
its own courts, if, in doing so, it violates no agreement of the parties. 6 And, in the absence
of a contractual provision, the local statute of limitation may be applied to a right created
in another jurisdiction even where the remedy in the latter is barred. 7 In such cases, the
rights and obligations of the parties are not varied. When, however, the parties have
expressly agreed upon a time limit on their obligation, a statute which invalidates the
agreement and directs enforcement of the contract after the time has expired increases
their obligation and imposes a burden not contracted for.
It is true also that a state is not bound to provide remedies and procedure to suit the
wishes of individual litigants. It may prescribe the kind of remedies to be available in its
courts and dictate the practice and procedure to be followed in pursuing those remedies.
Contractual provisions relating to these matters, even if valid where made, are often
disregarded by the court of the forum, pursuant to statute or otherwise. But the Texas

statute deals neither with the kind of remedy available nor with the mode in which it is to
be pursued. It purports to create rights and obligations. It may not validly affect contracts
which are neither made nor are to be performed in Texas.
Third. Dick urges that article 5545 of the Texas law is a declaration of its public policy; and
that a state may properly refuse to recognize foreign rights which violate its declared
policy. Doubtless, a state may prohibit the enjoyment by persons within its borders of rights
acquired elsewhere which violate its laws or public policy; and, under some circumstances,
it may refuse to aid in the enforcement of such rights. Bothwell v. Buckbee, Mears Co., 275
U. S. 274, 277, 279, 48 S. Ct. 124, 72 L. Ed. 277; Union Trust Co. v. Grosman, 245 U. S. 412,
38 S. Ct. 147, 62 L. Ed. 368; compare Fauntleroy v. Lum, 210 U. S. 230, 28 S. Ct. 641, 52 L.
Ed. 1039. But the Mexican corporation never was in Texas; and neither it nor the
garnishees invoked the aid of the Texas courts or the Texas laws. The Mexican corporation
was not before the court. The garnishees were brought in by compulsory process. Neither
has asked favors. They ask only to be let alone. We need not consider how far the state
may go in imposing restrictions on the conduct of its own residents, and of foreign
corporations which have received permission to do business within its borders; or how far it
may go in refusing to lend the aid of its courts to the enforcement of rights acquired
outside its borders. It may not abrogate the rights of parties beyond its borders having no
relation to anything done or to be done within them.
Fourth. Finally, it is urged that the Federal Constitution does not require the states to
recognize and protect rights derived from the laws of foreign countries-that as to them the
full faith and credit clause has no application. See AEtna Life Ins. Co. v. Tremblay, 223 U. S.
185, 32 S. Ct. 309, 56 L. Ed. 398. The claims here asserted are not based upon the full faith
and credit clause. Compare Royal Arcanum v. Green, 237 U. S. 531, 35 S. Ct. 724, 59 L. Ed.
1089, L. R. A. 1916A, 771. Modern Woodmen of America v. Mixer, 267 U. S. 544, 45 S. Ct.
389, 69 L. Ed. 783, 41 A. L. R. 1384. They rest upon the Fourteenth Amemdment. Its
protection extends to aliens. Moreover, the parties in interest here are American
companies. The defense asserted is based on the provision of the policy and on their
contracts of reinsurance. The courts of the state confused this defense with that based on
the Mexican Code. They held that, even if the effect of the foreign statute was to extinguish
the right, Dick's removal to Texas prior to the bar of the foreign statute removed the cause
of action from Mexico, and subjected it to the Texas statute of limitation. And they applied
the same rule to the provision in the policy. Whether or not that is a sufficient answer to the
defense based on the foreign law we may not consider; for no issue under the full faith and
credit clause was raised. But in Texas, as elsewhere, the contract was subject to its own
limitations.
Fifth. The garnishees contend that the guaranty of the contract clause relates, not to the
date of enactment of a statute, but to the date of its effect on contracts; that, when issued,
the policy of the Mexican corporation was concededly not subject to Texas law; that,
although the statute relied upon by Dick was passed prior to the making of the contract, it
did not operate upon the contract until this suit was brought in the Texas court; and that,
hence, the statute violates the contract clause. Since we hold that the Texas statute, as
construed and applied, violates the due process clause, we have no occasion to consider
this contention. Nor have we considered their further contention, in reliance upon Morris &
Co. v. Skandinavia Ins. Co., 279 U. S. 405, 49 S. Ct. 360, 73 L. Ed. 762, that there was lack
of jurisdiction over them for purposes of garnishment, because the authorization of service
upon their local agents is limited to suits brought against them as defendants. For this
objection was not made or considered below on constitutional grounds.
Reversed.
CC | Transformed by Public.Resource.Org

1.The policy contained also the provision: 'The present policy is subjected to the disposition
of the Commercial Code, in that it does not alter or modify the stipulations which that same
contains.' The dispositions of the Commercial Code thus incorporated are: 'Article 1038.
The rights of action derived from commercial acts shall be subject to prescription in
accordance with the provisions of this Code. Article 1039. The periods fixed for the
enforcement of rights of action arising out of commercial acts shall be fatal except
restitution against same is given. Article 1043. One year shall prescribe actions derived
from contracts of life insurance, sea and land.'
2. The loss was made payable to Dick and the Texas & Gulf Steamship Company as their
interests might appear. The steamship company and Suderman & Young, Inc., assignee of
part of the cause of action, intervened as plaintiffs, and are joined with Dick as appellees.
As there are no rights peculiar to them, they need not be further referred to. Dick contends
that, since the policy was payable to the Texas & Gulf Steamship Company, the contract
was performable in Texas. The contention is in conflict with the quoted language of the
policy, and there is no provision otherwise lending support to the argument. Texas is
nowhere mentioned in the policy. Moreover, there is nothing in the record to show that the
steamship company's sole place of business was in Texas. The state courts made no
findings on this claim.
3. Besides the defense here discussed the answers both of the Mexican corporation and of
the garnishees alleged: (2) That the suit was not brought within the period provided by the
Commercial Code of Mexico, and that thereby the right of action was completely barred
upon the expiration of one year; (3) that the policy was void because of plaintiff's
misrepresentations as to the value of the vessel; (4) that the vessel was not a total loss,
and was abandoned, in violation of the terms of the policy. None of these defense needs to
be considered.
4. That a provision requiring notice of loss within a fixed period and one requiring the
bringing of suit stand upon the same footing was held in Riddlesbarger v. Hartford
Insurance Co., 7 Wall. 386, 390, 19 L. Ed. 257. Compare Semmes v. Hartford Insurance Co.,
13 Wall. 158, 161, 20 L. Ed. 490. The validity and effectiveness of a clause limiting the time
for suit, in the absence of a controlling statute, was recognized also in Texas, Suggs v.
Travelers' Insurance Co., 71 Tex. 579, 9 S. W. 676, 1 L. R. A. 847. In that case, decided
before the enactment of article 5545, the Texas court upheld a similar provision in an
insurance policy against the claim of an infant without capacity to sue. The court described
the nature of the provision thus at page 581 of 71 Tex., 9 S. W. 676, 677: 'It is said to differ
from the statutory limitation in this: that it does not merely deny the remedy, but forfeits
the liability, when the suit is not brought within the stipulated time.'
5. The division of this court in the Tabacos and Dodge Cases was not on the principle here
stated, but on the question of fact whether there were in those cases things done within
the state of which the state could property lay hold as the basis of the regulations there
imposed. Compare Bothwell v. Buckabee, Mears Co., 275 U. S. 274, 48 S. Ct. 124, 72 L. Ed.
277; Palmetto Fire Ins. Co. v. Conn, 272 U. S. 295, 47 S. Ct. 88, 71 L. Ed. 243. In the
absence of any such things, as in this case, the Court was agreed that a state is without
power to impose either public or private obligations on contracts made outside of the state
and not to be performed there. Compare Mutual Life Insurance Co. v. Liebing, 259 U. S.
209, 42 S. Ct. 407, 66 L. Ed. 900; E. Merick Dodd, Jr., 'The Power of the Supreme Court to
Review State Decisions in the Field of Conflict of Laws,' 39 Harv. L. Rev. (1926) 533, 548.
6. The state courts placed some reliance on Campbell v. Holt, 115 U. S. 620, 6 S. Ct. 209,
29 L. Ed. 483. Whether, as there held, a statute of limitations may also be lengthened so as
to affect liabilities already barred is not here pertinent. There is a clear difference between
the revival of a liability which is unenforceable only because a statute has barred the
remedy regardless of the will of the parties, and the extension of a liability beyond the limit

expressly agreed upon by the parties. Compare National Surety Co. v. Architectural
Decorating Co., 226 U. S. 276, 282, 33 S. Ct. 17, 57 L. Ed. 221; William Danzer & Co. v. Gulf
Island R. R. Co., 268 U. S. 633, 636, 45 S. Ct. 612, 69 L. Ed. 1126.
7. Whether a distinction is to be drawn between statutes of limitation which extinguish or
limit the right and those which merely bar the remedy, we need not now determine.
Compare Davis v. Mills, 194 U. S. 451, 24 S. Ct. 692, 48 L. Ed. 1067, and Texas Portland
Cement Co. v. McCord, 233 U. S. 157, 34 S. Ct. 550, 58 L. Ed. 893, with Canadian Pac. Ry.
Co. v. Johnston (C. C. A.) 61 F. 738, 25 L. R. A. 470.

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 and set
aside the Resolution 1 dated September 27, 1995 and the Decision 2 dated April 10, 1996
of the Court of Appeals 3 in CA-G.R. SP No. 36533, 4 and the Orders 5 dated August 29,
1994 6 and February 2, 1995 7 that were issued by the trial court in Civil Case No. Q-9318394. 8
The pertinent antecedent facts which gave rise to the instant petition, as stated in the
questioned Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines
based in Jeddah, Saudi Arabia. . . .
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 male crew, in
contravention of Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in
Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she
worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the
international
flights. 11

Because she was wrongfully convicted, the Prince of Makkah dismissed the case against
her and allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was
terminated from the service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint 13 for damages against SAUDIA, and
Khaled Al-Balawi ("Al-Balawi"), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the
following grounds, to wit: (1) that the Complaint states no cause of action against Saudia;
(2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set
forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that
the trial court has no jurisdiction to try the case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a
reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped
as party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to
Dismiss Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.
From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994.
It alleged that the trial court has no jurisdiction to hear and try the case on the basis of
Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of
Saudi Arabia. On October 14, 1994, Morada filed her Opposition 22 (To Defendant's Motion
for Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its
Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus
Motion Rule does not apply, even if that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in
the prosecution of the instant case, and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
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
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition
with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining
Order 26 with the Court of Appeals.

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order

27 dated February 23, 1995, prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate
court denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated
February 18, 1995, to wit:

Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7,
1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section
1, Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533
has not yet become final and executory and this Honorable Court can take cognizance of
this case. 33
From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:

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

I.

SO ORDERED.

II.

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.

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS CASE

PHILIPPINE LAW SHOULD GOVERN.

However, during the pendency of the instant Petition, respondent Court of Appeals
rendered the Decision 30 dated April 10, 1996, now also assailed. It ruled that the
Philippines is an appropriate forum considering that the Amended 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.

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 Saudi Arabia, by virtue of the
lex loci delicti commissi rule. 34

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

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".

On the other hand, private respondent contends that since her Amended Complaint is
based on Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a
matter of domestic law. 37
Under the factual antecedents obtaining in this case, there is no dispute that the interplay
of events occurred in two states, the Philippines and Saudi Arabia.

Petitioner SAUDIA raised the following issues:

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

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.

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on
Article 21 of the New Civil Code since the proper law applicable is the law of the Kingdom
of Saudi Arabia inasmuch as this case involves what is known in private international law
as a "conflicts problem". Otherwise, the Republic of the Philippines will sit in judgment of
the acts done by another sovereign state which is abhorred.
II
Leave of court before filing a supplemental pleading is not a jurisdictional requirement.
Besides, the matter as to absence of leave of court is now moot and academic when this
Honorable Court required the respondents to comment on petitioner's April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary Restraining Order Within Ten
(10) Days From Notice Thereof. Further, the Revised Rules of Court should be construed
with liberality pursuant to Section 2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533
entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30, 1996

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.
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 served the international flights.
39

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, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the
New Civil Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice give everyone his due and observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that:
The aforecited provisions on human relations were intended to expand the concept of torts
in this jurisdiction by granting adequate legal remedy for the untold number of moral
wrongs which is impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its
provisions. Thus, we agree with private respondent's assertion that violations of Articles 19
and 21 are actionable, with judicially enforceable remedies in the municipal forum.
Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of
Court on jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City possesses
jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the case is
provided for under Section 1 of Republic Act No. 7691, to wit:
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:

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.

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

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

xxx

The forms in which this foreign element may appear are many. 41 The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign
domicile, or that a contract between nationals of one State involves properties situated in
another State. In other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private respondent
Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign
corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a
flight stewardess, events did transpire during her many occasions of travel across national
borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that
caused a "conflicts" situation to arise.

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 be found, or where the plaintiff or any
of the plaintiff resides, at the election of the plaintiff.

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.

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

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

Weighing the relative claims of the parties, the court a quo found it best to hear the case in
the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff
(private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi
Arabia where she no longer maintains substantial connections. That would have caused a
fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and
inconvenience have been shown by either of the parties. The choice of forum of the
plaintiff (now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein.
By filing her Complaint and Amended Complaint with the trial court, private respondent has
voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions 50 praying for the
dismissal of 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
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 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 subject matter. 52

Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance
both notions of justice and predictability, they do not always do so. The forum is then faced
with the problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a
certain set of facts or rules fall. This process is known as "characterization", or the
"doctrine of qualification". It is the "process of deciding whether or not the facts relate to
the kind of question specified in a conflicts rule." 55 The purpose of "characterization" is to
enable the forum to select the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57 An essential element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of
contact, such as the situs of the res, the place of celebration, the place of performance, or
the place of wrongdoing. 58
Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law. 59 These "test factors" or "points of contact" or
"connecting factors" could be any of the following:
(1)
origin;

The nationality of a person, his domicile, his residence, his place of sojourn, or his

(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 of affreightment. 60 (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 commissi,
modern theories and rules on tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with the modern theories on tort
liability, we find here an occasion to apply the "State of the most significant relationship"
rule, which in our view should be appropriate to apply now, given the factual context of this
case.
In applying said principle to determine the State which has the most significant
relationship, the following contacts are to be taken into account and evaluated according to
their relative importance with respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile,
residence, nationality, place of incorporation and place of business of the parties, and (d)
the place where the relationship, if any, between the parties is centered. 62

As already discussed, there is basis for the claim that over-all injury occurred and lodged in
the Philippines. There is likewise no question that private respondent is a resident Filipina
national, working with petitioner, a resident foreign corporation engaged here in the
business of international air carriage. Thus, the "relationship" between the parties was
centered here, although it should be stressed that this suit is not based on mere labor law
violations. From the record, the claim that the Philippines has the most significant contact
with the matter in this dispute, 63 raised by private respondent as plaintiff below against
defendant (herein petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort 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 matter." 64 As aptly said by private respondent, she has "no obligation to plead and
prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles
19 and 21" of the Civil Code of the Philippines. In her Amended Complaint and subsequent
pleadings, she never alleged that Saudi law should govern this case. 65 And as correctly
held by the respondent appellate court, "considering that it was the petitioner who was
invoking the applicability of the law of Saudi Arabia, then the burden was on it [petitioner]
to plead and to establish what the law of Saudi Arabia is". 66
Lastly, no error could be imputed to the respondent appellate court in upholding the trial
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-9318394 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.

CRESCENT PETROLEUM,
CORPORATION OF INDIA

LTD

v.

M/V

LOK

MAHESHWARI,

THE

SHIPPING

PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a) reversal of the November
28, 2001 Decision of the Court of Appeals in CA-G.R. No. CV-54920,[1] which dismissed for
want of jurisdiction the instant case, and the September 3, 2002 Resolution of the same
appellate court,[2] which denied petitioners motion for reconsideration, and (b)
reinstatement of the July 25, 1996 Decision[3] of the Regional Trial Court (RTC) in Civil Case
No. CEB-18679, which held that respondents were solidarily liable to pay petitioner the sum
prayed for in the complaint.
The facts are as follows: Respondent M/V Lok Maheshwari (Vessel) is an oceangoing vessel
of Indian registry that is owned by respondent Shipping Corporation of India (SCI), a
corporation organized and existing under the laws of India and principally owned by the
Government of India. It was time-chartered by respondent SCI to Halla Merchant Marine Co.
Ltd. (Halla), a South Korean company. Halla, in turn, sub-chartered the Vessel through a
time charter to Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered the
Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations
organized and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd.
(Crescent), a corporation organized and existing under the laws of Canada that is engaged
in the business of selling petroleum and oil products for the use and operation of
oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner
Crescent granted and confirmed the request through an advice via facsimile dated
November 2, 1995. As security for the payment of the bunker fuels and related services,
petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine Petrobulk
Limited (Marine Petrobulk), another Canadian corporation, for the physical delivery of the
bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to
US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of
Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly
acknowledged and received the delivery receipt. Marine Petrobulk issued an invoice to
petitioner Crescent for the US$101,400.00 worth of the bunker fuels. Petitioner Crescent
issued a check for the same amount in favor of Marine Petrobulk, which check was duly
encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November
21, 1995 to Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or
Charterers of M/V Lok Maheshwari in the amount of US$103,544.00 with instruction to
remit the amount on or before December 1, 1995. The period lapsed and several demands
were made but no payment was received. Also, the checks issued to petitioner Crescent as
security for the payment of the bunker fuels were dishonored for insufficiency of funds. As
a consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for
interest, tracking fees, and legal fees.

On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent
instituted before the RTC of Cebu City an action for a sum of money with prayer for
temporary restraining order and writ of preliminary attachment against respondents Vessel
and SCI, Portserv and/or Transmar. The case was raffled to Branch 10 and docketed as Civil
Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at
P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary restraining order
and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and SCI, and Portserv
and/or Transmar through the Master of the Vessel. On May 28, 1996, respondents Vessel
and SCI, through Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent exparte motion to approve Pioneers letter of undertaking, to consider it as counter-bond and
to discharge the attachment. On May 29, 1996, the trial court granted the motion; thus, the
letter of undertaking was approved as counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of petitioner Crescent, the trial
court declared respondents Vessel and SCI, Portserv and/or Transmar in default. Petitioner
Crescent was allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff
[Crescent] and against the defendants [Vessel, SCI, Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the
following:
(a) the sum of US$103,544.00, representing the outstanding obligation;
(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per annum
for the period thereafter, until the principal account is fully paid;
(c) attorneys fees of P300,000.00; and
(d) P200,000.00 as litigation expenses.
SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals. They
attached copies of the charter parties between respondent SCI and Halla, between Halla
and Transmar, and between Transmar and Portserv. They pointed out that Portserv was a
time charterer and that there is a clause in the time charters between respondent SCI and
Halla, and between Halla and Transmar, which states that the Charterers shall provide and
pay for all the fuel except as otherwise agreed. They submitted a copy of Part II of the
Bunker Fuel Agreement between petitioner Crescent and Portserv containing a stipulation
that New York law governs the construction, validity and performance of the contract. They
likewise submitted certified copies of the Commercial Instruments and Maritime Lien Act of
the United States (U.S.), some U.S. cases, and some Canadian cases to support their
defense.
On November 28, 2001, the Court of Appeals issued its assailed Decision, which reversed
that of the trial court, viz:
WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the
Regional Trial Court of Cebu City, Branch 10, is hereby REVERSED and SET ASIDE, and a
new one is entered DISMISSING the instant case for want of jurisdiction.
The appellate court denied petitioner Crescents motion for reconsideration explaining that
it dismissed the instant action primarily on the ground of forum non conveniens
considering that the parties are foreign corporations which are not doing business in the
Philippines.
Hence, this petition submitting the following issues for resolution, viz:

1.
Philippine courts have jurisdiction over a foreign vessel found inside Philippine
waters for the enforcement of a maritime lien against said vessel and/or its owners and
operators;
2.

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

3.
The trial court acquired jurisdiction over the subject matter of the instant
case, as well as over the res and over the persons of the parties;
4.
The enforcement of a maritime lien on the subject vessel is expressly granted
by law. The Ship Mortgage Acts as well as the Code of Commerce provides for relief to
petitioner for its unpaid claim;
5.
The arbitration clause in the contract was not rigid or inflexible but expressly
allowed petitioner to enforce its maritime lien in Philippine courts provided the vessel was
in the Philippines;
6.
The law of the state of New York is inapplicable to the present controversy as
the same has not been properly pleaded and proved;
7.
Petitioner has legal capacity to sue before Philippine courts as it is suing upon
an isolated business transaction;
8.
Respondents were duly served summons although service of summons upon
respondents is not a jurisdictional requirement, the action being a suit quasi in rem;
9.
10.

The trial courts decision has factual and legal bases; and,
The respondents should be held jointly and solidarily liable.

In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign
supplier in a foreign port to a vessel of foreign registry that is owned, chartered and subchartered by foreign entities.
Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise
exclusive original jurisdiction (i)n all actions in admiralty and maritime where the demand
or claim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where such
demand or claim exceeds four hundred thousand pesos (P400,000). Two (2) tests have
been used to determine whether a case involving a contract comes within the admiralty
and maritime jurisdiction of a court - the locational test and the subject matter test. The
English rule follows the locational test wherein maritime and admiralty jurisdiction, with a
few exceptions, is exercised only on contracts made upon the sea and to be executed
thereon. This is totally rejected under the American rule where the criterion in determining
whether a contract is maritime depends on the nature and subject matter of the contract,
having reference to maritime service and transactions.[4] In International Harvester
Company of the Philippines v. Aragon,[5] we adopted the American rule and held that
(w)hether or not a contract is maritime depends not on the place where the contract is
made and is to be executed, making the locality the test, but on the subject matter of the
contract, making the true criterion a maritime service or a maritime transaction.
A contract for furnishing supplies like the one involved in this case is maritime and within
the jurisdiction of admiralty.[6] It may be invoked before our courts through an action in
rem or quasi in rem or an action in personam. Thus: [7]
xxx

Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or
enforcing not only the liens created under Section 580 but also for the collection of any
kind of lien whatsoever.[8] In the Philippines, we have a complete legislation, both
substantive and adjective, under which to bring an action in rem against a vessel for the
purpose of enforcing liens. The substantive law is found in Article 580 of the Code of
Commerce. The procedural law is to be found in Article 584 of the same Code. The result is,
therefore, that in the Philippines any vessel even though it be a foreign vessel found in any
port of this Archipelago may be attached and sold under the substantive law which defines
the right, and the procedural law contained in the Code of Commerce by which this right is
to be enforced.[9] x x x. But where neither the law nor the contract between the parties
creates any lien or charge upon the vessel, the only way in which it can be seized before
judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of
the Rules of Court.[10]
But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent
bases its claim of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No.
1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person
furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other
necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove
that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following
persons shall be presumed to have authority from the owner to procure repairs, supplies,
towage, use of dry dock or marine railway, and other necessaries for the vessel: The
managing owner, ships husband, master or any person to whom the management of the
vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession
or charge of a vessel shall have authority to bind the vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and
agents of a vessel specified in Section 22 of this Decree shall be taken to include such
officers and agents when appointed by a charterer, by an owner pro hac vice, or by an
agreed purchaser in possession of the vessel; but nothing in this Decree shall be construed
to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have
ascertained, that because of the terms of a charter party, agreement for sale of the vessel,
or for any other reason, the person ordering the repairs, supplies, or other necessaries was
without authority to bind the vessel therefor.
Petitioner Crescent submits that these provisions apply to both domestic and foreign
vessels, as well as domestic and foreign suppliers of necessaries. It contends that the use
of the term any person in Section 21 implies that the law is not restricted to domestic
suppliers but also includes all persons who supply provisions and necessaries to a vessel,
whether foreign or domestic. It points out further that the law does not indicate that the
supplies or necessaries must be furnished in the Philippines in order to give petitioner the
right to seek enforcement of the lien with a Philippine court.[11]
Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No.
1521 or the Ship Mortgage Decree of 1978 does not apply to a foreign supplier like
petitioner Crescent as the provision refers only to a situation where the person furnishing
the supplies is situated inside the territory of the Philippines and not where the necessaries
were furnished in a foreign jurisdiction like Canada.[12]
We find against petitioner Crescent.
I.

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the growth
and development of the shipping industry and to extend the benefits accorded to overseas
shipping under Presidential Decree No. 214 to domestic shipping.[13] It is patterned closely
from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to
preferred mortgages.[14] Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship
Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S.
Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S.
jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage
Decree of 1978 applies in the present case.
The various tests used in the U.S. to determine whether a maritime lien exists are the
following:
One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a
foreign port, whether such lien exists, or whether the court has or will exercise jurisdiction,
depends on the law of the country where the supplies were furnished, which must be
pleaded and proved.[15] This principle was laid down in the 1888 case of The Scotia,[16]
reiterated in The Kaiser Wilhelm II[17] (1916), in The Woudrichem[18] (1921) and in The
City of Atlanta[19] (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor
methodologies as the law of the place of supply.[20]
In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New York, joined the crew
of a ship of Danish flag and registry that is owned by a Danish citizen. He signed the ships
articles providing that the rights of the crew members would be governed by Danish law
and by the employers contract with the Danish Seamens Union, of which he was a member.
While in Havana and in the course of his employment, he was negligently injured. He sued
the shipowner in a federal district court in New York for damages under the Jones Act. In
holding that Danish law and not the Jones Act was applicable, the Supreme Court adopted a
multiple-contact test to determine, in the absence of a specific Congressional directive as
to the statutes reach, which jurisdictions law should be applied. The following factors were
considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of
the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6)
inaccessibility of foreign forum; and (7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International
Terminal Operating Co.[22] again considered a foreign seamans personal injury claim under
both the Jones Act and the general maritime law. The Court held that the factors first
announced in the case of Lauritzen were applicable not only to personal injury claims
arising under the Jones Act but to all matters arising under maritime law in general.[23]
Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones Act by a Greek seaman
injured aboard a ship of Greek registry while in American waters. The ship was operated by
a Greek corporation which has its largest office in New York and another office in New
Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a Greek
citizen. The ship was engaged in regularly scheduled runs between various ports of the U.S.
and the Middle East, Pakistan, and India, with its entire income coming from either
originating or terminating in the U.S. The contract of employment provided that Greek law
and a Greek collective bargaining agreement would apply between the employer and the
seaman and that all claims arising out of the employment contract were to be adjudicated
by a Greek court. The U.S. Supreme Court observed that of the seven factors listed in the
Lauritzen test, four were in favor of the shipowner and against jurisdiction. In arriving at
the conclusion that the Jones Act applies, it ruled that the application of the Lauritzen test
is not a mechanical one. It stated thus: [t]he significance of one or more factors must be
considered in light of the national interest served by the assertion of Jones Act jurisdiction.
(footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be
exhaustive. x x x [T]he shipowners base of operations is another factor of importance in
determining whether the Jones Act is applicable; and there well may be others.
The principles enunciated in these maritime tort cases have been extended to cases
involving unpaid supplies and necessaries such as the

cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine
Services v. M/V El Centroamericano.[26]
Three. The factors provided in Restatement (Second) of Conflicts of Law have also been
applied, especially in resolving cases brought under the Federal Maritime Lien Act. Their
application suggests that in the absence of an effective choice of law by the parties, the
forum contacts to be considered include: (a) the place of contracting; (b) the place of
negotiation of the contract; (c) the place of performance; (d) the location of the subject
matter of the contract; and (e) the domicile, residence, nationality, place of incorporation
and place of business of the parties.[27]
In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,[28] an admiralty action
in rem was brought by an American supplier against a vessel of Norwegian flag owned by a
Norwegian Company and chartered by a London time charterer for unpaid fuel oil and
marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed
in London. It was held that because the bunker fuel was delivered to a foreign flag vessel
within the jurisdiction of the U.S., and because the invoice specified payment in the U.S.,
the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals recognized
the modern approach to maritime conflict of law problems introduced in the Lauritzen case.
However, it observed that Lauritzen involved a torts claim under the Jones Act while the
present claim involves an alleged maritime lien arising from unpaid supplies. It made a
disclaimer that its conclusion is limited to the unique circumstances surrounding a
maritime lien as well as the statutory directives found in the Maritime Lien Statute and that
the initial choice of law determination is significantly affected by the statutory policies
surrounding a maritime lien. It ruled that the facts in the case call for the application of the
Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the
congressional intent in enacting the Maritime Lien Statute to protect the interests of
American supplier of goods, services or necessaries by making maritime liens available
where traditional services are routinely rendered. It concluded that the Maritime Lien
Statute represents a relevant policy of the forum that serves the needs of the international
legal system as well as the basic policies underlying maritime law. The court also gave
equal importance to the predictability of result and protection of justified expectations in a
particular field of law. In the maritime realm, it is expected that when necessaries are
furnished to a vessel in an American port by an American supplier, the American Lien
Statute will apply to protect that supplier regardless of the place where the contract was
formed or the nationality of the vessel.
The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery
I[29] where the American court refused to apply the Federal Maritime Lien Act to create a
maritime lien for goods and services supplied by foreign companies in foreign ports. In this
case, a Swedish company supplied radio equipment in a Spanish port to refurbish a
Panamanian vessel damaged by fire. Some of the contract negotiations occurred in Spain
and the agreement for supplies between the parties indicated Swedish companys
willingness to submit to Swedish law. The ship was later sold under a contract of purchase
providing for the application of New York law and was arrested in the U.S. The U.S. Court of
Appeals also held that while the contacts-based framework set forth in Lauritzen was useful
in the analysis of all maritime choice of law situations, the factors were geared towards a
seamans injury claim. As in Gulf Trading, the lien arose by operation of law because the
ships owner was not a party to the contract under which the goods were supplied. As a
result, the court found it more appropriate to consider the factors contained in Section 6 of
the Restatement (Second) of Conflicts of Law. The U.S. Court held that the primary concern
of the Federal Maritime Lien Act is the protection of American suppliers of goods and
services.
The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.[30]
II.
Finding guidance from the foregoing decisions, the Court cannot sustain petitioner
Crescents insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of
1978 and hold that a maritime lien exists.

First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls
under one the law of the forum. All other elements are foreign Canada is the place of the
wrongful act, of the allegiance or domicile of the injured and the place of contract; India is
the law of the flag and the allegiance of the defendant shipowner. Balancing these basic
interests, it is inconceivable that the Philippine court has any interest in the case that
outweighs the interests of Canada or India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the
factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act
of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to
protect Filipino suppliers and was not intended to create a lien from a contract for supplies
between foreign entities delivered in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime
lien exists would not promote the public policy behind the enactment of the law to develop
the domestic shipping industry. Opening up our courts to foreign suppliers by granting
them a maritime lien under our laws even if they are not entitled to a maritime lien under
their laws will encourage forum shopping.
Finally. The submission of petitioner is not in keeping with the reasonable expectation of
the parties to the contract. Indeed, when the parties entered into a contract for supplies in
Canada, they could not have intended the laws of a remote country like the Philippines to
determine the creation of a lien by the mere accident of the Vessels being in Philippine
territory.
III.
But under which law should petitioner Crescent prove the existence of its maritime lien?
In light of the interests of the various foreign elements involved, it is clear that Canada has
the most significant interest in this dispute. The injured party is a Canadian corporation,
the sub-charterer which placed the orders for the supplies is also Canadian, the entity
which physically delivered the bunker fuels is in Canada, the place of contracting and
negotiation is in Canada, and the supplies were delivered in Canada.
The arbitration clause contained in the Bunker Fuel Agreement which states that New York
law governs the construction, validity and performance of the contract is only a factor that
may be considered in the choice-of-law analysis but is not conclusive. As in the cases of
Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose by
operation of law and not by contract because the shipowner was not a party to the contract
under which the goods were supplied.
It is worthy to note that petitioner Crescent never alleged and proved Canadian law as
basis for the existence of a maritime lien. To the end, it insisted on its theory that Philippine
law applies. Petitioner contends that even if foreign law applies, since the same was not
properly pleaded and proved, such foreign law must be presumed to be the same as
Philippine law pursuant to the doctrine of processual presumption.
Thus, we are left with two choices: (1) dismiss the case for petitioners failure to establish a
cause of action[31] or (2) presume that Canadian law is the same as Philippine law. In
either case, the case has to be dismissed.
It is well-settled that a party whose cause of action or defense depends upon a foreign law
has the burden of proving the foreign law. Such foreign law is treated as a question of fact
to be properly pleaded and proved.[32] Petitioner Crescents insistence on enforcing a
maritime lien before our courts depended on the existence of a maritime lien under the
proper law. By erroneously claiming a maritime lien under Philippine law instead of proving
that a maritime lien exists under Canadian law, petitioner Crescent failed to establish a
cause of action.[33]
Even if we apply the doctrine of processual presumption, the result will still be the same.
Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites
for maritime liens on necessaries to exist: (1) the necessaries must have been furnished to
and for the benefit of the vessel; (2) the necessaries must have been necessary for the
continuation of the voyage of the vessel; (3) the credit must have been extended to the
vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries

must be ordered by persons authorized to contract on behalf of the vessel.[34] These do

not avail in the instant case.
First. It was not established that benefit was extended to the vessel. While this is presumed
when the master of the ship is the one who placed the order, it is not disputed that in this
case it was the sub-charterer Portserv which placed the orders to petitioner Crescent.[35]
Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to
prove that benefit was extended to the vessel. Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine products were
necessary for the continuation of the vessel.
Third. It was not established that credit was extended to the vessel. It is presumed that in
the absence of fraud or collusion, where advances are made to a captain in a foreign port,
upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute
her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the
vessel, that they are made upon the credit of the vessel as well as upon that of her owners.
[36] In this case, it was the sub-charterer Portserv which requested for the delivery of the
bunker fuels. The issuance of two checks amounting to US$300,000 in favor of petitioner
Crescent prior to the delivery of the bunkers as security for the payment of the obligation
weakens petitioner Crescents contention that credit was extended to the Vessel.
We also note that when copies of the charter parties were submitted by respondents in the
Court of Appeals, the time charters between respondent SCI and Halla and between Halla
and Transmar were shown to contain a clause which states that the Charterers shall
provide and pay for all the fuel except as otherwise agreed. This militates against petitioner
Crescents position that Portserv is authorized by the shipowner to contract for supplies
upon the credit of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed
where it appears that the repairs and supplies were necessary for the ship and that they
were ordered by the master. This presumption does not arise in this case since the fuels
were not ordered by the master and there was no proof of necessity for the supplies.
Finally. The necessaries were not ordered by persons authorized to contract in behalf of the
vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 the managing owner, the ships husband, master or any person with whom the
management of the vessel at the port of supply is entrusted. Clearly, Portserv, a subcharterer under a time charter, is not someone to whom the management of the vessel has
been entrusted. A time charter is a contract for the use of a vessel for a specified period of
time or for the duration of one or more specified voyages wherein the owner of the timechartered vessel retains possession and control through the master and crew who remain
his employees.[37] Not enjoying the presumption of authority, petitioner Crescent should
have proved that Portserv was authorized by the shipowner to contract for supplies.
Petitioner failed.
A discussion on the principle of forum non conveniens is unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated
November 28, 2001, and its subsequent Resolution of September 3, 2002 are AFFIRMED.
The instant petition for review on certiorari is DENIED for lack of merit. Cost against
petitioner.
SO ORDERED.