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G.R. No. 103493 June 19, 1997
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL
FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC,
VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG,
respondents.
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign
judgment upon the rights of the parties under the same cause of action
asserted in a case in our local court. Petitioners brought this case in the
Regional Trial Court of Makati, Branch 56, which, in view of the pendency at
the time of the foreign action, dismissed Civil Case No. 16563 on the
ground of litis pendentia, in addition to forum non conveniens. On appeal,
the Court of Appeals affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained
separate loans from petitioners Ayala International Finance Limited
(hereafter called AYALA) 1 and Philsec Investment Corporation (hereafter
called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock
owned by Ducat with a market value of P14,088,995.00. In order to
facilitate the payment of the loans, private respondent 1488, Inc., through
its president, private respondent Drago Daic, assumed Ducat's obligation
under an Agreement, dated January 27, 1983, whereby 1488, Inc.
executed a Warranty Deed with Vendor's Lien by which it sold to petitioner
Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris
County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA
extended a loan to ATHONA in the amount of US$2,500,000.00 as initial
payment of the purchase price. The balance of US$307,209.02 was to be
paid by means of a promissory note executed by ATHONA in favor of 1488,
Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488,
Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging
to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the
entire amount covered by the note became due and demandable.
Accordingly, on October 17, 1985, private respondent 1488, Inc. sued
petitioners PHILSEC, AYALA, and ATHONA in the United States for payment
of the balance of US$307,209.02 and for damages for breach of contract
and for fraud allegedly perpetrated by petitioners in misrepresenting the
marketability of the shares of stock delivered to 1488, Inc. under the
Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the
venue of the action was later transferred to the United States District Court
for the Southern District of Texas, where 1488, Inc. filed an amended
complaint, reiterating its allegations in the original complaint. ATHONA filed
an answer with counterclaim, impleading private respondents herein as
counterdefendants, for allegedly conspiring in selling the property at a price
over its market value. Private respondent Perlas, who had allegedly
appraised the property, was later dropped as counterdefendant. ATHONA
sought the recovery of damages and excess payment allegedly made to
1488, Inc. and, in the alternative, the rescission of sale of the property. For
their part, PHILSEC and AYALA filed a motion to dismiss on the ground of
lack of jurisdiction over their person, but, as their motion was denied, they
later filed a joint answer with counterclaim against private respondents and
Edgardo V. Guevarra, PHILSEC's own former president, for the rescission of
the sale on the ground that the property had been overvalued. On March
13, 1990, the United States District Court for the Southern District of Texas
dismissed the counterclaim against Edgardo V. Guevarra on the ground that
it was "frivolous and [was] brought against him simply to humiliate and
embarrass him." For this reason, the U.S. court imposed so-called Rule 11
sanctions on PHILSEC and AYALA and ordered them to pay damages to
Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United
States, petitioners filed a complaint "For Sum of Money with Damages and
Writ of Preliminary Attachment" against private respondents in the Regional
Trial Court of Makati, where it was docketed as Civil Case No. 16563. The
complaint reiterated the allegation of petitioners in their respective
counterclaims in Civil Action No. H-86-440 of the United States District
Court of Southern Texas that private respondents committed fraud by
selling the property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private respondents'
fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced
to enter into the Agreement and to purchase the Houston property.
Petitioners prayed that private respondents be ordered to return to ATHONA
the excess payment of US$1,700,000.00 and to pay damages. On April 20,
1987, the trial court issued a writ of preliminary attachment against the
real and personal properties of private respondents. 2
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the
grounds of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by
1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure
of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property prejudiced only
petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not
parties to the sale and whose only participation was to extend financial
accommodation to ATHONA under a separate loan agreement. On the other

hand, private respondents 1488, Inc. and its president Daic filed a joint
"Special Appearance and Qualified Motion to Dismiss," contending that the
action being in personam, extraterritorial service of summons by publication
was ineffectual and did not vest the court with jurisdiction over 1488, Inc.,
which is a non-resident foreign corporation, and Daic, who is a non-resident
alien.
On January 26, 1988, the trial court granted Ducat's motion to dismiss,
stating that "the evidentiary requirements of the controversy may be more
suitably tried before the forum of the litis pendentia in the U.S., under the
principle in private international law of forum non conveniens," even as it
noted that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daic's motion to
dismiss. On March 9, 1988, the trial court 3 granted the motion to dismiss
filed by 1488, Inc. and Daic on the ground of litis pendentia considering
that
the "main factual element" of the cause of action in this case which is the
validity of the sale of real property in the United States between defendant
1488 and plaintiff ATHONA is the subject matter of the pending case in the
United States District Court which, under the doctrine of forum non
conveniens, is the better (if not exclusive) forum to litigate matters needed
to determine the assessment and/or fluctuations of the fair market value of
real estate situated in Houston, Texas, U.S.A. from the date of the
transaction in 1983 up to the present and verily, . . . (emphasis by trial
court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic
because they were non-residents and the action was not an action in rem or
quasi in rem, so that extraterritorial service of summons was ineffective.
The trial court subsequently lifted the writ of attachment it had earlier
issued against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court
erred in applying the principle of litis pendentia and forum non conveniens
and in ruling that it had no jurisdiction over the defendants, despite the
previous attachment of shares of stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil
Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground of litis
pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the
defendants are Philsec, the Ayala International Finance Ltd. (BPI-IFL's
former name) and the Athona Holdings, NV. The case at bar involves the
same parties. The transaction sued upon by the parties, in both cases is the
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Warranty Deed executed by and between Athona Holdings and 1488 Inc. In
the U.S. case, breach of contract and the promissory note are sued upon by
1488 Inc., which likewise alleges fraud employed by herein appellants, on
the marketability of Ducat's securities given in exchange for the Texas
property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land,
constitute the action before the Philippine court, which likewise stems from
the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in
personam for the recovery of a sum of money for alleged tortious acts, so
that service of summons by publication did not vest the trial court with
jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No.
16563 on the ground of forum non conveniens was likewise affirmed by the
Court of Appeals on the ground that the case can be better tried and
decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction,
and involve foreign elements, to wit: 1) the property subject matter of the
sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident
foreign corporation; 3) although the buyer, Athona Holdings, a foreign
corporation which does not claim to be doing business in the Philippines, is
wholly owned by Philsec, a domestic corporation, Athona Holdings is also
owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was
executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE
SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY
THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF
THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON
BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL
COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF
APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE
IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS
FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED
UPON THEM HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while
the present case was pending in the Court of Appeals, the United States
District Court for the Southern District of Texas rendered judgment 5 in the
case before it. The judgment, which was in favor of private respondents,
was affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the
principal issue to be resolved in this case is whether Civil Case No. 16536 is
barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as
res judicata, a judgment admitting the foreign decision is not necessary. On
the other hand, petitioners argue that the foreign judgment cannot be given
the effect of res judicata without giving them an opportunity to impeach it
on grounds stated in Rule 39, 50 of the Rules of Court, to wit: "want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
law or fact."
Petitioners' contention is meritorious. While this Court has given the effect
of res judicata to foreign judgments in several cases, 7 it was after the
parties opposed to the judgment had been given ample opportunity to repel
them on grounds allowed under the law. 8 It is not necessary for this
purpose to initiate a separate action or proceeding for enforcement of the
foreign judgment. What is essential is that there is opportunity to challenge
the foreign judgment, in order for the court to properly determine its
efficacy. This is because in this jurisdiction, with respect to actions in
personam, as distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the
contrary. 9 Rule 39, 50 provides:
Sec. 50. Effect of foreign judgments. The effect of a judgment of a
tribunal of a foreign country, having jurisdiction to pronounce the judgment
is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their successors
in interest by a subsequent title; but the judgment may be repelled by
evidence of a want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union
Insurance Society of Canton, Ltd., 10 which private respondents invoke for
claiming conclusive effect for the foreign judgment in their favor, the foreign
judgment was considered res judicata because this Court found "from the
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evidence as well as from appellant's own pleadings" 11 that the foreign
court did not make a "clear mistake of law or fact" or that its judgment was
void for want of jurisdiction or because of fraud or collusion by the
defendants. Trial had been previously held in the lower court and only
afterward was a decision rendered, declaring the judgment of the Supreme
Court of the State of Washington to have the effect of res judicata in the
case before the lower court. In the same vein, in Philippines International
Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign
judgment was valid and enforceable in the Philippines there being no
showing that it was vitiated by want of notice to the party, collusion, fraud
or clear mistake of law or fact. The prima facie presumption under the Rule
had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private respondents.
The proceedings in the trial court were summary. Neither the trial court nor
the appellate court was even furnished copies of the pleadings in the U.S.
court or apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the U.S. court
were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata. As the trial court stated in
its disputed order dated March 9, 1988.
On the plaintiff's claim in its Opposition that the causes of action of this
case and the pending case in the United States are not identical, precisely
the Order of January 26, 1988 never found that the causes of action of this
case and the case pending before the USA Court, were identical. (emphasis
added)
It was error therefore for the Court of Appeals to summarily rule that
petitioners' action is barred by the principle of res judicata. Petitioners in
fact questioned the jurisdiction of the U.S. court over their persons, but
their claim was brushed aside by both the trial court and the Court of
Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed
a petition for the enforcement of judgment in the Regional Trial Court of
Makati, where it was docketed as Civil Case No. 92-1070 and assigned to
Branch 134, although the proceedings were suspended because of the
pendency of this case. To sustain the appellate court's ruling that the
foreign judgment constitutes res judicata and is a bar to the claim of
petitioners would effectively preclude petitioners from repelling the
judgment in the case for enforcement. An absurdity could then arise: a
foreign judgment is not subject to challenge by the plaintiff against whom it
is invoked, if it is pleaded to resist a claim as in this case, but it may be
opposed by the defendant if the foreign judgment is sought to be enforced
 CONFLICTS | 03Dec | 4

against him in a separate proceeding. This is plainly untenable. It has been attached prior to service of summons under the Order of the trial court
held therefore that: dated April 20, 1987. 19

[A] foreign judgment may not be enforced if it is not recognized in the
jurisdiction where affirmative relief is being sought. Hence, in the interest of
justice, the complaint should be considered as a petition for the recognition
of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of
Court in order that the defendant, private respondent herein, may present
evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of
fact and law, if applicable. 14
Accordingly, to insure the orderly administration of justice, this case and
Civil Case No. 92-1070 should be consolidated. 15 After all, the two have
been filed in the Regional Trial Court of Makati, albeit in different salas, this
case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil
Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In
such proceedings, petitioners should have the burden of impeaching the
foreign judgment and only in the event they succeed in doing so may they
proceed with their action against private respondents.
Fourth. As for the temporary restraining order issued by the Court on June
29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by
Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the
petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in
Civil Case No. 16563. The separability of Guevara's claim is not only
admitted by petitioners, 20 it appears from the pleadings that petitioners
only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21
Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to
proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil
Case No. 16563 is REMANDED to the Regional Trial Court of Makati for
consolidation with Civil Case No. 92-1070 and for further proceedings in
accordance with this decision. The temporary restraining order issued on
June 29, 1994 is hereby LIFTED.

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

In this case, the trial court abstained from taking jurisdiction solely on the
basis of the pleadings filed by private respondents in connection with the
motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC)
is a domestic corporation and one of the defendants (Ventura Ducat) is a
Filipino, and that it was the extinguishment of the latter's debt which was
the object of the transaction under litigation. The trial court arbitrarily
dismissed the case even after finding that Ducat was not a party in the U.S.
case.

Third. It was error we think for the Court of Appeals and the trial court to
hold that jurisdiction over 1488, Inc. and Daic could not be obtained
because this is an action in personam and summons were served by
extraterritorial service. Rule 14, 17 on extraterritorial service provides that
service of summons on a non-resident defendant may be effected out of the
Philippines by leave of Court where, among others, "the property of the
defendant has been attached within the Philippines." 18 It is not disputed
that the properties, real and personal, of the private respondents had been

G.R. No. L-24170 December 16, 1968
ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK
INGKIN, and MOHAMMAD BANTALLA, petitioners,
vs.
THE COMMISSIONER OF CUSTOMS, respondent.
SYLLABUS
1. COURTS; COURT OF TAX APPEALS; APPEAL FROM DECISIONS THEREOF
TO SUPREME COURT; FINDINGS OF FACT BY SUBSTANTIAL EVIDENCE,
BINDING There is no plausible reason not to accept in its entirety the
conclusion reached by the Court of Tax Appeals. Nor even if the persuasive
element therein were not so overwhelming, could we alter the decisive facts
as found by it. For it is now beyond question that its finding, if supported by
substantial evidence, binds us, only questions of law being for us to resolve.
Where the issue raised belongs to the former category, we lack the power
to review.
2. TAXATION; SEIZURE AND FORFEITURE OF VESSELS AND CARGO FOR
SMUGGLING; JURISDICTION OF THE COMMISSIONER OF CUSTOMS IN
RELATION THERETO From the apprehension and seizure of the vessel in
question on the high seas beyond the territorial waters of the Philippines,
the absence of jurisdiction of Commissioner of Customs is predicated. Such
contention of petitioners-appellants is without merit. It is unquestioned that
all vessels seized are of Philippine registry. The Revised Penal Code leaves
no doubt as to its applicability and enforceability not only within the
Philippines, its interior waters and maritime zone, but also outside of its
jurisdiction against those committing offense while on a Philippine
ship . . . . The principle of law that sustains the validity of such a provision
equally supplies a firm foundation for the seizure of the five sailing vessels
found thereafter to have violated the applicable provisions of the Revised
Administrative Code.
3. ID.; ID.; ID.; EXPIRATION OF R.A. 650 DID NOT DIVEST THE
COMMISSIONER OF CUSTOMS OF JURISDICTION Despite the expiration
of Republic Act 650 the Commissioner of Customs retained his jurisdiction
over the case and could continue to take cognizance thereof until its final
determination, for the main question brought in by the appeal from the
decision of the Collector of Customs was the legality or illegality of the
decision of the Collector of Customs and that question could not have been
abated by the mere expiration of R.A. No. 650. We firmly believe that the
expiration of R.A. 650 could not have produced the effect: (1) of declaring
legal the importation of the cotton counterpanes which were illegally
imported, and (2) of declaring the seizure and forfeiture ordered by the
CONFLICTS | 03Dec | 5
Collector of Customs illegal or null and void; in other words, it could not
have the effect of annulling or setting aside the decision of the Collector of
Customs which was rendered while the law was in force and which should
stand until it is revoked by the appellate tribunal.
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; SEIZURE IN INSTANT CASE
DOES NOT CONSTITUTE DENIAL OF DUE PROCESS There could be no
denial of due process. There was nothing arbitrary about the manner in
which such seizure and forfeiture were effected. The right to a hearing of
petitioners-appellants was respected. They could not have been unaware of
what they were doing. It would be an affront to reason if under the
circumstances they could be allowed to raise in all seriousness a due
process question. Such a conditional guaranty, basic and fundamental,
certainly should not be allowed to lend itself as an instrument for escaping
a liability arising from ones own nefarious acts.
FERNANDO, J.:
The policy relentlessly adhered to and unhesitatingly pursued to minimize,
if not to do away entirely, with the evil and corruption that smuggling brings
in its wake would be frustrated and set at naught if the action taken by
respondent Commissioner of Customs in this case, as affirmed by the Court
of Tax Appeals, were to be set aside and this appeal from the decision of
the latter were to succeed. Fortunately, the controlling principles of law do
not call for a contrary conclusion. It cannot be otherwise if the legitimate
authority vested in the government were not to be reduced to futility and
impotence in the face of an admittedly serious malady, that at times has
assumed epidemic proportions.
The principal question raised by petitioners, owners of five sailing vessels
and the cargo loaded therein declared forfeited by respondent
Commissioner of Customs for smuggling, is the validity of their interception
and seizure by customs officials on the high seas, the contention being
raised that importation had not yet begun and that the seizure was effected
outside our territorial waters..
Why such a plea could not be given the least credence without doing
violence to common sense and placing the law in disrepute would be
apparent from a statement of the case and the findings of facts as set forth
in the decision now under review, of the Court of Tax Appeals, dated
November 19, 1964, the opinion being penned by the late Associate Judge
Augusto M. Luciano.
His opinion starts thus: "This is an appeal from the decision of the Acting
Commissioner of Customs in Customs Case No. 113, dated September 26,
1961, (Jolo Seizure Identification Cases Nos. 38, 39, 40, 41 & 42)
decreeing the forfeiture of five (5) sailing vessels (kumpits) named 'Iroc-

Iroc,' 'Lahat-lahat,' 'Liberal Wing III,' 'Sulu Area Command,' and 'Business,'
with their respective cargoes of blue seal cigarettes and rattan chairs for
violation of Section 1363(a) of the Revised Administrative Code and Section
20 of Republic Act No. 426 in relation with Section 1363(f) of the Revised
Administrative Code."1
The facts according to the above opinion "are not controverted." Thus: "It
appears that on September 10, 1950, at about noon time, a customs patrol
team on board Patrol Boat ST-23 intercepted the five (5) sailing vessels in
question on the high seas, between British North Borneo and Sulu while
they were heading towards Tawi-tawi, Sulu. After ordering the vessels to
stop, the customs officers boarded and found on board, 181 cases of
'Herald' cigarettes, 9 cases of 'Camel' cigarettes, and some pieces of rattan
chairs. The sailing vessels are all of Philippine registry, owned and manned
by Filipino residents of Sulu, and of less than thirty (30) tons burden. They
came from Sandakan, British North Borneo, but did not possess any permit
from the Commissioner of Customs to engage in the importation of
merchandise into any port of the Sulu sea, as required by Section 1363(a)
of the Revised Administrative Code. Their cargoes were not covered by the
required import license under Republic Act No. 426, otherwise known as the
Import Control Law."2
Respondent Commissioner of Customs, as noted at the outset, affirmed the
decision rendered by the Collector of Customs of Jolo, who found cause for
forfeiture under the law of the vessels and the cargo contained therein. He
was, as also already made known, sustained by the Court of Tax Appeals.
Hence this petition for review.
The first two errors assigned by petitioners would impugn the jurisdiction of
the Bureau of Customs to institute seizure proceedings and thereafter to
declare the forfeiture of the vessels in question and their cargo. They would
justify their stand thus: "In the light of the fact that the vessels involved
with the articles laden therein were apprehended and seized on the high
seas, beyond the territorial waters of the Philippines, the said vessels could
not have touched any place or port in the Philippines, whether a port or
place of entry or not, consequently, the said vessels could not have been
engaged in the importation of the articles laden therein into any Philippine
port or place, whether a port or place of entry or not, to have incurred the
liability of forfeiture under Section 1363(a) of the Revised Administrative
Code."3
Such a contention was advanced by petitioners before the Court of Tax
Appeals. It met the repudiation that it deserved. Thus: "We perfectly see
the point of the petitioners but considering the circumstances surrounding
the apprehension of the vessels in question, we believe that Section
1363(a) of the Revised Administrative Code should be applied to the case at
bar. It has been established that the five vessels came from Sandakan,
CONFLICTS | 03Dec | 6
British North Borneo, a foreign port, and when intercepted, all of them were
heading towards Tawi-tawi, a domestic port within the Sulu sea. Laden with
foreign manufactured cigarettes, they did not possess the import license
required by Republic Act No. 426, nor did they carry a permit from the
Commissioner of Customs to engage in importation into any port in the
Sulu sea. Their course announced loudly their intention not merely to skirt
along the territorial boundary of the Philippines but to come within our
limits and land somewhere in Tawi-tawi towards which their prows were
pointed. As a matter of fact, they were about to cross our aquatic boundary
but for the intervention of a customs patrol which, from all appearances,
was more than eager to accomplish its mission."4
The sense of realism and the vigorous language employed by the late Judge
Luciano in rejecting such a plea deserve to be quoted. Thus: "To entertain
even for a moment the thought that these vessels were probably not bound
for a Philippine port would be too much a concession even for a simpleton
or a perennial optimist. It is quite irrational for Filipino sailors manning five
Philippine vessels to sneak out of the Philippines and go to British North
Borneo, and come a long way back laden with highly taxable goods only to
turn about upon reaching the brink of our territorial waters and head for
another foreign port."5
1. We find no plausible reason not to accept in its entirety such a conclusion
reached by the Court of Tax Appeals. Nor, even if the persuasive element in
the above view were not so overwhelming, could we alter the decisive facts
as found by it. For it is now beyond question that its finding, if supported by
substantial evidence, binds us, only questions of law being for us to resolve.
Where the issue raised belongs to the former category, we lack the power
of review.6
Moreover, for understandable reasons, we feel extreme reluctance to
substitute our own discretion for that of the Court of Tax Appeals in its
appreciation of the relevant facts and its appraisal of their significance. As
we had occasion to state in a relatively recent decision: "Nor as a matter of
principle is it advisable for this Court to set aside the conclusion reached by
an agency such as the Court of Tax Appeals which is, by the very nature of
its function, dedicated exclusively to the study and consideration of tax
problems and has necessarily developed an expertise on the subject, ...,
there has been an abuse or improvident exercise of its authority."7
2. We thus could rest our decision affirming that of the Court of Tax Appeals
on the above consideration.
It might not be amiss however to devote some degree of attention to the
legal points raised in the above two assignment of errors, discussed jointly
by petitioners-appellants, alleging the absence of jurisdiction, the
deprivation of property without due process of law and the abatement of

liability consequent upon the repeal of Republic Act No. 426. Not one of the
principles of law relied upon suffices to call for reversal of the action taken
by the respondent Commissioner of Customs, even if the facts presented a
situation less conclusive against the pretension of petitioners-appellants.
From the apprehension and seizure of the vessels in question on the high
seas beyond the territorial waters of the Philippines, the absence of
jurisdiction of Commissioner of Customs is predicated. Such contention of
petitioners-appellants is without merit.
It is unquestioned that all vessels seized are of Philippine registry. The
Revised Penal Code leaves no doubt as to its applicability and enforceability
not only within the Philippines, its interior waters and maritime zone, but
also outside of its jurisdiction against those committing offense while on a
Philippine ship ...8 The principle of law that sustains the validity of such a
provision equally supplies a firm foundation for the seizure of the five
sailing vessels found thereafter to have violated the applicable provisions of
the Revised Administrative Code.9
Moreover, it is a well settled doctrine of International Law that goes back to
Chief Justice Marshall's opinion in Church v. Hubbart,10 an 1804 decision,
that a state has the right to protect itself and its revenues, a right not
limited to its own territory but extending to the high seas. In the language
of Chief Justice Marshall: "The authority of a nation within its own territory
is absolute and exclusive. The seizure of a vessel within the range of its
cannon by a foreign force is an invasion of that territory, and is a hostile act
which it is its duty to repel. But its power to secure itself from injury may
certainly be exercised beyond the limits of its territory."
The question asked in the brief of petitioners-appellants as to whether the
seizure of the vessels in question and the cargoes on the high seas and
thus beyond the territorial waters of the Philippines was legal must be
answered in the affirmative.
4. The next question raised is the alleged denial of due process arising from
such forfeiture and seizure. The argument on the alleged lack of validity of
the action taken by the Commissioner of Customs is made to rest on the
fact that the alleged offense imputed to petitioners-appellants is a violation
of Section 1363(a) and not Section 1363(f). The title of Section 1363 is
clear, "Property subject to forfeiture under customs laws." The first
subsection thereof, (a) cover any vessel including cargo unlawfully engaged
in the importation of merchandise except a port of entry. Subsection (f)
speaks of any merchandise of any prohibited importation, the importation
of which is effected or attempted contrary to law and all other merchandise
which in the opinion of the Collector of Customs have been used are or
were intended to be used as instrument in the importation or exportation of
the former.
CONFLICTS | 03Dec | 7
From the above recital of the legal provisions relied upon, it would appear
most clearly that the due process question raised is insubstantial. Certainly,
the facts on which the seizure was based were not unknown to petitioners-
appellants. On those facts the liability of the vessels and merchandise under
the above terms of the statute would appear to be undeniable. The action
taken then by the Commissioner of Customs was in accordance with law.
How could there be a denial of due process? There was nothing arbitrary
about the manner in which such seizure and forfeiture were effected. The
right to a hearing of petitioners-appellants was respected. They could not
have been unaware of what they were doing. It would be an affront to
reason if under the above circumstances they could be allowed to raise in
all seriousness a due process question. Such a constitutional guaranty,
basic and fundamental, certainly should not be allowed to lend itself as an
instrument for escaping a liability arising from one's own nefarious acts.
5. Petitioners-appellants would further assail the validity of the action taken
by the respondent Commissioner of Customs by the plea that the repeal of
Republic Act No. 426 abated whatever liability could have been incurred
thereunder. This argument raised before the Court of Tax Appeals was
correctly held devoid of any persuasive force. The decision under review
cited our opinion in Golay-Buchel & Cie v. Commissioner of Customs11 to
the effect that the expiration of the Import Control Law "did not produce
the effect of declaring legal the importation of goods which were illegally
imported and the seizure and forfeiture thereof as ordered by the Collector
of Customs illegal or null and void."
Roxas v. Sayoc 12 announced that principle earlier. Thus: "Herein, we are
concerned with the effect of the expiration of a law, not with the abrogation
of a law, and we hold the view that once the Commissioner of Customs has
acquired jurisdiction over the case, the mere expiration of Republic Act No.
650 will not divest him of his jurisdiction thereon duly acquired while said
law was still in force. In other words, we believe that despite the expiration
of Republic Act No. 650 the Commissioner of Customs retained his
jurisdiction over the case and could continue to take cognizance thereof
until its final determination, for the main question brought in by the appeal
from the decision of the Collector of Customs was the legality or illegality of
the decision of the Collector of Customs, and that question could not have
been abated by the mere expiration of Republic Act No. 650. We firmly
believe that the expiration of Republic Act No. 650 could not have produced
the effect (1) of declaring legal the importation of the cotton counterpanes
which were illegally imported, and (2) of declaring the seizure and forfeiture
ordered by the Collector of Customs illegal or null and void; in other words
it could not have the effect of annulling or setting aside the decision of the
Collector of Customs which was rendered while the law was in force and
which should stand until it is revoked by the appellate tribunal."
 CONFLICTS | 03Dec | 8

As late as 1965, in Bombay Dept. Store v. Commissioner of Customs,13 we

had occasion to reaffirm the doctrine in the above two decisions, the
present Chief Justice, speaking for the Court, stating that such expiration of
the period of effectivity of Republic Act No. 650 "did not have the effect of
depriving the Commissioner of Customs of the jurisdiction, acquired by him
prior thereto, to act on cases of forfeiture pending before him, which are in
the nature of proceeding in rem...."

It is thus most evident that the Court of Tax Appeals had not in any wise
refused to adhere faithfully to controlling legal principles when it sustained
the action taken by respondent Commissioner of Customs. It would be a
reproach and a reflection on the law if on the facts as they had been shown
to exist, the seizure and forfeiture of the vessels and cargo in question were
to be characterized as outside the legal competence of our government and
violative of the constitutional rights of petitioners-appellants. Fortunately,
as had been made clear above, that would be an undeserved reflection and
an unwarranted reproach. The vigor of the war against smuggling must not
be hampered by a misreading of international law concepts and a misplaced
reliance on a constitutional guaranty that has not in any wise been
infringed.

WHEREFORE, the decision of respondent Court of Tax Appeals of November

19, 1964, is affirmed. With costs against petitioners-appellants.

G.R. No. L-5887 December 16, 1910
THE UNITED STATES, plaintiff-appellee,vs.
LOOK CHAW (alias LUK CHIU), defendant-appellant.
ARELLANO, C. J.:
The first complaint filed against the defendant, in the Court of First Instance
of Cebu, stated that he "carried, kept, possessed and had in his possession
and control, 96 kilogrammes of opium," and that "he had been surprised in
the act of selling 1,000 pesos worth prepared opium."
The defense presented a demurrer based on two grounds, the second of
which was the more than one crime was charged in the complaint. The
demurrer was sustained, as the court found that the complaint contained
two charges, one, for the unlawful possession of opium, and the other, for
the unlawful sale of opium, and, consequence of that ruling, it ordered that
the fiscal should separated one charge from the other and file a complaint
for each violation; this, the fiscal did, and this cause concerns only the
unlawful possession of opium. It is registered as No. 375, in the Court of
First Instance of Cebu, and as No. 5887 on the general docket of this court.
The facts of the case are contained in the following finding of the trial court:
The evidence, it says, shows that between 11 and 12 o'clock a. m. on the
present month (stated as August 19, 1909), several persons, among them
Messrs. Jacks and Milliron, chief of the department of the port of Cebu and
internal-revenue agent of Cebu, respectively, went abroad the steamship
Erroll to inspect and search its cargo, and found, first in a cabin near the
saloon, one sack (Exhibit A) and afterwards in the hold, another sack
(Exhibit B). The sack referred to as Exhibit A contained 49 cans of opium,
and the other, Exhibit B, the larger sack, also contained several cans of the
same substance. The hold, in which the sack mentioned in Exhibit B was
found, was under the defendant's control, who moreover, freely and of his
own will and accord admitted that this sack, as well as the other referred to
in Exhibit B and found in the cabin, belonged to him. The said defendant
also stated, freely and voluntarily, that he had bought these sacks of
opium, in Hongkong with the intention of selling them as contraband in
Mexico or Vera Cruz, and that, as his hold had already been searched
several times for opium, he ordered two other Chinamen to keep the sack.
Exhibit A.
It is to be taken into account that the two sacks of opium, designated as
Exhibits A and B, properly constitute the corpus delicti. Moreover, another
lot of four cans of opium, marked, as Exhibit C, was the subject matter of
investigation at the trial, and with respect to which the chief of the
department of the port of Cebu testified that they were found in the part of
CONFLICTS | 03Dec | 9
the ship where the firemen habitually sleep, and that they were delivered to
the first officer of the ship to be returned to the said firemen after the
vessel should have left the Philippines, because the firemen and crew of
foreign vessels, pursuant to the instructions he had from the Manila
custom-house, were permitted to retain certain amounts of opium, always
provided it should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," is also corpus delicti
and important as evidence in this cause. With regard to this the internal-
revenue agent testified as follows:itc-alf
FISCAL. What is it?
WITNESS. It is a can opium which was bought from the defendant by a
secret-service agent and taken to the office of the governor to prove that
the accused had opium in his possession to sell.
On motion by the defense, the court ruled that this answer might be
stricken out "because it refers to a sale." But, with respect to this answer,
the chief of the department of customs had already given this testimony, to
wit:
FISCAL. Who asked you to search the vessel?
WITNESS. The internal-revenue agent came to my office and said that a
party brought him a sample of opium and that the same party knew that
there was more opium on board the steamer, and the agent asked that the
vessel be searched.
The defense moved that this testimony be rejected, on the ground of its
being hearsay evidence, and the court only ordered that the part thereof
"that there was more opium, on board the vessel" be stricken out.
The defense, to abbreviate proceedings, admitted that the receptacles
mentioned as Exhibits A, B, and C, contained opium and were found on
board the steamship Erroll, a vessel of English nationality, and that it was
true that the defendant stated that these sacks of opium were his and that
he had them in his possession.
According to the testimony of the internal-revenue agent, the defendant
stated to him, in the presence of the provincial fiscal, of a Chinese
interpreter (who afterwards was not needed, because the defendant spoke
English), the warden of the jail, and four guards, that the opium seized in
the vessel had been bought by him in Hongkong, at three pesos for each
round can and five pesos for each one of the others, for the purpose of
selling it, as contraband, in Mexico and Puerto de Vera Cruz; that on the
15th the vessel arrived at Cebu, and on the same day he sold opium; that
 CONFLICTS | 03Dec | 10

he had tried to sell opium for P16 a can; that he had a contract to sell an
amount of the value of about P500; that the opium found in the room of the
other two Chinamen prosecuted in another cause, was his, and that he had
left it in their stateroom to avoid its being found in his room, which had
already been searched many times; and that, according to the defendant,
the contents of the large sack was 80 cans of opium, and of the small one,
49, and the total number, 129.
appear that, on such account, the two penalties fixed by the law on the
subject, should be imposed in the maximum degree.
Therefore, reducing the imprisonment and the fine imposed to six months
and P1,000, respectively, we affirm in all other respects the judgment
appealed from, with the costs of this instance against the appellant. So
ordered.

It was established that the steamship Erroll was of English nationality, that
it came from Hongkong, and that it was bound for Mexico, via the call ports
of Manila and Cebu.

The defense moved for a dismissal of the case, on the grounds that the
court had no jurisdiction to try the same and the facts concerned therein
did not constitute a crime. The fiscal, at the conclusion of his argument,
asked that the maximum penalty of the law be imposed upon the
defendant, in view of the considerable amount of opium seized. The court
ruled that it did not lack jurisdiction, inasmuch as the crime had been
committed within its district, on the wharf of Cebu.

The court sentenced the defendant to five years' imprisonment, to pay a

fine of P10,000, with additional subsidiary imprisonment in case of
insolvency, though not to exceed one third of the principal penalty, and to
the payment of the costs. It further ordered the confiscation, in favor of the
Insular Government, of the exhibits presented in the case, and that, in the
event of an appeal being taken or a bond given, or when the sentenced
should have been served, the defendant be not released from custody, but
turned over to the customs authorities for the purpose of the fulfillment of
the existing laws on immigration.

From this judgment, the defendant appealed to this court.lawphi1.net

The appeal having been heard, together with the allegations made therein
by the parties, it is found: That, although the mere possession of a thing of
prohibited use in these Islands, aboard a foreign vessel in transit, in any of
their ports, does not, as a general rule, constitute a crime triable by the
courts of this country, on account of such vessel being considered as an
extension of its own nationality, the same rule does not apply when the
article, whose use is prohibited within the Philippine Islands, in the present
case a can of opium, is landed from the vessel upon Philippine soil, thus
committing an open violation of the laws of the land, with respect to which,
as it is a violation of the penal law in force at the place of the commission of
the crime, only the court established in that said place itself had competent
jurisdiction, in the absence of an agreement under an international treaty.

It is also found: That, even admitting that the quantity of the drug seized, G.R. No. L-18924 October 19, 1922
the subject matter of the present case, was considerable, it does not

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the
Court of First Instance of Manila, sustaining the demurrer presented by the
defendant to the information that initiated this case and in which the
appellee is accused of having illegally smoked opium, aboard the merchant
vessel Changsa of English nationality while said vessel was anchored in
Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court,
which so held and dismissed the case.
The question that presents itself for our consideration is whether such
ruling is erroneous or not; and it will or will not be erroneous according as
said court has or has no jurisdiction over said offense.
The point at issue is whether the courts of the Philippines have jurisdiction
over crime, like the one herein involved, committed aboard merchant
vessels anchored in our jurisdiction waters. 1awph!l.net
There are two fundamental rules on this particular matter in connection
with International Law; to wit, the French rule, according to which crimes
committed aboard a foreign merchant vessels should not be prosecuted in
the courts of the country within whose territorial jurisdiction they were
committed, unless their commission affects the peace and security of the
territory; and the English rule, based on the territorial principle and
followed in the United States, according to which, crimes perpetrated under
such circumstances are in general triable in the courts of the country within
territory they were committed. Of this two rules, it is the last one that
obtains in this jurisdiction, because at present the theories and
jurisprudence prevailing in the United States on this matter are authority in
the Philippines which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch
[U. S.], 116), Chief Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be
obviously inconvenient and dangerous to society, and would subject the
laws to continual infraction, and the government to degradation, if such
individuals or merchants did not owe temporary and local allegiance, and
were not amenable to the jurisdiction of the country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
CONFLICTS | 03Dec | 11
. . . No court of the Philippine Islands had jurisdiction over an offense or
crime committed on the high seas or within the territorial waters of any
other country, but when she came within three miles of a line drawn from
the headlands, which embrace the entrance to Manila Bay, she was within
territorial waters, and a new set of principles became applicable. (Wheaton,
International Law [Dana ed.], p. 255, note 105; Bonfils, Le Droit Int., secs.
490 et seq.; Latour, La Mer Ter., ch. 1.) The ship and her crew were then
subject to the jurisdiction of the territorial sovereign subject to such
limitations as have been conceded by that sovereignty through the proper
political agency. . . .
It is true that in certain cases the comity of nations is observed, as in Mali
and Wildenhus vs. Keeper of the Common Jail (120 U.., 1), wherein it was
said that:
. . . The principle which governs the whole matter is this: Disorder which
disturb only the peace of the ship or those on board are to be dealt with
exclusively by the sovereignty of the home of the ship, but those which
disturb the public peace may be suppressed, and, if need be, the offenders
punished by the proper authorities of the local jurisdiction. It may not be
easy at all times to determine which of the two jurisdictions a particular act
of disorder belongs. Much will undoubtedly depend on the attending
circumstances of the particular case, but all must concede that felonious
homicide is a subject for the local jurisdiction, and that if the proper
authorities are proceeding with the case in the regular way the consul has
no right to interfere to prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:
Although the mere possession of an article of prohibited use in the
Philippine Islands, aboard a foreign vessel in transit in any local port, does
not, as a general rule, constitute a crime triable by the courts of the
Islands, such vessels being considered as an extension of its own
nationality, the same rule does not apply when the article, the use of which
is prohibited in the Islands, is landed from the vessels upon Philippine soil;
in such a case an open violation of the laws of the land is committed with
respect to which, as it is a violation of the penal law in force at the place of
the commission of the crime, no court other than that established in the
said place has jurisdiction of the offense, in the absence of an agreement
under an international treaty.
As to whether the United States has ever consented by treaty or otherwise
to renouncing such jurisdiction or a part thereof, we find nothing to this
effect so far as England is concerned, to which nation the ship where the
crime in question was committed belongs. Besides, in his work "Treaties,
Conventions, etc.," volume 1, page 625, Malloy says the following:
 CONFLICTS | 03Dec | 12

There shall be between the territories of the United States of America, and
all the territories of His Britanic Majesty in Europe, a reciprocal liberty of
commerce. The inhabitants of the two countries, respectively, shall have
liberty freely and securely to come with their ships and cargoes to all such
places, ports and rivers, in the territories aforesaid, to which other
foreigners are permitted to come, to enter into the same, and to remain
and reside in any parts of the said territories, respectively; also to hire and
occupy houses and warehouses for the purposes of their commerce; and,
generally, the merchants and traders of each nation respectively shall enjoy
the most complete protection and security for their commerce, but subject
always to the laws and statutes of the two countries, respectively. (Art. 1,
Commerce and Navigation Convention.)

We have seen that the mere possession of opium aboard a foreign vessel in
transit was held by this court not triable by or courts, because it being the
primary object of our Opium Law to protect the inhabitants of the
Philippines against the disastrous effects entailed by the use of this drug, its
mere possession in such a ship, without being used in our territory, does
not being about in the said territory those effects that our statute
contemplates avoiding. Hence such a mere possession is not considered a
disturbance of the public order.

But to smoke opium within our territorial limits, even though aboard a
foreign merchant ship, is certainly a breach of the public order here
established, because it causes such drug to produce its pernicious effects
within our territory. It seriously contravenes the purpose that our
Legislature has in mind in enacting the aforesaid repressive statute.
Moreover, as the Attorney-General aptly observes:

. . . The idea of a person smoking opium securely on board a foreign vessel

at anchor in the port of Manila in open defiance of the local authorities, who
are impotent to lay hands on him, is simply subversive of public order. It
requires no unusual stretch of the imagination to conceive that a foreign
ship may come into the port of Manila and allow or solicit Chinese residents
to smoke opium on board.

The order appealed from is revoked and the cause ordered remanded to the
court of origin for further proceedings in accordance with law, without
special findings as to costs. So ordered.

G.R. No. 120135 March 31, 2003


BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL,
LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO
LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.
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 Appeals1 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 Complaint2 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 Carrier4; (b) El General5;
(c) El Challenger6; and (d) El Conqueror7; 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
CONFLICTS | 03Dec | 13
banks.11 The Litonjuas prayed for the accounting of the revenues derived
in the operation of the six vessels and of the proceeds of the sale thereof at
the foreclosure proceedings instituted by petitioners; damages for breach of
trust; exemplary damages and attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of forum non
conveniens and lack of cause of action against them.13
On December 3, 1993, the trial court issued an Order denying the Motion to
Dismiss, thus:
"WHEREFORE, and in view of the foregoing consideration, the Motion to
Dismiss is hereby DENIED. The defendant is therefore, given a period of ten
(10) days to file its Answer to the complaint.
"SO ORDERED."14
Instead of filing an answer the defendant banks went to the Court of
Appeals on a "Petition for Review on Certiorari"15 which was aptly treated
by the appellate court as a petition for certiorari. They assailed the above-
quoted order as well as the subsequent denial of their Motion for
Reconsideration.16 The appellate court dismissed the petition and denied
petitioners' Motion for Reconsideration.17
Hence, herein petition anchored on the following grounds:
"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT
THAT THE SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS
(MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL
BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION
THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE
THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE
ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING
WHETHER THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE
CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE
APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT
IN THE PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY
BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY
THE PRIVATE RESPONDENT. COROLLARY TO THIS, THE RESPONDENT
COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING." 18

As to the first assigned error: Petitioners argue that the borrowers and the
registered owners of the vessels are the foreign corporations and not
private respondents Litonjuas who are mere stockholders; and that the
revenues derived from the operations of all the vessels are deposited in the
accounts of the corporations. Hence, petitioners maintain that these foreign
corporations are the legal entities that have the personalities to sue and not
herein private respondents; that private respondents, being mere
shareholders, have no claim on the vessels as owners since they merely
have an inchoate right to whatever may remain upon the dissolution of the
said foreign corporations and after all creditors have been fully paid and
satisfied;19 and that while private respondents may have allegedly spent
amounts equal to 10% of the acquisition costs of the vessels in question,
their 10% however represents their investments as stockholders in the
foreign corporations.20
Anent the second assigned error, petitioners posit that while the application
of the principle of forum non conveniens is discretionary on the part of the
Court, said discretion is limited by the guidelines pertaining to the private
as well as public interest factors in determining whether plaintiffs' choice of
forum should be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert21 and
Piper Aircraft Co. vs. Reyno,22 to wit:
"Private interest factors include: (a) the relative ease of access to sources
of proof; (b) the availability of compulsory process for the attendance of
unwilling witnesses; (c) the cost of obtaining attendance of willing
witnesses; or (d) all other practical problems that make trial of a case easy,
expeditious and inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court congestion; (b) the local
interest in having localized controversies decided at home; (c) the
avoidance of unnecessary problems in conflict of laws or in the application
of foreign law; or (d) the unfairness of burdening citizens in an unrelated
forum with jury duty."23
In support of their claim that the local court is not the proper forum,
petitioners allege the following:
"i) The Bank of America Branches involved, as clearly mentioned in the
Complaint, are based in Hongkong and England. As such, the evidence and
the witnesses are not readily available in the Philippines;
"ii) The loan transactions were obtained, perfected, performed,
consummated and partially paid outside the Philippines;
"iii) The monies were advanced outside the Philippines. Furthermore, the
mortgaged vessels were part of an offshore fleet, not based in the
Philippines;
CONFLICTS | 03Dec | 14
"iv) All the loans involved were granted to the Private Respondents' foreign
CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the laws of
England;
"vi) The subsequent sales of the mortgaged vessels and the application of
the sales proceeds occurred and transpired outside the Philippines, and the
deliveries of the sold mortgaged vessels were likewise made outside the
Philippines;
"vii) The revenues of the vessels and the proceeds of the sales of these
vessels were ALL deposited to the Accounts of the foreign CORPORATIONS
abroad; and
"viii) Bank of America International Ltd. is not licensed nor engaged in trade
or business in the Philippines."24
Petitioners argue further that the loan agreements, security documentation
and all subsequent restructuring agreements uniformly, unconditionally and
expressly provided that they will be governed by the laws of England;25
that Philippine Courts would then have to apply English law in resolving
whatever issues may be presented to it in the event it recognizes and
accepts herein case; that it would then be imposing a significant and
unnecessary expense and burden not only upon the parties to the
transaction but also to the local court. Petitioners insist that the
inconvenience and difficulty of applying English law with respect to a wholly
foreign transaction in a case pending in the Philippines may be avoided by
its dismissal on the ground of forum non conveniens. 26
Finally, petitioners claim that private respondents have already waived their
alleged causes of action in the case at bar for their refusal to contest the
foreign civil cases earlier filed by the petitioners against them in Hongkong
and England, to wit:
"1.) Civil action in England in its High Court of Justice, Queen's Bench
Division Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN
TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL
CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC
NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K.
LITONJUA & (h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice, Queen's Bench
Division, Commercial Court (1992-Folio No. 2245) against (a) EL
CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO
KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN LITONJUA.

"3.) Civil action in the Supreme Court of Hongkong High Court (Action No.
4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A.,
(f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA.
"4.) A civil action in the Supreme Court of Hong Kong High Court (Action
No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A.,
(f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN
LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA."
and that private respondents' alleged cause of action is already barred by
the pendency of another action or by litis pendentia as shown above.27
On the other hand, private respondents contend that certain material facts
and pleadings are omitted and/or misrepresented in the present petition for
certiorari; that the prefatory statement failed to state that part of the
security of the foreign loans were mortgages on a 39-hectare piece of real
estate located in the Philippines;28 that while the complaint was filed only
by the stockholders of the corporate borrowers, the latter are wholly-owned
by the private respondents who are Filipinos and therefore under Philippine
laws, aside from the said corporate borrowers being but their alter-egos,
they have interests of their own in the vessels.29 Private respondents also
argue that the dismissal by the Court of Appeals of the petition for certiorari
was justified because there was neither allegation nor any showing
whatsoever by the petitioners that they had no appeal, nor any plain,
speedy, and adequate remedy in the ordinary course of law from the Order
of the trial judge denying their Motion to Dismiss; that the remedy available
to the petitioners after their Motion to Dismiss was denied was to file an
Answer to the complaint;30 that as upheld by the Court of Appeals, the
decision of the trial court in not applying the principle of forum non
conveniens is in the lawful exercise of its discretion.31 Finally, private
respondents aver that the statement of petitioners that the doctrine of res
judicata also applies to foreign judgment is merely an opinion advanced by
them and not based on a categorical ruling of this Court;32 and that herein
private respondents did not actually participate in the proceedings in the
foreign courts.33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot
be the subject of petition for certiorari. Petitioners should have filed an
answer to the complaint, proceed to trial and await judgment before
making an appeal. As repeatedly held by this Court:
CONFLICTS | 03Dec | 15
"An order denying a motion to dismiss is interlocutory and cannot be the
subject of the extraordinary petition for certiorari or mandamus. The
remedy of the aggrieved party is to file an answer and to interpose as
defenses the objections raised in his motion to dismiss, proceed to trial, and
in case of an adverse decision, to elevate the entire case by appeal in due
course. xxx Under certain situations, recourse to certiorari or mandamus is
considered appropriate, i.e., (a) when the trial court issued the order
without or in excess of jurisdiction; (b) where there is patent grave abuse
of discretion by the trial court; or (c) appeal would not prove to be a
speedy and adequate remedy as when an appeal would not promptly
relieve a defendant from the injurious effects of the patently mistaken order
maintaining the plaintiff's baseless action and compelling the defendant
needlessly to go through a protracted trial and clogging the court dockets
by another futile case."34
Records show that the trial court acted within its jurisdiction when it issued
the assailed Order denying petitioners' motion to dismiss. Does the denial
of the motion to dismiss constitute a patent grave abuse of discretion?
Would appeal, under the circumstances, not prove to be a speedy and
adequate remedy? We will resolve said questions in conjunction with the
issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing
to dismiss the complaint on the ground that plaintiffs have no cause of
action against defendants since plaintiffs are merely stockholders of the
corporations which are the registered owners of the vessels and the
borrowers of petitioners?
No. Petitioners' argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to sue, and
therefore, the complaint should be dismissed, is untenable. A case is
dismissible for lack of personality to sue upon proof that the plaintiff is not
the real party-in-interest. Lack of personality to sue can be used as a
ground for a Motion to Dismiss based on the fact that the complaint, on the
face thereof, evidently states no cause of action.35 In San Lorenzo Village
Association, Inc. vs. Court of Appeals,36 this Court clarified that a
complaint states a cause of action where it contains three essential
elements of a cause of action, namely: (1) the legal right of the plaintiff, (2)
the correlative obligation of the defendant, and (3) the act or omission of
the defendant in violation of said legal right. If these elements are absent,
the complaint becomes vulnerable to a motion to dismiss on the ground of
failure to state a cause of action.37 To emphasize, it is not the lack or
absence of cause of action that is a ground for dismissal of the complaint
but rather the fact that the complaint states no cause of action.38 "Failure
to state a cause of action" refers to the insufficiency of allegation in the
pleading, unlike "lack of cause of action" which refers to the insufficiency of

factual basis for the action. "Failure to state a cause of action" may be
raised at the earliest stages of an action through a motion to dismiss the
complaint, while "lack of cause of action" may be raised any time after the
questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented.39
In the case at bar, the complaint contains the three elements of a cause of
action. It alleges that: (1) plaintiffs, herein private respondents, have the
right to demand for an accounting from defendants (herein petitioners), as
trustees by reason of the fiduciary relationship that was created between
the parties involving the vessels in question; (2) petitioners have the
obligation, as trustees, to render such an accounting; and (3) petitioners
failed to do the same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that the
corporate entities have juridical personalities separate and distinct from
those of the private respondents. Private respondents maintain that the
corporations are wholly owned by them and prior to the incorporation of
such entities, they were clients of petitioners which induced them to acquire
loans from said petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case,40
"xxx assuming that the allegation of facts constituting plaintiffs' cause of
action is not as clear and categorical as would otherwise be desired, any
uncertainty thereby arising should be so resolved as to enable a full inquiry
into the merits of the action."
As this Court has explained in the San Lorenzo case, such a course, would
preclude multiplicity of suits which the law abhors, and conduce to the
definitive determination and termination of the dispute. To do otherwise,
that is, to abort the action on account of the alleged fatal flaws of the
complaint would obviously be indecisive and would not end the controversy,
since the institution of another action upon a revised complaint would not
be foreclosed.41
Second Issue. Should the complaint be dismissed on the ground of forum
non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning 'the forum is
inconvenient', emerged in private international law to deter the practice of
global forum shopping,42 that is to prevent non-resident litigants from
choosing the forum or place wherein to bring their suit for malicious
reasons, such as to secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more friendly
venue. Under this doctrine, a court, in conflicts of law cases, may refuse
CONFLICTS | 03Dec | 16
impositions on its jurisdiction where it is not the most "convenient" or
available forum and the parties are not precluded from seeking remedies
elsewhere.43
Whether a suit should be entertained or dismissed on the basis of said
doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.44 In the case of
Communication Materials and Design, Inc. vs. Court of Appeals,45 this
Court held that "xxx [a Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are met:
(1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, (3) that the Philippine Court has
or is likely to have power to enforce its decision."46 Evidently, all these
requisites are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs.
Court of Appeals,47 that the doctrine of forum non conveniens should not
be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the
Rules of Court does not include said doctrine as a ground. This Court
further ruled that while it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only after vital
facts are established, to determine whether special circumstances require
the court's desistance; and that the propriety of dismissing a case based on
this principle of forum non conveniens requires a factual determination,
hence it is more properly considered a matter of defense.48
Third issue. Are private respondents guilty of forum shopping because of
the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are
present and where a final judgment in one case will amount to res judicata
in the other.49 Parenthetically, for litis pendentia to be a ground for the
dismissal of an action there must be: (a) identity of the parties or at least
such as to represent the same interest in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same acts;
and (c) the identity in the two cases should be such that the judgment
which may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.50
In case at bar, not all the requirements for litis pendentia are present. While
there may be identity of parties, notwithstanding the presence of other
respondents,51 as well as the reversal in positions of plaintiffs and
defendants52, 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
 CONFLICTS | 03Dec | 17

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.

G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD.,

petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.
DIOSANA AND MARCELO G. SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari1 to annul the following
orders of the National Labor Relations Commission (hereinafter referred to
as "NLRC") for having been issued without or with excess jurisdiction and
with grave abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting aside its earlier
resolution of August 28, 1992.4 The questioned order declared that the
NLRC, not the Philippine Overseas Employment Administration (hereinafter
referred to as "POEA"), had jurisdiction over private respondent's
complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to jointly and
severally pay private respondent twelve thousand and six hundred dollars
(US$ 12,600.00) representing salaries for the unexpired portion of his
contract; three thousand six hundred dollars (US$3,600.00) as extra four
months salary for the two (2) year period of his contract, three thousand
six hundred dollars (US$3,600.00) as "14th month pay" or a total of
nineteen thousand and eight hundred dollars (US$19,800.00) or its peso
equivalent and attorney's fees amounting to ten percent (10%) of the total
award; and
(3) Order of March 30, 1995.6 Denying the motion for reconsideration of
the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as
"Santos") was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was
directly hired by the Palace Hotel, Beijing, People's Republic of China and
later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as
"MHC") and the Manila Hotel International Company, Limited (hereinafter
referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and
controlled corporation duly organized and existing under the laws of the
Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong
Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital
stock.8
CONFLICTS | 03Dec | 18
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu
Company Limited), MHICL10 trained the personnel and staff of the Palace
Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of
Oman, respondent Santos received a letter dated May 2, 1988 from Mr.
Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with
a higher monthly salary and increased benefits. The position was slated to
open on October 1, 1988.11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his
acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a
ready to sign employment contract to respondent Santos. Mr. Henk advised
respondent Santos that if the contract was acceptable, to return the same
to Mr. Henk in Manila, together with his passport and two additional pictures
for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing
Press, effective June 30, 1988, under the pretext that he was needed at
home to help with the family's piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4)
signed copies of the employment contract (dated June 4, 1988) and notified
them that he was going to arrive in Manila during the first week of July
1988.
The employment contract of June 4, 1988 stated that his employment
would commence September 1, 1988 for a period of two years.12 It
provided for a monthly salary of nine hundred dollars (US$900.00) net of
taxes, payable fourteen (14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned from the
Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started
to work at the Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment
agreement" with the Palace Hotel, effective November 5, 1988. In the
contract, Mr. Shmidt represented the Palace Hotel. The Vice President
(Operations and Development) of petitioner MHICL Miguel D. Cergueda
signed the employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July 17,
1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna
suggested in a handwritten note that respondent Santos be given one (1)
month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter
signed by Mr. Shmidt that his employment at the Palace Hotel print shop
would be terminated due to business reverses brought about by the political
upheaval in China.15 We quote the letter:16
"After the unfortunate happenings in China and especially Beijing (referring
to Tiannamen Square incidents), our business has been severely affected.
To reduce expenses, we will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest
assured this does in no way reflect your past performance which we found
up to our expectations."
"Should a turnaround in the business happen, we will contact you directly
and give you priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the employment of
respondent Santos and paid all benefits due him, including his plane fare
back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave
wrote Mr. Shmidt, demanding full compensation pursuant to the
employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:17
CONFLICTS | 03Dec | 19
His service with the Palace Hotel, Beijing was not abruptly terminated but
we followed the one-month notice clause and Mr. Santos received all
benefits due him.
"For your information the Print Shop at the Palace Hotel is still not
operational and with a low business outlook, retrenchment in various
departments of the hotel is going on which is a normal management
practice to control costs.
"When going through the latest performance ratings, please also be advised
that his performance was below average and a Chinese National who is
doing his job now shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly showed
up for work but still enjoyed free accommodation/laundry/meals up to the
day of his departure."
On February 20, 1990, respondent Santos filed a complaint for illegal
dismissal with the Arbitration Branch, National Capital Region, National
Labor Relations Commission (NLRC). He prayed for an award of nineteen
thousand nine hundred and twenty three dollars (US$19,923.00) as actual
damages, forty thousand pesos (P40,000.00) as exemplary damages and
attorney's fees equivalent to 20% of the damages prayed for. The complaint
named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and
neither participated in the proceedings before the Labor Arbiter.18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case
against petitioners, thus:19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned
salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA,
not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:20
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null
and void for want of jurisdiction. Complainant is hereby enjoined to file his
complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for reconsideration of
the afore-quoted resolution. He argued that the case was not cognizable by
the POEA as he was not an "overseas contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself. The
NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the
question of whether private respondent was retrenched or dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings
based on the testimonial and documentary evidence presented to and
heard by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the
National Capital Region, Arbitration Branch, and the case was transferred to
Labor Arbiter Jose G. de Vera.24
On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He
found that respondent Santos was illegally dismissed from employment and
recommended that he be paid actual damages equivalent to his salaries for
the unexpired portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private respondent, to
wit:27
"WHEREFORE, finding that the report and recommendations of Arbiter de
Vera are supported by substantial evidence, judgment is hereby rendered,
directing the respondents to jointly and severally pay complainant the
following computed contractual benefits: (1) US$12,600.00 as salaries for
the unexpired portion of the parties' contract; (2) US$3,600.00 as extra
four (4) months salary for the two (2) years period (sic) of the parties'
contract; (3) US$3,600.00 as "14th month pay" for the aforesaid two (2)
years contract stipulated by the parties or a total of US$19,800.00 or its
peso equivalent, plus (4) attorney's fees of 10% of complainant's total
award.
"SO ORDERED."
CONFLICTS | 03Dec | 20
On February 2, 1995, petitioners filed a motion for reconsideration arguing
that Labor Arbiter de Vera's recommendation had no basis in law and in
fact.28
On March 30, 1995, the NLRC denied the motion for reconsideration.29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent motion for
the issuance of a temporary restraining order and/or writ of preliminary
injunction and a motion for the annulment of the entry of judgment of the
NLRC dated July 31, 1995.31
On November 20, 1995, the Court denied petitioner's urgent motion. The
Court required respondents to file their respective comments, without
giving due course to the petition.32
On March 8, 1996, the Solicitor General filed a manifestation stating that
after going over the petition and its annexes, they can not defend and
sustain the position taken by the NLRC in its assailed decision and orders.
The Solicitor General prayed that he be excused from filing a comment on
behalf of the NLRC33
On April 30,1996, private respondent Santos filed his comment.34
On June 26, 1996, the Court granted the manifestation of the Solicitor
General and required the NLRC to file its own comment to the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The only link
that the Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases
involving our citizens can be tried here.
The employment contract. Respondent Santos was hired directly by the
Palace Hotel, a foreign employer, through correspondence sent to the
Sultanate of Oman, where respondent Santos was then employed. He was

hired without the intervention of the POEA or any authorized recruitment
agency of the government.36
Under the rule of forum non conveniens, a Philippine court or agency may
assume jurisdiction over the case if it chooses to do so provided: (1) that
the Philippine court is one to which the parties may conveniently resort to;
(2) that the Philippine court is in a position to make an intelligent decision
as to the law and the facts; and (3) that the Philippine court has or is likely
to have power to enforce its decision.37 The conditions are unavailing in the
case at bar.
Not Convenient. We fail to see how the NLRC is a convenient forum given
that all the incidents of the case from the time of recruitment, to
employment to dismissal occurred outside the Philippines. The
inconvenience is compounded by the fact that the proper defendants, the
Palace Hotel and MHICL are not nationals of the Philippines. Neither .are
they "doing business in the Philippines." Likewise, the main witnesses, Mr.
Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law. Neither can an intelligent decision
be made as to the law governing the employment contract as such was
perfected in foreign soil. This calls to fore the application of the principle of
lex loci contractus (the law of the place where the contract was made).38
The employment contract was not perfected in the Philippines. Respondent
Santos signified his acceptance by writing a letter while he was in the
Republic of Oman. This letter was sent to the Palace Hotel in the People's
Republic of China.
No power to determine the facts. Neither can the NLRC determine the
facts surrounding the alleged illegal dismissal as all acts complained of took
place in Beijing, People's Republic of China. The NLRC was not in a position
to determine whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify respondent Santos'
retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming
that a proper decision could be reached by the NLRC, such would not have
any binding effect against the employer, the Palace Hotel. The Palace Hotel
is a corporation incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to
solve controversies involving foreign employers. Neither are we saying that
we do not have power over an employment contract executed in a foreign
country. If Santos were an "overseas contract worker", a Philippine forum,
CONFLICTS | 03Dec | 21
specifically the POEA, not the NLRC, would protect him.39 He is not an
"overseas contract worker" a fact which he admits with conviction.40
Even assuming that the NLRC was the proper forum, even on the merits,
the NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the
case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as
a separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its
capital stock. However, this is not enough to pierce the veil of corporate
fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to
when the corporate fiction is used to defeat public convenience, justify
wrong, protect fraud or defend a crime. 41 It is done only when a
corporation is a mere alter ego or business conduit of a person or another
corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere
ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be pierced are:
First, the defendant must have control or complete domination of the other
corporation's finances, policy and business practices with regard to the
transaction attacked. There must be proof that the other corporation had no
separate mind, will or existence with respect the act complained of. Second,
control must be used by the defendant to commit fraud or wrong. Third, the
aforesaid control or breach of duty must be the proximate cause of the
injury or loss complained of. The absence of any of the elements prevents
the piercing of the corporate veil.43
It is basic that a corporation has a personality separate and distinct from
those composing it as well as from that of any other legal entity to which it
may be related.44 Clear and convincing evidence is needed to pierce the
veil of corporate fiction.45 In this case, we find no evidence to show that
MHICL and MHC are one and the same entity.
III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL
"signed" his employment contract with the Palace Hotel. This fact fails to
persuade us.
First, we note that the Vice President (Operations and Development) of
MHICL, Miguel D. Cergueda signed the employment contract as a mere
witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or
approval, as a party would.46 In Sichangco v. Board of Commissioners of
Immigration,47 the Court recognized that the term "noted" means that the
person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a
decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The
"witnessing part" of the document is that which, "in a deed or other formal
instrument is that part which comes after the recitals, or where there are
no recitals, after the parties (emphasis ours)."48 As opposed to a party to a
contract, a witness is simply one who, "being present, personally sees or
perceives a thing; a beholder, a spectator, or eyewitness."49 One who
"notes" something just makes a "brief written statement"50 a
memorandum or observation.
Second, and more importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers.
It did not select respondent Santos as an employee for the Palace Hotel. He
was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not
engage respondent Santos to work. The terms of employment were
negotiated and finalized through correspondence between respondent
Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of
the Palace Hotel and not MHICL. Neither did respondent Santos adduce any
proof that MHICL had the power to control his conduct. Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that terminated
respondent Santos' services.
CONFLICTS | 03Dec | 22
Neither is there evidence to suggest that MHICL was a "labor-only
contractor."52 There is no proof that MHICL "supplied" respondent Santos
or even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are
one and the same entity. The fact that the Palace Hotel is a member of the
"Manila Hotel Group" is not enough to pierce the corporate veil between
MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering
further that no employer-employee relationship existed between MHICL,
MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had
no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-
01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the
following:53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
"4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
"5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
"6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement."
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the
Labor Code is limited to disputes arising from an employer-employee
relationship which can be resolved by reference to the Labor Code, or other
labor statutes, or their collective bargaining agreements.54
 CONFLICTS | 03Dec | 23

"To determine which body has jurisdiction over the present controversy, we
rely on the sound judicial principle that jurisdiction over the subject matter
is conferred by law and is determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein."55

The lack of jurisdiction of the Labor Arbiter was obvious from the
allegations of the complaint. His failure to dismiss the case amounts to
grave abuse of discretion.56

V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and
ANNULS the orders and resolutions of the National Labor Relations
Commission dated May 31, 1993, December 15, 1994 and March 30, 1995
in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).

No costs.

SO ORDERED.

G.R. Nos. 90306-07 July 30, 1990
K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO.,
LTD., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A.,
and THE VESSEL M/V "ESTELLA", respondents.
CORTES, J:
Ordinarily, the Court will not disturb the factual findings of the Court of
Appeals, these being considered final and conclusive. However, when its
factual conclusions are manifestly mistaken, the Court will step in to correct
the misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v.
Court of Appeals, G.R. No. L-48290, September 29, 1983, 124 SCRA 808.]
This case is one such instance calling for the Court's review of the facts.
On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as
Kumagai), a corporation formed and existing under the laws of Japan, filed
a complaint for the collection of a sum of money with preliminary
attachment against Atlantic Venus Co., S.A. (hereinafter referred to as
"Atlantic"), a corporation registered in Panama, the vessel MV Estella and
Crestamonte Shipping Corporation (hereinafter referred to as
"Crestamonte"), a Philippine corporation. Atlantic is the owner of the MV
Estella. The complaint, docketed as Civil Case No. 8738930 of the Regional
Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat
charterer and operator of the MV Estella, appointed N.S. Shipping
Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as
its general agent in Japan. The appointment was formalized in an Agency
Agreement. NSS in turn appointed Kumagai as its local agent in Osaka,
Japan. Kumagai supplied the MV Estella with supplies and services but
despite repeated demands Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed
complaints-in-intervention.
On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as
Fu Hing"), a corporation organized in Hong Kong and not doing business in
the Philippines, filed a motion for leave to intervene with an attached
complaint-in-intervention, alleging that Fu Hing supplied marine diesel
oil/fuel to the MV Estella and incurred barge expenses for the total sum of
One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six
Cents (US$152,412.56) but such has remained unpaid despite demand and
that the claim constitutes a maritime lien. The issuance of a writ of
attachment was also prayed for.
CONFLICTS | 03Dec | 24
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho
(hereinafter referred to as K.K. Shell"), a corporation organized in Japan
and not doing business in the Philippines, likewise filed a motion to
intervene with an attached complaint-in-intervention, alleging that upon
request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided
and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo
and Mutsure in Japan and that despite previous demands Crestamonte has
failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six
Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen
(Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime lien on
the MV Estella. The complaint-in-intervention sought the issuance of a writ
of preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June
19,1987 and August 11, 1987, respectively. Writs of preliminary attachment
were issued on August 25, 1987 upon posting of the appropriate bonds.
Upon the posting of counterbonds, the writs of attachment were discharged
on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in-
intervention filed by Fu Hing and K.K. Shell.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court
of Appeals against the trial court judge, Kumagai, NSS and Keihin, docketed
as CA-G.R. SP No. 12999, which sought the annulment of the orders of the
trial court dated April 30, 1987 and August 11, 1987. Among others, the
omnibus order dated August 11, 1987 denied the motion to reconsider the
order allowing Fu Hing's intervention and granted K.K. Shell's motion to
intervene. Again Fu Hing and K.K. Shell intervened, CA-G.R. SP No. 12999
was consolidated with another case (CA-G.R. SP No. 12341). Fu Hing and
K.K. Shell intervened in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders
of the trial court and directed it to cease and desist from proceeding with
the case.
According to the Court of Appeals, Fu Hing and K.K. Shell were not
suppliers but sub-agents of NSS, hence they were bound by the Agency
Agreement between Crestamonte and NSS, particularly, the choice of forum
clause, which provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this Agreement shall be subject exclusively to the
jurisdiction of the District Courts of Japan.

Thus, concluded the Court of Appeals, the trial court should have disallowed
their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this
was denied by the Court of Appeals. Hence this petition;
In this case, we shall review the decision of the Court of Appeals only
insofar as it relate to the intervention of K.K. Shell. Fu Hing Oil Co., Ltd.
filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that
an amicable settlement had been reached with private respondents. The
Court granted the motion on March 19, 1990.
After considering the pleadings filed by the parties and the arguments
raised therein, the Court finds reversible error on the part of the Court of
Appeals in so far; as it disallowed petitioners' intervention in the case
before the trial court and ordered the latter to cease and desist from
proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion
that K.K. Shell is a sub-agent of NSS and is, therefore, bound by the
agreement.
The body of the Agency Agreement entered into by and between
Crestamonte (referred to in the agreement as "Owner") and NSS ("Agent")
provides:
WITNESSETH
That the OWNER has appointed and by these presents hereby appoints the
AGENT as its General Agents for all Japan in connection with the Owner's
vessels and/or providing suitable vessels for Japan Ports under the following
terms and conditions:
1.0 - In general, the Agent will abide by the Owner's decisions regarding
the mode of operations of the vessels in Japan and that all cargo bookings,
vessel's fixtures/charters, etc. by the Agent, shall always be subject to the
prior approval and consent of the Owners.
2.0 - That the Agent shall provide for the necessary services required for
the husbanding of the Owner's vessels in all Japan Ports and issue Bill(s) of
Lading to Shippers in the form prescribed by the Owners.
3.0 - That the Agent shall be responsible for fixing south-bound cargoes
with revenues sufficient to cover ordinary liner operation expenses such as
bunkers, additives, lubricating oil, water, running repairs, drydocking
expenses, usual port disbursement accounts, cargo handling charges
CONFLICTS | 03Dec | 25
including stevedorage, provisions and ship's stores and cash advance to
crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be
essentially the Agent's responsibility, and should the revenue for south-
bound cargoes as above-mentioned be insufficient to cover the aforesaid
expenses, the Agent shall provide credit to the extent of the vessels'
requirements, provided however that said obligation shall be secured by the
Owner committing at least forty-eight (48) mailings of Japan/Philippines
liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for
the operation costs on Owner's liner service carried forward from the
present Owner's agent, subject to approval of Owner's Representative in
Japan in regard to amount and nature thereof.
4.0- That the agent shall furnish office space of approximately thirty (30)
square meters for the exclusive use of the Owner and its representatives,
within the premises of the Agent's office, free of charge.
5.0 That the responsibilities of the Agent in regard to the cargo shall
begin, in the case of imports into the territory of Japan, from the time such
cargo has left the ship's tackles, and shall cease, in case of export, upon
completion of loading.
6.0 That the remuneration of the Agent from the Owner shall be as
follows:
xxx xxx xxx
7.0 That the Agent shall exert best efforts to recommend to Owners
stevedoring and other expenses incurred in connection with work on board
the Owner's vessels, as well as customs house charges, pilotage, harbour
dues, cables, etc. which are for Owner's account, on the cheapest possible
terms. Owners shall decide and may appoint through the Agent the services
described herein.
8.0 That the Agent shall be responsible for the due collection of and due
payment to the Owner of all outward freight prepaid for cargo without delay
upon the sailing of each vessel from the port. The Agent shall be also
responsible for the due collection of all inward freight payable at the port
against delivery unless otherwise instructed by the Owner to the contrary.
9.0 The account statements supported by vouchers in two copies
itemized for each service and/or supply for each vessel, shall be forwarded
by the Agent to the Owner promptly after the departure of each vessel but
in no case later than 60 days thereafter.

10.0 That the freightage to be collected by the Agent in Japan shall be
paid to the Owner after deducting the total amount of disbursements
incurred in Japan.
11.0 That this Agreement takes effect as of April 15, 1983 and shall
remain in force unless terminated by either party upon 60 days notice.
12.0 That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this reement shall be subject exclusively to the
jurisdiction of the District Courts of Japan. [Annex "G" of the Petition, Rollo,
pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of
the terms of the agreement, particularly the choice-of-forum clause, to sub-
agents is made in the text of the agreement. What the contract clearly
states are NSS' principal duties, i.e., that it shall provide for the necessary
services required for the husbanding of Crestamonte's vessels in Japanese
ports (section 2.0) and shall be responsible for fixing southbound cargoes
with revenues sufficient to cover ordinary expenses (section 3.0).itc-asl person furnishing repairs, supplies, to wage, use of dry dock or marine
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges
that it provided and supplied the MV Estella with marine diesel oil/fuel,
upon request of NSS who was acting for and as duly appointed agent of
Crestamonte [Rollo, pp. 116117.] There is thus no basis for the Court of
Appeal's finding, as regards K.K Shell in relation to its intervention in Civil
Case No. 87-38930, that "the sub-agents admitted in their pleadings that
they were appointed as local agent/sub-agent or representatives by NSS by
virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.] What the
Court of Appeals could have been referring to was K.K. Shell's Urgent
Motion for Leave to Intervene dated February 24, 1987 in another case
(Civil Case No. 86-38704) in another court and involving other vessels (NW
Ofelia and MV Christina C), where it was alleged that K.K. Shell is "one of
the representatives of NS Shipping Corporation for the supply of bunker oil,
fuel oil, provisions and other necessaries to vessels of which NS Shipping
Corporation was the general agent." [Comment, p. 17; Rollo, p. 274.]
However, this allegation does not conclusively establish a sub-agency
between NSS and K.K. Shell. It is therefore surprising how the Court of
Appeals could have come to the conclusion, just on the basis of the Agency
Agreement and the pleadings filed in the trial court, that "Crestamonte is
the principal, NSS is the agent and ... Fu Hing and K.K Shell are the sub-
agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings
filed in the trial court, additional evidence, if there be any, would still have
CONFLICTS | 03Dec | 26
to be presented to establish the allegation that K.K. Shell is a sub-agent of
NSS.
In the same vein, as the choice-of-forum clause in the agreement
(paragraph 12.0) has not been conclusively shown to be binding upon K.K.
Shell, additional evidence would also still have to be presented to establish
this defense, K.K. Shell cannot therefore, as of yet, be barred from
instituting an action in the Philippines.
2. Private respondents have anticipated the possibility that the courts
will not find that K.K. Shell is expressly bound by the Agency Agreement,
and thus they fall back on the argument that even if this were so, the
doctrine of forum non conveniens would be a valid ground to cause the
dismissal of K.K. Shell's complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime
lienholder. It cites Presidential Decree No. 1521, the Ship Mortgage Decree
of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any
railway, or other necessaries, to any vessel, whether foreign or domestic,
upon the order of the owner of such vessel, or of a person authorized by
the owner, shall have a maritime lien on the vessel, which may be enforced
by suit in rem, and it shall be necessary to allege or prove that credit was
given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is
applicable, K.K. Shell cannot rely on the maritime lien because the fuel was
provided not exclusively for the benefit of the MV Estella, but for the benefit
of Crestamonte in general. Under the law it must be established that the
credit was extended to the vessel itself. Now, this is a defense that calls
precisely for a factual determination by the trial court of who benefitted
from the delivery of the fuel. Hence, again, the necessity for the reception
of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the
private respondents have yet to file their answer in the proceedings below
and trial on the merits is still to be conducted, whether or not petitioners
are indeed maritime lienholders and as such may enforce the lien against
the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents' invocation of the
doctrine of forum non conveniens, as the exact nature of the relationship of
the parties is still to be established. We leave this matter to the sound
discretion of the trial court judge who is in the best position, after some
 CONFLICTS | 03Dec | 27

vital facts are established, to determine whether special circumstances

require that his court desist from assuming jurisdiction over the suit.

It was clearly reversible error on the. part of the Court of Appeals to annul
the trial court's orders, insofar as K.K. Shell is concerned, and order the
trial court to cease and desist from proceeding with Civil Case No. 87-
38930. There are still numerous material facts to be established in order to
arrive at a conclusion as to the true nature of the relationship between
Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best
recourse would have been to allow the trial court to proceed with Civil Case
No. 87-38930 and consider whatever defenses may be raised by private
respondents after they have filed their answer and evidence to support their
conflicting claims has been presented. The Court of Appeals, however,
substituted its judgment for that of the trial court and decided the merits of
the case, even in the absence of evidence, on the pretext of reviewing an
interlocutory order.

WHEREFORE, the petition is GRANTED and the decision of the Court of

Appeals is REVERSED in CA-G.R. SP No. 12999, insofar as it annulled the
order of the August 11, 1987 and directed the trial court to cease and
desist from proceeding with Civil Case No. 87-38930.

SO ORDERED.

G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-
TRADE, INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and
FRANCISCO S. AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC,
INC., respondents.
TORRES, JR., J.:p
Business Corporations, according to Lord Coke, "have no souls." They do
business peddling goods, wares or even services across national boundaries
in "souless forms" in quest for profits albeit at times, unwelcomed in these
strange lands venturing into uncertain markets and, the risk of dealing with
wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the
Court of Appeals on June 7, 1991, sustaining the RTC Order dated February
22, 1991, denying the petitioners' Motion to Dismiss, and directing the
issuance of a writ of preliminary injunction, and its companion Resolution of
October 9, 1991, denying the petitioners' Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for
brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both
domestic corporations, while petitioner Francisco S. Aguirre is their
President and majority stockholder. Private Respondents ITEC, INC. and/or
ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly
organized and existing under the laws of the State of Alabama, United
States of America. There is no dispute that ITEC is a foreign corporation not
licensed to do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC
referred to as "Representative Agreement". 1 Pursuant to the contract, ITEC
engaged ASPAC as its "exclusive representative" in the Philippines for the
sale of ITEC's products, in consideration of which, ASPAC was paid a
stipulated commission. The agreement was signed by G.A. Clark and
Francisco S. Aguirre, presidents of ITEC and ASPAC respectively, for and in
behalf of their companies. 2 The said agreement was initially for a term of
twenty-four months. After the lapse of the agreed period, the agreement
was renewed for another twenty-four months.
Through a "License Agreement" 3 entered into by the same parties on
November 10, 1988, ASPAC was able to incorporate and use the name
CONFLICTS | 03Dec | 28
"ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and
publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by
ITEC, to their sole customer, the Philippine Long Distance Telephone
Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation,
and PLDT executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL" 4
which defined the project details for the supply of ITEC's Interface
Equipment in connection with the Fifth Expansion Program of PLDT.
One year into the second term of the parties' Representative Agreement,
ITEC decided to terminate the same, because petitioner ASPAC allegedly
violated its contractual commitment as stipulated in their agreements. 5
ITEC charges the petitioners and another Philippine Corporation, DIGITAL
BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of
which is likewise petitioner Aguirre, of using knowledge and information of
ITEC's products specifications to develop their own line of equipment and
product support, which are similar, if not identical to ITEC's own, and
offering them to ITEC's former customer.
On January 31, 1991, the complaint 6 in Civil Case No. 91-294, was filed
with the Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff
sought to enjoin, first, preliminarily and then, after trial, permanently; (1)
defendants DIGITAL, CMDI, and Francisco Aguirre and their agents and
business associates, to cease and desist from selling or attempting to sell to
PLDT and to any other party, products which have been copied or
manufactured "in like manner, similar or identical to the products, wares
and equipment of plaintiff," and (2) defendant ASPAC, to cease and desist
from using in its corporate name, letter heads, envelopes, sign boards and
business dealings, plaintiff's trademark, internationally known as ITEC; and
the recovery from defendants in solidum, damages of at least P500,000.00,
attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss 7 the complaint on the
following grounds:
(1) That plaintiff has no legal capacity to sue as it is a foreign
corporation doing business in the Philippines without the required BOI
authority and SEC license, and (2) that plaintiff is simply engaged in forum
shopping which justifies the application against it of the principle of "forum
non conveniens".
On February 8, 1991, the complaint was amended by virtue of which ITEC
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. 8

In their Supplemental Motion to Dismiss, 9 defendants took note of the
amendment of the complaint and asked the court to consider in toto their
motion to dismiss and their supplemental motion as their answer to the
amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court
a quo on February 22, 1991, issued its Order: 10 (1) denying the motion to
dismiss for being devoid of legal merit with a rejection of both grounds
relied upon by the defendants in their motion to dismiss, and (2) directing
the issuance of a writ of preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent
Court of Appeals on a Petition for Certiorari and Prohibition 11 under Rule
65 of the Revised Rules of Court, assailing and seeking the nullification and
the setting aside of the Order and the Writ of Preliminary Injunction issued
by the Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of record, to disagree
with the (lower court's) ruling. We therefore are unable to find in
respondent Judge's issuance of said writ the grave abuse of discretion
ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not show that Certiorari
lies in the present case and therefore, the petition does not deserve to be
given due course.
WHEREFORE, the present petition should be, as it is hereby, denied due
course and accordingly, is hereby dismissed. Costs against the petitioners.
SO ORDERED. 12
Petitioners filed a motion for reconsideration 13 on June 7, 1991, which was
likewise denied by the respondent court.
WHEREFORE, the present motion for reconsideration should be, as it is
hereby, denied for lack of merit. For the same reason, the motion to have
the motion for reconsideration set for oral argument likewise should be and
is hereby denied.
SO ORDERED. 14
Petitioners are now before us via Petition for Review on Certiorari 15 under
Rule 45 of the Revised Rules of Court.
CONFLICTS | 03Dec | 29
It is the petitioners' submission that private respondents are foreign
corporations actually doing business in the Philippines without the requisite
authority and license from the Board of Investments and the Securities and
Exchange Commission, and thus, disqualified from instituting the present
action in our courts. It is their contention that the provisions of the
Representative Agreement, petitioner ASPAC executed with private
respondent ITEC, are similarly "highly restrictive" in nature as those found
in the agreements which confronted the Court in the case of Top-Weld
Manufacturing, Inc. vs. ECED S.A. et al., 16 as to reduce petitioner ASPAC
to a mere conduit or extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign corporations are doing
business in the Philippines because when the respondents entered into the
disputed contracts with the petitioner, they were carrying out the purposes
for which they were created, i.e., to manufacture and market welding
products and equipment. The terms and conditions of the contracts as well
as the respondents' conduct indicate that they established within our
country a continuous business, and not merely one of a temporary
character. The respondents could be exempted from the requirements of
Republic Act 5455 if the petitioner is an independent entity which buys and
distributes products not only of the petitioner, but also of other
manufacturers or transacts business in its name and for its account and not
in the name or for the account of the foreign principal. A reading of the
agreements between the petitioner and the respondents shows that they
are highly restrictive in nature, thus making the petitioner a mere conduit
or extension of the respondents.
It is alleged that certain provisions of the "Representative Agreement"
executed by the parties are similar to those found in the License Agreement
of the parties in the Top-Weld case which were considered as "highly
restrictive" by this Court. The provisions in point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by ITEC
from time to time. Unless otherwise expressly agreed to in writing by ITEC
the purchase price is net to ITEC and does not include any transportation
charges, import charges or taxes into or within the Territory. All orders from
customers are subject to formal acceptance by ITEC at its Huntsville,
Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:

3.1.1. Not represent or offer for sale within the Territory any product
which competes with an existing ITEC product or any product which ITEC
has under active development.
3.1.2. Actively solicit all potential customers within the Territory in a
systematic and business like manner.
3.1.3. Inform ITEC of all request for proposals, requests for bids,
invitations to bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC.
The Sales Goals for the first 24 months is set forth on Attachment two (2)
hereto. The Sales Goal for additional twelve month periods, if any, shall be
sent to the Sales Agent by ITEC at the beginning of each period. These
Sales Goals shall be incorporated into this Agreement and made a part
hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement REPRESENTATIVE is authorized
to solicit sales within the Territory on ITEC's behalf but is authorized to bind
ITEC only in its capacity as Representative and no other, and then only to
specific customers and on terms and conditions expressly authorized by
ITEC in writing. 17
Aside from the abovestated provisions, petitioners point out the following
matters of record, which allegedly bear witness to the respondents'
activities within the Philippines in pursuit of their business dealings:
a. While petitioner ASPAC was the authorized exclusive representative
for three (3) years, it solicited from and closed several sales for and on
behalf of private respondents as to their products only and no other, to
PLDT, worth no less than US $ 15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales
and identified by private respondents' sole witness, Mr. Clarence Long, is
not in the name of petitioner ASPAC as such representative, but in the
name of private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL
(Annex C of the original and amended complaints) which defined the
responsibilities of the parties thereto as to the supply, installation and
maintenance of the ITEC equipment sold under said Contract No. 1 is, as its
CONFLICTS | 03Dec | 30
very title indicates, in the names jointly of the petitioner ASPAC and private
respondents;
d. To evidence receipt of the purchase price of US $ 15 Million, private
respondent ITEC, Inc. issued in its letter head, a Confirmation of payment
dated November 13, 1989 and its Invoice dated November 22, 1989
(Annexes 1 and 2 of the Motion to Dismiss and marked as Exhibits 2 and 3
for the petitioners), both of which were identified by private respondent's
sole witness, Mr. Clarence Long (pp. 25-27, tsn, Feb. 18, 1991). 18
Petitioners contend that the above acts or activities belie the supposed
independence of petitioner ASPAC from private respondents. "The
unrebutted evidence on record below for the petitioners likewise reveal the
continuous character of doing business in the Philippines by private
respondents based on the standards laid down by this Court in Wang
Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al. 19 and again in TOP-
WELD. (supra)" It thus appears that as the respondent Court of Appeals
and the trial court's failure to give credence on the grounds relied upon in
support of their Motion to Dismiss that petitioners ascribe grave abuse of
discretion amounting to an excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no capacity
to bring suit here, the Philippines is not the "most convenient forum"
because the trial court is devoid of any power to enforce its orders issued or
decisions rendered in a case that could not have been commenced to begin
with, such that in insisting to assume and exercise jurisdiction over the case
below, the trial court had gravely abused its discretion and even actually
exceeded its jurisdiction.
As against petitioner's insistence that private respondent is "doing
business" in the Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules
and Regulations Implementing the Omnibus Investments Code of 1987, the
following:
(1) A foreign firm is deemed not engaged in business in the Philippines
if it transacts business through middlemen, acting in their own names, such
as indebtors, commercial bookers commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its
representative domiciled in the Philippines has an independent status in
that it transacts business in its name and for its account. 20
Private respondent argues that a scrutiny of its Representative Agreement
with the Petitioners will show that although ASPAC was named as

representative of ITEC., ASPAC actually acted in its own name and for its
own account. The following provisions are particularly mentioned:
3.1.7.1. In the event that REPRESENTATIVE imports directly from
ITEC, REPRESENTATIVE will pay for its own account; all customs duties and
import fees imposed on any ITEC products; all import expediting or
handling charges and expenses imposed on ITEC products; and any stamp
tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as representative
under this Agreement, REPRESENTATIVE shall receive a sales commission
equivalent to a per centum of the FOB value of all ITEC equipment sold to
customers within the territory as a direct result of REPRESENTATIVE's sales
efforts. 21
More importantly, private respondent charges ASPAC of admitting its
independence from ITEC by entering and ascribing to provision No. 6 of the
Representative Agreement.
6.0 Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor and not as an
employee, worker, laborer, partner, joint venturer of ITEC as these terms
are defined by the laws, regulations, decrees or the like of any jurisdiction,
including the jurisdiction of the United States, the state of Alabama and the
Territory. 22
Although it admits that the Representative Agreement contains provisions
which both support and belie the independence of ASPAC, private
respondent echoes the respondent court's finding that the lower court did
not commit grave abuse of discretion nor acted in excess of jurisdiction
when it found that the ground relied upon by the petitioners in their motion
to dismiss does not appear to be indubitable. 23
The issues before us now are whether or not private respondent ITEC is an
unlicensed corporation doing business in the Philippines, and if it is,
whether or not this fact bars it from invoking the injunctive authority of our
courts.
Considering the above, it is necessary to state what is meant by "doing
business" in the Philippines. Section 133 of the Corporation Code, provides
that "No foreign corporation, transacting business in the Philippines without
a license, or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative
CONFLICTS | 03Dec | 31
agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine Courts or administrative tribunals on any valid
cause of action recognized under Philippine laws." 24
Generally, a "foreign corporation" has no legal existence within the state in
which it is foreign. This proceeds from the principle that juridical existence
of a corporation is confined within the territory of the state under whose
laws it was incorporated and organized, and it has no legal status beyond
such territory. Such foreign corporation may be excluded by any other state
from doing business within its limits, or conditions may be imposed on the
exercise of such privileges. 25 Before a foreign corporation can transact
business in this country, it must first obtain a license to transact business in
the Philippines, and a certificate from the appropriate government agency.
If it transacts business in the Philippines without such a license, it shall not
be permitted to maintain or intervene in any action, suit, or proceeding in
any court or administrative agency of the Philippines, but it may be sued on
any valid cause of action recognized under Philippine laws. 26
In a long line of decisions, this Court has not altogether prohibited foreign
corporation not licensed to do business in the Philippines from suing or
maintaining an action in Philippine Courts. What it seeks to prevent is a
foreign corporation doing business in the Philippines without a licensed from
gaining access to Philippine Courts. 27
The purpose of the law in requiring that foreign corporations doing business
in the Philippines be licensed to do so and that they appoint an agent for
service of process is to subject the foreign corporation doing business in the
Philippines to the jurisdiction of its courts. The object is not to prevent the
foreign corporation from performing single acts, but to prevent it from
acquiring a domicile for the purpose of business without taking steps
necessary to render it amenable to suit in the local courts. 28 The
implication of the law is that it was never the purpose of the legislature to
exclude a foreign corporation which happens to obtain an isolated order for
business from the Philippines, and thus, in effect, to permit persons to
avoid their contracts made with such foreign corporations. 29
There is no exact rule or governing principle as to what constitutes "doing"
or "engaging" or "transacting" business. Indeed, such case must be judged
in the light of its peculiar circumstances, upon its peculiar facts and upon
the language of the statute applicable. The true test, however, seems to be
whether the foreign corporation is continuing the body or substance of the
business or enterprise for which it was organized. 30
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to
include:

soliciting orders, purchases, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or
distributors who are domiciled in the Philippines or who in any calendar
year stay in the Philippines for a period or periods totalling one hundred
eighty (180) days or more; participating in the management, supervision or
control of any domestic business firm, entity or corporation in the
Philippines, and any other act or acts that imply a continuity or commercial
dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident
to, and in progressive prosecution of, commercial gain or of the purpose
and object of the business organization.
Thus, a foreign corporation with a settling agent in the Philippines which
issued twelve marine policies covering different shipments to the Philippines
31 and a foreign corporation which had been collecting premiums on
outstanding policies 32 were regarded as doing business here.
The same rule was observed relating to a foreign corporation with an
"exclusive distributing agent" in the Philippines, and which has been selling
its products here since 1929, 33 and a foreign corporation engaged in the
business of manufacturing and selling computers worldwide, and had
installed at least 26 different products in several corporations in the
Philippines, and allowed its registered logo and trademark to be used and
made it known that there exists a designated distributor in the Philippines.
34
In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was held that the
uninterrupted performance by a foreign corporation of acts pursuant to its
primary purposes and functions as a regional area headquarters for its
home office, qualifies such corporation as one doing business in the
country.
These foregoing instances should be distinguished from a single or isolated
transaction or occasional, incidental, or casual transactions, which do not
come within the meaning of the law, 36 for in such case, the foreign
corporation is deemed not engaged in business in the Philippines.
Where a single act or transaction, however, is not merely incidental or
casual but indicates the foreign corporation's intention to do other business
in the Philippines, said single act or transaction constitutes "doing" or
"engaging in" or "transacting" business in the Philippines. 37
In determining whether a corporation does business in the Philippines or
not, aside from their activities within the forum, reference may be made to
the contractual agreements entered into by it with other entities in the
country. Thus, in the Top-Weld case (supra), the foreign corporation's
LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with
CONFLICTS | 03Dec | 32
their local contacts were made the basis of their being regarded by this
Tribunal as corporations doing business in the country. Likewise, in Merill
Lynch Futures, Inc. vs. Court of Appeals, etc. 38 the FUTURES CONTRACT
entered into by the petitioner foreign corporation weighed heavily in the
court's ruling.
With the abovestated precedents in mind, we are persuaded to conclude
that private respondent had been "engaged in" or "doing business" in the
Philippines for some time now. This is the inevitable result after a scrutiny
of the different contracts and agreements entered into by ITEC with its
various business contacts in the country, particularly ASPAC and Telephone
Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local
electronics firm engaged by ITEC to be its local technical representative,
and to create a service center for ITEC products sold locally. Its
arrangements, with these entities indicate convincingly ITEC's purpose to
bring about the situation among its customers and the general public that
they are dealing directly with ITEC, and that ITEC is actively engaging in
business in the country.
In its Master Service Agreement 39 with TESSI, private respondent required
its local technical representative to provide the employees of the technical
and service center with ITEC identification cards and business cards, and to
correspond only on ITEC, Inc., letterhead. TESSI personnel are instructed to
answer the telephone with "ITEC Technical Assistance Center.", such
telephone being listed in the telephone book under the heading of ITEC
Technical Assistance Center, and all calls being recorded and forwarded to
ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report
detailing the failure and repair of ITEC products, and to requisition monthly
the materials and components needed to replace stock consumed in the
warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the respondents
shows that there are provisions which are highly restrictive in nature, such
as to reduce petitioner ASPAC to a mere extension or instrument of the
private respondent.
The "No Competing Product" provision of the Representative Agreement
between ITEC and ASPAC provides: "The Representative shall not represent
or offer for sale within the Territory any product which competes with an
existing ITEC product or any product which ITEC has under active
development." Likewise pertinent is the following provision: "When acting
under this Agreement, REPRESENTATIVE is authorized to solicit sales within
the Territory on ITEC's behalf but is authorized to bind ITEC only in its
capacity as Representative and no other, and then only to specific

customers and on terms and conditions expressly authorized by ITEC in
writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI, they
were carrying out the purposes for which it was created, i.e., to market
electronics and communications products. The terms and conditions of the
contracts as well as ITEC's conduct indicate that they established within our
country a continuous business, and not merely one of a temporary
character. 40
Notwithstanding such finding that ITEC is doing business in the country,
petitioner is nonetheless estopped from raising this fact to bar ITEC from
instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue in Philippine
Courts although not authorized to do business here against a Philippine
citizen or entity who had contracted with and benefited by said corporation.
41 To put it in another way, a party is estopped to challenge the personality
of a corporation after having acknowledged the same by entering into a
contract with it. And the doctrine of estoppel to deny corporate existence
applies to a foreign as well as to domestic corporations. 42 One who has
dealt with a corporation of foreign origin as a corporate entity is estopped
to deny its corporate existence and capacity: The principle will be applied to
prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where
such person has received the benefits of the contract. 43
The rule is deeply rooted in the time-honored axiom of Commodum ex
injuria sua non habere debet no person ought to derive any advantage of
his own wrong. This is as it should be for as mandated by law, "every
person must in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and
good faith." 44
Concededly, corporations act through agents, like directors and officers.
Corporate dealings must be characterized by utmost good faith and
fairness. Corporations cannot just feign ignorance of the legal rules as in
most cases, they are manned by sophisticated officers with tried
management skills and legal experts with practiced eye on legal problems.
Each party to a corporate transaction is expected to act with utmost candor
and fairness and, thereby allow a reasonable proportion between benefits
and expected burdens. This is a norm which should be observed where one
or the other is a foreign entity venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
CONFLICTS | 03Dec | 33
The parties are charged with knowledge of the existing law at the time they
enter into a contract and at the time it is to become operative. (Twiehaus v.
Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person
is presumed to be more knowledgeable about his own state law than his
alien or foreign contemporary. In this case, the record shows that, at least,
petitioner had actual knowledge of the applicability of R.A. No. 5455 at the
time the contract was executed and at all times thereafter. This conclusion
is compelled by the fact that the same statute is now being propounded by
the petitioner to bolster its claim. We, therefore sustain the appellate
court's view that "it was incumbent upon TOP-WELD to know whether or not
IRTI and ECED were properly authorized to engage in business in the
Philippines when they entered into the licensing and distributorship
agreements." The very purpose of the law was circumvented and evaded
when the petitioner entered into said agreements despite the prohibition of
R.A. No. 5455. The parties in this case being equally guilty of violating R.A.
No. 5455, they are in pari delicto, in which case it follows as a consequence
that petitioner is not entitled to the relief prayed for in this case.
The doctrine of lack of capacity to sue based on the failure to acquire a local
license is based on considerations of sound public policy. The license
requirement was imposed to subject the foreign corporation doing business
in the Philippines to the jurisdiction of its courts. It was never intended to
favor domestic corporations who enter into solitary transactions with
unwary foreign firms and then repudiate their obligations simply because
the latter are not licensed to do business in this country. 45
In Antam Consolidated Inc. vs. Court of Appeals, et al. 46 we expressed our
chagrin over this commonly used scheme of defaulting local companies
which are being sued by unlicensed foreign companies not engaged in
business in the Philippines to invoke the lack of capacity to sue of such
foreign companies. Obviously, the same ploy is resorted to by ASPAC to
prevent the injunctive action filed by ITEC to enjoin petitioner from using
knowledge possibly acquired in violation of fiduciary arrangements between
the parties.
By entering into the "Representative Agreement" with ITEC, Petitioner is
charged with knowledge that ITEC was not licensed to engage in business
activities in the country, and is thus estopped from raising in defense such
incapacity of ITEC, having chosen to ignore or even presumptively take
advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted from the
license requirement in order to institute an action in our courts if its
representative in the country maintained an independent status during the
existence of the disputed contract. Petitioner is deemed to have acceded to
such independent character when it entered into the Representative
Agreement with ITEC, particularly, provision 6.2 (supra).
 CONFLICTS | 03Dec | 34

Petitioner's insistence on the dismissal of this action due to the application,

or non application, of the private international law rule of forum non
conveniens defies well-settled rules of fair play. According to petitioner, the
Philippine Court has no venue to apply its discretion whether to give
cognizance or not to the present action, because it has not acquired
jurisdiction over the person of the plaintiff in the case, the latter allegedly
having no personality to sue before Philippine Courts. This argument is
misplaced because the court has already acquired jurisdiction over the
plaintiff in the suit, by virtue of his filing the original complaint. And as we
have already observed, petitioner is not at liberty to question plaintiff's
standing to sue, having already acceded to the same by virtue of its entry
into the Representative Agreement referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based
on the facts of the case, whether to give due course to the suit or dismiss
it, on the principle of forum non convenience. 47 Hence, the Philippine
Court may refuse to assume jurisdiction in spite of its having acquired
jurisdiction. Conversely, the court may assume jurisdiction over the case if
it chooses to do so; provided, that the following requisites are met: 1) That
the Philippine Court is one to which the parties may conveniently resort to;
2) That the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, 3) That the Philippine Court has or is likely
to have power to enforce its decision. 48

The aforesaid requirements having been met, and in view of the court's
disposition to give due course to the questioned action, the matter of the
present forum not being the "most convenient" as a ground for the suit's
dismissal, deserves scant consideration.

IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby

DISMISSED. The decision of the Court of Appeals dated June 7, 1991,
upholding the RTC Order dated February 22, 1991, denying the petitioners'
Motion to Dismiss, and ordering the issuance of the Writ of Preliminary
Injunction, is hereby affirmed in toto.

SO ORDERED.

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
CONFLICTS | 03Dec | 35
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,
CONFLICTS | 03Dec | 36
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
 CONFLICTS | 03Dec | 37

trial court to abstain from assuming jurisdiction on this ground, it should do SO ORDERED.
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 full-blown trial on the merits can afford.

WHEREFORE, the instant petition for review on certiorari is DENIED. The

Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67001
are hereby AFFIRMED. Costs against petitioner.
G.R. No. 125078 May 30, 2011

BERNABE NAVIDA, ET AL VS HON. TEODORO A. DIZON, JR.,
Presiding Judge, Regional Trial Court, Branch 37, General Santos
City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL
CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO.,
DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH
PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO., CHIQUITA
BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS, INC.,
Respondents.
G.R. No. 125598
THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL
CORPORATION, vs. BERNABE L. NAVIDA, ET. AL.
G.R. No. 126654
CORNELIO ABELLA, JR., ET. AL. VS THE HON. ROMEO D.
MARASIGAN, Presiding Judge of Regional Trial Court, Branch 16,
Davao City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL
CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT &
STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL
MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO.,
CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS,
INC.,
G.R. No. 127856
DEL MONTE FRESH PRODUCE N.A. and DEL MONTE TROPICAL FRUIT
CO., Petitioners, vs. THE REGIONAL TRIAL COURT OF DAVAO CITY,
BRANCHES 16 AND 13, ET AL
G.R. No. 128398
CHIQUITA BRANDS, INC., and CHIQUITA BRANDS INTERNATIONAL,
INC., Petitioners, vs. HON. ANITA ALFELOR-ALAGABAN, in her
capacity as Presiding Judge of the Regional Trial Court, Davao City,
Branch 13, CORNELIO ABELLA, JR., ET. AL.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are consolidated Petitions for Review on Certiorari under
Rule 45 of the Rules of Court, which arose out of two civil cases that were
filed in different courts but whose factual background and issues are closely
intertwined.
CONFLICTS | 03Dec | 38
The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3
dated May 20, 1996 of the Regional Trial Court (RTC) of General Santos
City, Branch 37, in Civil Case No. 5617. The said Order decreed the
dismissal of the case in view of the perceived lack of jurisdiction of the RTC
over the subject matter of the complaint. The petition in G.R. No. 125598
also challenges the Orders dated June 4, 19964 and July 9, 1996,5 which
held that the RTC of General Santos City no longer had jurisdiction to
proceed with Civil Case No. 5617.
On the other hand, the petitions in G.R. Nos. 126654,6 127856,7 and
1283988 seek the reversal of the Order9 dated October 1, 1996 of the RTC
of Davao City, Branch 16, in Civil Case No. 24,251-96, which also dismissed
the case on the ground of lack of jurisdiction.
G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were
consolidated in the Resolutions dated February 10, 1997,10 April 28,
199711 and March 10, 1999.12
The factual antecedents of the petitions are as follows:
Proceedings before the Texas Courts
Beginning 1993, a number of personal injury suits were filed in different
Texas state courts by citizens of twelve foreign countries, including the
Philippines. The thousands of plaintiffs sought damages for injuries they
allegedly sustained from their exposure to dibromochloropropane (DBCP), a
chemical used to kill nematodes (worms), while working on farms in 23
foreign countries. The cases were eventually transferred to, and
consolidated in, the Federal District Court for the Southern District of Texas,
Houston Division. The cases therein that involved plaintiffs from the
Philippines were "Jorge Colindres Carcamo, et al. v. Shell Oil Co., et al.,"
which was docketed as Civil Action No. H-94-1359, and "Juan Ramon
Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No.
H-95-1356. The defendants in the consolidated cases prayed for the
dismissal of all the actions under the doctrine of forum non conveniens.
In a Memorandum and Order dated July 11, 1995, the Federal District Court
conditionally granted the defendants motion to dismiss. Pertinently, the
court ordered that:
Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90
days after the entry of this Memorandum and Order provided that
defendants and third- and fourth-party defendants have:
(1) participated in expedited discovery in the United States xxx;

(2) either waived or accepted service of process and waived any other
jurisdictional defense within 40 days after the entry of this Memorandum
and Order in any action commenced by a plaintiff in these actions in his
home country or the country in which his injury occurred. Any plaintiff
desiring to bring such an action will do so within 30 days after the entry of
this Memorandum and Order;
(3) waived within 40 days after the entry of this Memorandum and Order
any limitations-based defense that has matured since the commencement
of these actions in the courts of Texas;
(4) stipulated within 40 days after the entry of this Memorandum and Order
that any discovery conducted during the pendency of these actions may be
used in any foreign proceeding to the same extent as if it had been
conducted in proceedings initiated there; and
(5) submitted within 40 days after the entry of this Memorandum and Order
an agreement binding them to satisfy any final judgment rendered in favor
of plaintiffs by a foreign court.
xxxx
Notwithstanding the dismissals that may result from this Memorandum and
Order, in the event that the highest court of any foreign country finally
affirms the dismissal for lack of jurisdiction of an action commenced by a
plaintiff in these actions in his home country or the country in which he was
injured, that plaintiff may return to this court and, upon proper motion, the
court will resume jurisdiction over the action as if the case had never been
dismissed for [forum non conveniens].13
Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos.
125078 and 125598
In accordance with the above Memorandum and Order, a total of 336
plaintiffs from General Santos City (the petitioners in G.R. No. 125078,
hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint14 in the
RTC of General Santos City on August 10, 1995. The case was docketed as
Civil Case No. 5617. Named as defendants therein were: Shell Oil Co.
(SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp.
(OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit
Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to
as DOLE); Chiquita Brands, Inc. and Chiquita Brands International, Inc.
(CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co.
(hereinafter collectively referred to as DEL MONTE); Dead Sea Bromine Co.,
Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac Chemical
Corp. (The aforementioned defendants are hereinafter collectively referred
to as defendant companies.)
CONFLICTS | 03Dec | 39
Navida, et al., prayed for the payment of damages in view of the illnesses
and injuries to the reproductive systems which they allegedly suffered
because of their exposure to DBCP. They claimed, among others, that they
were exposed to this chemical during the early 1970s up to the early
1980s when they used the same in the banana plantations where they
worked at; and/or when they resided within the agricultural area where
such chemical was used. Navida, et al., claimed that their illnesses and
injuries were due to the fault or negligence of each of the defendant
companies in that they produced, sold and/or otherwise put into the stream
of commerce DBCP-containing products. According to NAVIDA, et al., they
were allowed to be exposed to the said products, which the defendant
companies knew, or ought to have known, were highly injurious to the
formers health and well-being.
Instead of answering the complaint, most of the defendant companies
respectively filed their Motions for Bill of Particulars.15 During the pendency
of the motions, on March 13, 1996, NAVIDA, et al., filed an Amended Joint
Complaint,16 excluding Dead Sea Bromine Co., Ltd., Ameribrom, Inc.,
Bromine Compounds, Ltd. and Amvac Chemical Corp. as party defendants.
Again, the remaining defendant companies filed their various Motions for
Bill of Particulars.17 On May 15, 1996, DOW filed an Answer with
Counterclaim.18
On May 20, 1996, without resolving the motions filed by the parties, the
RTC of General Santos City issued an Order dismissing the complaint. First,
the trial court determined that it did not have jurisdiction to hear the case,
to wit:
THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT
SHOULD BE DISMISSED FOR LACK OF JURISDICTION
xxxx
The substance of the cause of action as stated in the complaint against the
defendant foreign companies cites activity on their part which took place
abroad and had occurred outside and beyond the territorial domain of the
Philippines. These acts of defendants cited in the complaint included the
manufacture of pesticides, their packaging in containers, their distribution
through sale or other disposition, resulting in their becoming part of the
stream of commerce.
Accordingly, the subject matter stated in the complaint and which is
uniquely particular to the present case, consisted of activity or course of
conduct engaged in by foreign defendants outside Philippine territory,

hence, outside and beyond the jurisdiction of Philippine Courts, including
the present Regional Trial Court.19
Second, the RTC of General Santos City declared that the tort alleged by
Navida, et al., in their complaint is a tort category that is not recognized in
Philippine laws. Said the trial court:
THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT
FOREIGN COMPANIES IS NOT WITHIN THE SUBJECT MATTER
JURISDICTION OF THE REGIONAL TRIAL COURT, BECAUSE IT IS NOT A
TORT CATEGORY WITHIN THE PURVIEW OF THE PHILIPPINE LAW
The specific tort asserted against defendant foreign companies in the
present complaint is product liability tort. When the averments in the
present complaint are examined in terms of the particular categories of tort
recognized in the Philippine Civil Code, it becomes stark clear that such
averments describe and identify the category of specific tort known as
product liability tort. This is necessarily so, because it is the product
manufactured by defendant foreign companies, which is asserted to be the
proximate cause of the damages sustained by the plaintiff workers, and the
liability of the defendant foreign companies, is premised on being the
manufacturer of the pesticides.
It is clear, therefore, that the Regional Trial Court has jurisdiction over the
present case, if and only if the Civil Code of the Philippines, or a suppletory
special law prescribes a product liability tort, inclusive of and
comprehending the specific tort described in the complaint of the plaintiff
workers.20
Third, the RTC of General Santos City adjudged that Navida, et al., were
coerced into submitting their case to the Philippine courts, viz:
FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS
The Court views that the plaintiffs did not freely choose to file the instant
action, but rather were coerced to do so, merely to comply with the U.S.
District Courts Order dated July 11, 1995, and in order to keep open to the
plaintiffs the opportunity to return to the U.S. District Court.21
Fourth, the trial court ascribed little significance to the voluntary
appearance of the defendant companies therein, thus:
THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT
IS ILLUSORY
Defendants have appointed their agents authorized to accept service of
summons/processes in the Philippines pursuant to the agreement in the
CONFLICTS | 03Dec | 40
U.S. court that defendants will voluntarily submit to the jurisdiction of this
court. While it is true that this court acquires jurisdiction over persons of
the defendants through their voluntary appearance, it appears that such
voluntary appearance of the defendants in this case is conditional. Thus in
the "Defendants Amended Agreement Regarding Conditions of Dismissal
for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S.
District Court, defendants declared that "(t)he authority of each designated
representative to accept service of process will become effective upon final
dismissal of these actions by the Court". The decision of the U.S. District
Court dismissing the case is not yet final and executory since both the
plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended
Complaint). Consequently, since the authority of the agent of the
defendants in the Philippines is conditioned on the final adjudication of the
case pending with the U.S. courts, the acquisition of jurisdiction by this
court over the persons of the defendants is also conditional. x x x.
The appointment of agents by the defendants, being subject to a
suspensive condition, thus produces no legal effect and is ineffective at the
moment.22
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of
filing the case in the Philippine courts violated the rules on forum shopping
and litis pendencia. The trial court expounded:
THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING
This court frowns upon the fact that the parties herein are both vigorously
pursuing their appeal of the decision of the U.S. District court dismissing
the case filed thereat. To allow the parties to litigate in this court when they
are actively pursuing the same cases in another forum, violates the rule on
forum shopping so abhorred in this jurisdiction. x x x.
xxxx
THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN
JURISDICTION
Moreover, the filing of the case in the U.S. courts divested this court of its
own jurisdiction. This court takes note that the U.S. District Court did not
decline jurisdiction over the cause of action. The case was dismissed on the
ground of forum non conveniens, which is really a matter of venue. By
taking cognizance of the case, the U.S. District Court has, in essence,
concurrent jurisdiction with this court over the subject matter of this case.
It is settled that initial acquisition of jurisdiction divests another of its own
jurisdiction. x x x.
xxxx

THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"
Furthermore, the case filed in the U.S. court involves the same parties,
same rights and interests, as in this case. There exists litis pendencia since
there are two cases involving the same parties and interests. The court
would like to emphasize that in accordance with the rule on litis pendencia x
x x; the subsequent case must be dismissed. Applying the foregoing
[precept] to the case-at-bar, this court concludes that since the case
between the parties in the U.S. is still pending, then this case is barred by
the rule on "litis pendencia."23
In fine, the trial court held that:
It behooves this Court, then to dismiss this case. For to continue with these
proceedings, would be violative of the constitutional provision on the Bill of
Rights guaranteeing speedy disposition of cases (Ref. Sec. 16, Article III,
Constitution). The court has no other choice. To insist on further
proceedings with this case, as it is now presented, might accord this court a
charming appearance. But the same insistence would actually thwart the
very ends of justice which it seeks to achieve.
This evaluation and action is made not on account of but rather with due
consideration to the fact that the dismissal of this case does not necessarily
deprive the parties especially the plaintiffs of their possible remedies.
The court is cognizant that the Federal Court may resume proceedings of
that earlier case between the herein parties involving the same acts or
omissions as in this case.
WHEREFORE, in view of the foregoing considerations, this case is now
considered DISMISSED.24
On June 4, 1996, the RTC of General Santos City likewise issued an
Order,25 dismissing DOWs Answer with Counterclaim.
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration26
of the RTC Order dated May 20, 1996, while DOW filed a motion for
reconsideration27 of the RTC Order dated June 4, 1996. Subsequently,
DOW and OCCIDENTAL also filed a Joint Motion for Reconsideration28 of the
RTC Order dated May 20, 1996.
In an Order29 dated July 9, 1996, the RTC of General Santos City declared
that it had already lost its jurisdiction over the case as it took into
consideration the Manifestation of the counsel of NAVIDA, et al., which
stated that the latter had already filed a petition for review on certiorari
before this Court.
CONFLICTS | 03Dec | 41
CHIQUITA and SHELL filed their motions for reconsideration30 of the above
order.
On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in
order to assail the RTC Order dated May 20, 1996, which was docketed as
G.R. No. 125078.
The RTC of General Santos City then issued an Order31 dated August 14,
1996, which merely noted the incidents still pending in Civil Case No. 5617
and reiterated that it no longer had any jurisdiction over the case.
On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review
on Certiorari,32 challenging the orders of the RTC of General Santos City
dated May 20, 1996, June 4, 1996 and July 9, 1996. Their petition was
docketed as G.R. No. 125598.
In their petition, DOW and OCCIDENTAL aver that the RTC of General
Santos City erred in ruling that it has no jurisdiction over the subject matter
of the case as well as the persons of the defendant companies.
In a Resolution33 dated October 7, 1996, this Court resolved to consolidate
G.R. No. 125598 with G.R. No. 125078.
CHIQUITA filed a Petition for Review on Certiorari,34 which sought the
reversal of the RTC Orders dated May 20, 1996, July 9, 1996 and August
14, 1996. The petition was docketed as G.R. No. 126018. In a Resolution35
dated November 13, 1996, the Court dismissed the aforesaid petition for
failure of CHIQUITA to show that the RTC committed grave abuse of
discretion. CHIQUITA filed a Motion for Reconsideration,36 but the same
was denied through a Resolution37 dated January 27, 1997.
Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos.
126654, 127856, and 128398
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL,
DOLE, DEL MONTE, and CHIQUITA was filed before Branch 16 of the RTC of
Davao City by 155 plaintiffs from Davao City. This case was docketed as
Civil Case No. 24,251-96. These plaintiffs (the petitioners in G.R. No.
126654, hereinafter referred to as ABELLA, et al.) amended their Joint-
Complaint on May 21, 1996.38
Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as
workers in the banana plantation and/or as residents near the said
plantation, they were made to use and/or were exposed to nematocides,
which contained the chemical DBCP. According to ABELLA, et al., such
exposure resulted in "serious and permanent injuries to their health,
including, but not limited to, sterility and severe injuries to their

reproductive capacities."39 ABELLA, et al., claimed that the defendant
companies manufactured, produced, sold, distributed, used, and/or made
available in commerce, DBCP without warning the users of its hazardous
effects on health, and without providing instructions on its proper use and
application, which the defendant companies knew or ought to have known,
had they exercised ordinary care and prudence.
Except for DOW, the other defendant companies filed their respective
motions for bill of particulars to which ABELLA, et al., filed their opposition.
DOW and DEL MONTE filed their respective Answers dated May 17, 1996
and June 24, 1996.
The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its
Order dated October 1, 1996, which, in its entirety, reads:
Upon a thorough review of the Complaint and Amended Complaint For:
Damages filed by the plaintiffs against the defendants Shell Oil Company,
DOW Chemicals Company, Occidental Chemical Corporation, Standard Fruit
Company, Standard Fruit and Steamship, DOLE Food Company, DOLE Fresh
Fruit Company, Chiquita Brands, Inc., Chiquita Brands International, Del
Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign
corporations with Philippine Representatives, the Court, as correctly pointed
out by one of the defendants, is convinced that plaintiffs "would have this
Honorable Court dismiss the case to pave the way for their getting an
affirmance by the Supreme Court" (#10 of Defendants Del Monte Fresh
Produce, N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated
July 22, 1996). Consider these:
1) In the original Joint Complaint, plaintiffs state that: defendants have no
properties in the Philippines; they have no agents as well (par. 18);
plaintiffs are suing the defendants for tortuous acts committed by these
foreign corporations on their respective countries, as plaintiffs, after having
elected to sue in the place of defendants residence, are now compelled by
a decision of a Texas District Court to file cases under torts in this
jurisdiction for causes of actions which occurred abroad (par. 19); a petition
was filed by same plaintiffs against same defendants in the Courts of Texas,
USA, plaintiffs seeking for payment of damages based on negligence, strict
liability, conspiracy and international tort theories (par. 27); upon
defendants Motion to Dismiss on Forum non [conveniens], said petition was
provisionally dismissed on condition that these cases be filed in the
Philippines or before 11 August 1995 (Philippine date; Should the Philippine
Courts refuse or deny jurisdiction, the U. S. Courts will reassume
jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995,
the Federal District Court issued a Memorandum and Order conditionally
dismissing several of the consolidated actions including those filed by the
CONFLICTS | 03Dec | 42
Filipino complainants. One of the conditions imposed was for the plaintiffs
to file actions in their home countries or the countries in which they were
injured x x x. Notwithstanding, the Memorandum and [O]rder further
provided that should the highest court of any foreign country affirm the
dismissal for lack of jurisdictions over these actions filed by the plaintiffs in
their home countries [or] the countries where they were injured, the said
plaintiffs may return to that court and, upon proper motion, the Court will
resume jurisdiction as if the case had never been dismissed for forum non
conveniens.
The Court however is constrained to dismiss the case at bar not solely on
the basis of the above but because it shares the opinion of legal experts
given in the interview made by the Inquirer in its Special report "Pesticide
Cause Mass Sterility," to wit:
1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said:
The Philippines should be an inconvenient forum to file this kind of damage
suit against foreign companies since the causes of action alleged in the
petition do not exist under Philippine laws. There has been no decided case
in Philippine Jurisprudence awarding to those adversely affected by DBCP.
This means there is no available evidence which will prove and disprove the
relation between sterility and DBCP.
2. Retired Supreme Court Justice Abraham Sarmiento opined that while a
class suit is allowed in the Philippines the device has been employed strictly.
Mass sterility will not qualify as a class suit injury within the contemplation
of Philippine statute.
3. Retired High Court Justice Rodolfo Nocom stated that there is simply an
absence of doctrine here that permits these causes to be heard. No product
liability ever filed or tried here.
Case ordered dismissed.40
Docketed as G.R. No. 126654, the petition for review, filed on November
12, 1996 by ABELLA, et al., assails before this Court the above-quoted
order of the RTC of Davao City.
ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil
Case No. 24,251-96 on the ground of lack of jurisdiction.
According to ABELLA, et al., the RTC of Davao City has jurisdiction over the
subject matter of the case since Articles 2176 and 2187 of the Civil Code
are broad enough to cover the acts complained of and to support their
claims for damages.

ABELLA, et al., further aver that the dismissal of the case, based on the
opinions of legal luminaries reported in a newspaper, by the RTC of Davao
City is bereft of basis. According to them, their cause of action is based on
quasi-delict under Article 2176 of the Civil Code. They also maintain that
the absence of jurisprudence regarding the award of damages in favor of
those adversely affected by the DBCP does not preclude them from
presenting evidence to prove their allegations that their exposure to DBCP
caused their sterility and/or infertility.
SHELL, DOW, and CHIQUITA each filed their respective motions for
reconsideration of the Order dated October 1, 1996 of the RTC of Davao
City. DEL MONTE also filed its motion for reconsideration, which contained
an additional motion for the inhibition of the presiding judge.
The presiding judge of Branch 16 then issued an Order41 dated December
2, 1996, voluntarily inhibiting himself from trying the case. Thus, the case
was re-raffled to Branch 13 of the RTC of Davao City.
In an Order42 dated December 16, 1996, the RTC of Davao City affirmed
the Order dated October 1, 1996, and denied the respective motions for
reconsideration filed by defendant companies.
Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997,
questioning the Orders dated October 1, 1996 and December 16, 1996 of
the RTC of Davao City. This case was docketed as G.R. No. 128398.
In its petition, CHIQUITA argues that the RTC of Davao City erred in
dismissing the case motu proprio as it acquired jurisdiction over the subject
matter of the case as well as over the persons of the defendant companies
which voluntarily appeared before it. CHIQUITA also claims that the RTC of
Davao City cannot dismiss the case simply on the basis of opinions of
alleged legal experts appearing in a newspaper article.
Initially, this Court in its Resolution43 dated July 28, 1997, dismissed the
petition filed by CHIQUITA for submitting a defective certificate against
forum shopping. CHIQUITA, however, filed a motion for reconsideration,
which was granted by this Court in the Resolution44 dated October 8, 1997.
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari
before this Court assailing the above-mentioned orders of the RTC of Davao
City. Its petition was docketed as G.R. No. 127856.
DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil
Case No. 24,251-96, as defined under the law and that the said court
already obtained jurisdiction over its person by its voluntary appearance
and the filing of a motion for bill of particulars and, later, an answer to the
complaint. According to DEL MONTE, the RTC of Davao City, therefore,
CONFLICTS | 03Dec | 43
acted beyond its authority when it dismissed the case motu proprio or
without any motion to dismiss from any of the parties to the case.
In the Resolutions dated February 10, 1997, April 28, 1997, and March 10,
1999, this Court consolidated G.R. Nos. 125078, 125598, 126654, 127856,
and 128398.
The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-
Respondents filed by NAVIDA, et al. and ABELLA, et al.
On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before
this Court a Consolidated Motion (to Drop Party-Respondents).45 The
plaintiff claimants alleged that they had amicably settled their cases with
DOW, OCCIDENTAL, and SHELL sometime in July 1997. This settlement
agreement was evidenced by facsimiles of the "Compromise Settlement,
Indemnity, and Hold Harmless Agreement," which were attached to the said
motion. Pursuant to said agreement, the plaintiff claimants sought to
withdraw their petitions as against DOW, OCCIDENTAL, and SHELL.
DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as
the settlement entered into between the plaintiff claimants and DOW,
OCCIDENTAL, and SHELL.
The Memoranda of the Parties
Considering the allegations, issues, and arguments adduced by the parties,
this Court, in a Resolution dated June 22, 1998,46 required all the parties
to submit their respective memoranda.
CHIQUITA filed its Memorandum on August 28, 1998;47 SHELL asked to be
excused from the filing of a memorandum alleging that it had already
executed a compromise agreement with the plaintiff claimants.48 DOLE
filed its Memorandum on October 12, 199849 while DEL MONTE filed on
October 13, 1998.50 NAVIDA, et al., and ABELLA, et al., filed their
Consolidated Memorandum on February 3, 1999;51 and DOW and
OCCIDENTAL jointly filed a Memorandum on December 23, 1999.52
The Motion to Withdraw Petition for Review in G.R. No. 125598
On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw
Petition for Review in G.R. No. 125598, 53 explaining that the said petition
"is already moot and academic and no longer presents a justiciable
controversy" since they have already entered into an amicable settlement
with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully
complied with their obligations set forth in the 1997 Compromise
Agreements.

DOLE filed its Manifestation dated September 6, 2004,54 interposing no
objection to the withdrawal of the petition, and further stating that they
maintain their position that DOW and OCCIDENTAL, as well as other settling
defendant companies, should be retained as defendants for purposes of
prosecuting the cross-claims of DOLE, in the event that the complaint below
is reinstated.
NAVIDA, et al., also filed their Comment dated September 14, 2004,55
stating that they agree with the view of DOW and OCCIDENTAL that the
petition in G.R. No. 125598 has become moot and academic because Civil
Case No. 5617 had already been amicably settled by the parties in 1997.
On September 27, 2004, DEL MONTE filed its Comment on Motion to
Withdraw Petition for Review Filed by Petitioners in G.R. No. 125598,56
stating that it has no objections to the withdrawal of the petition filed by
DOW and OCCIDENTAL in G.R. No. 125598.
In a Resolution57 dated October 11, 2004, this Court granted, among
others, the motion to withdraw petition for review filed by DOW and
OCCIDENTAL.
THE ISSUES
In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al.,
presented the following issues for our consideration:
IN REFUTATION
I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION.
a) The court did not simply dismiss the case because it was filed in bad
faith with petitioners intending to have the same dismissed and returned to
the Texas court.
b) The court dismissed the case because it was convinced that it did not
have jurisdiction.
IN SUPPORT OF THE PETITION
II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF
THE CASE.
a. The acts complained of occurred within Philippine territory.
b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover
the acts complained of.
CONFLICTS | 03Dec | 44
c. Assumption of jurisdiction by the U.S. District Court over petitioner[s]
claims did not divest Philippine [c]ourts of jurisdiction over the same.
d. The Compromise Agreement and the subsequent Consolidated Motion to
Drop Party Respondents Dow, Occidental and Shell does not unjustifiably
prejudice remaining respondents Dole, Del Monte and Chiquita.58
DISCUSSION
On the issue of jurisdiction
Essentially, the crux of the controversy in the petitions at bar is whether the
RTC of General Santos City and the RTC of Davao City erred in dismissing
Civil Case Nos. 5617 and 24,251-96, respectively, for lack of jurisdiction.
Remarkably, none of the parties to this case claims that the courts a quo
are bereft of jurisdiction to determine and resolve the above-stated cases.
All parties contend that the RTC of General Santos City and the RTC of
Davao City have jurisdiction over the action for damages, specifically for
approximately P2.7 million for each of the plaintiff claimants.
NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts
and/or omissions of defendant companies occurred within Philippine
territory. Specifically, the use of and exposure to DBCP that was
manufactured, distributed or otherwise put into the stream of commerce by
defendant companies happened in the Philippines. Said fact allegedly
constitutes reasonable basis for our courts to assume jurisdiction over the
case. Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the
provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as
Article 2176 thereof, are broad enough to cover their claim for damages.
Thus, NAVIDA, et al., and ABELLA, et al., pray that the respective rulings of
the RTC of General Santos City and the RTC of Davao City in Civil Case Nos.
5617 and 24,251-96 be reversed and that the said cases be remanded to
the courts a quo for further proceedings.
DOLE similarly maintains that the acts attributed to defendant companies
constitute a quasi-delict, which falls under Article 2176 of the Civil Code. In
addition, DOLE states that if there were no actionable wrongs committed
under Philippine law, the courts a quo should have dismissed the civil cases
on the ground that the Amended Joint-Complaints of NAVIDA, et al., and
ABELLA, et al., stated no cause of action against the defendant companies.
DOLE also argues that if indeed there is no positive law defining the alleged
acts of defendant companies as actionable wrong, Article 9 of the Civil Code
dictates that a judge may not refuse to render a decision on the ground of
insufficiency of the law. The court may still resolve the case, applying the
customs of the place and, in the absence thereof, the general principles of
law. DOLE posits that the Philippines is the situs of the tortious acts

allegedly committed by defendant companies as NAVIDA, et al., and
ABELLA, et al., point to their alleged exposure to DBCP which occurred in
the Philippines, as the cause of the sterility and other reproductive system
problems that they allegedly suffered. Finally, DOLE adds that the RTC of
Davao City gravely erred in relying upon newspaper reports in dismissing
Civil Case No. 24,251-96 given that newspaper articles are hearsay and
without any evidentiary value. Likewise, the alleged legal opinions cited in
the newspaper reports were taken judicial notice of, without any notice to
the parties. DOLE, however, opines that the dismissal of Civil Case Nos.
5617 and 24,251-96 was proper, given that plaintiff claimants merely
prosecuted the cases with the sole intent of securing a dismissal of the
actions for the purpose of convincing the U.S. Federal District Court to re-
assume jurisdiction over the cases.
In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction
over the subject matter of the cases filed before them. The Amended Joint-
Complaints sought approximately P2.7 million in damages for each plaintiff
claimant, which amount falls within the jurisdiction of the RTC. CHIQUITA
avers that the pertinent matter is the place of the alleged exposure to
DBCP, not the place of manufacture, packaging, distribution, sale, etc., of
the said chemical. This is in consonance with the lex loci delicti commisi
theory in determining the situs of a tort, which states that the law of the
place where the alleged wrong was committed will govern the action.
CHIQUITA and the other defendant companies also submitted themselves to
the jurisdiction of the RTC by making voluntary appearances and seeking
for affirmative reliefs during the course of the proceedings. None of the
defendant companies ever objected to the exercise of jurisdiction by the
courts a quo over their persons. CHIQUITA, thus, prays for the remand of
Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and
the RTC of Davao City, respectively.
The RTC of General Santos City and the RTC of Davao City have jurisdiction
over Civil Case Nos. 5617 and 24,251-96, respectively
The rule is settled that jurisdiction over the subject matter of a case is
conferred by law and is determined by the allegations in the complaint and
the character of the relief sought, irrespective of whether the plaintiffs are
entitled to all or some of the claims asserted therein.59 Once vested by
law, on a particular court or body, the jurisdiction over the subject matter
or nature of the action cannot be dislodged by anybody other than by the
legislature through the enactment of a law.
At the time of the filing of the complaints, the jurisdiction of the RTC in civil
cases under Batas Pambansa Blg. 129, as amended by Republic Act No.
7691, was:
CONFLICTS | 03Dec | 45
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages
of whatever kind, attorneys fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand pesos
(P100,000.00) or, in such other cases in Metro Manila, where the demand,
exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000.00).60
Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:
2. The exclusion of the term "damages of whatever kind" in determining the
jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg.
129, as amended by R.A. No. 7691, applies to cases where the damages
are merely incidental to or a consequence of the main cause of action.
However, in cases where the claim for damages is the main cause of action,
or one of the causes of action, the amount of such claim shall be considered
in determining the jurisdiction of the court.
Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded
Amended Joint-Complaints filed before the courts a quo, the following
prayer:
PRAYER
WHEREFORE, premises considered, it is most respectfully prayed that after
hearing, judgment be rendered in favor of the plaintiffs ordering the
defendants:
a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million
Five Hundred Thousand Pesos (P1,500,00.00);
b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four
Hundred Thousand Pesos (P400,000.00) each;
c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six
Hundred Thousand Pesos (P600,000.00);
d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos
(P200,000.00); and
e) TO PAY THE COSTS of the suit.61

From the foregoing, it is clear that the claim for damages is the main cause
of action and that the total amount sought in the complaints is
approximately P2.7 million for each of the plaintiff claimants. The RTCs
unmistakably have jurisdiction over the cases filed in General Santos City
and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall
within the purview of the definition of the jurisdiction of the RTC under
Batas Pambansa Blg. 129.
Moreover, the allegations in both Amended Joint-Complaints narrate that:
THE CAUSES OF ACTION
4. The Defendants manufactured, sold, distributed, used, AND/OR MADE
AVAILABLE IN COMMERCE nematocides containing the chemical
dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS
USED AGAINST the parasite known as the nematode, which plagued
banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED
OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS
ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human
reproductive system as well.
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s
WHILE (a) they used this product in the banana plantations WHERE they
were employed, and/or (b) they resided within the agricultural area WHERE
IT WAS USED. As a result of such exposure, the plaintiffs suffered serious
and permanent injuries TO THEIR HEALTH, including, but not limited to,
STERILITY and severe injuries to their reproductive capacities.
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY
MANUFACTURED, produced, sold, and/or USED DBCP and/or otherwise, PUT
THE SAME into the stream of commerce, WITHOUT INFORMING THE USERS
OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT
INSTRUCTIONS ON ITS PROPER USE AND APPLICATION. THEY allowed
Plaintiffs to be exposed to, DBCP-containing materials which THEY knew, or
in the exercise of ordinary care and prudence ought to have known, were
highly harmful and injurious to the Plaintiffs health and well-being.
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD,
DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE STREAM OF
COMMERCE were negligent OR AT FAULT in that they, AMONG OTHERS:
a. Failed to adequately warn Plaintiffs of the dangerous characteristics of
DBCP, or to cause their subsidiaries or affiliates to so warn plaintiffs;
b. Failed to provide plaintiffs with information as to what should be
reasonably safe and sufficient clothing and proper protective equipment and
CONFLICTS | 03Dec | 46
appliances, if any, to protect plaintiffs from the harmful effects of exposure
to DBCP, or to cause their subsidiaries or affiliates to do so;
c. Failed to place adequate warnings, in a language understandable to the
worker, on containers of DBCP-containing materials to warn of the dangers
to health of coming into contact with DBCP, or to cause their subsidiaries or
affiliates to do so;
d. Failed to take reasonable precaution or to exercise reasonable care to
publish, adopt and enforce a safety plan and a safe method of handling and
applying DBCP, or to cause their subsidiaries or affiliates to do so;
e. Failed to test DBCP prior to releasing these products for sale, or to cause
their subsidiaries or affiliates to do so; and
f. Failed to reveal the results of tests conducted on DBCP to each plaintiff,
governmental agencies and the public, or to cause their subsidiaries or
affiliate to do so.
8. The illnesses and injuries of each plaintiff are also due to the FAULT or
negligence of defendants Standard Fruit Company, Dole Fresh Fruit
Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita
Brands International, Inc. in that they failed to exercise reasonable care to
prevent each plaintiffs harmful exposure to DBCP-containing products
which defendants knew or should have known were hazardous to each
plaintiff in that they, AMONG OTHERS:
a. Failed to adequately supervise and instruct Plaintiffs in the safe and
proper application of DBCP-containing products;
b. Failed to implement proper methods and techniques of application of said
products, or to cause such to be implemented;
c. Failed to warn Plaintiffs of the hazards of exposure to said products or to
cause them to be so warned;
d. Failed to test said products for adverse health effects, or to cause said
products to be tested;
e. Concealed from Plaintiffs information concerning the observed effects of
said products on Plaintiffs;
f. Failed to monitor the health of plaintiffs exposed to said products;
g. Failed to place adequate labels on containers of said products to warn
them of the damages of said products; and

h. Failed to use substitute nematocides for said products or to cause such
substitutes to [be] used.62 (Emphasis supplied and words in brackets
ours.)
Quite evidently, the allegations in the Amended Joint-Complaints of
NAVIDA, et al., and ABELLA, et al., attribute to defendant companies certain
acts and/or omissions which led to their exposure to nematocides
containing the chemical DBCP. According to NAVIDA, et al., and ABELLA, et
al., such exposure to the said chemical caused ill effects, injuries and
illnesses, specifically to their reproductive system.
Thus, these allegations in the complaints constitute the cause of action of
plaintiff claimants a quasi-delict, which under the Civil Code is defined as
an act, or omission which causes damage to another, there being fault or
negligence. To be precise, Article 2176 of the Civil Code provides:
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and
ABELLA, et al., point to the acts and/or omissions of the defendant
companies in manufacturing, producing, selling, using, and/or otherwise
putting into the stream of commerce, nematocides which contain DBCP,
"without informing the users of its hazardous effects on health and/or
without instructions on its proper use and application." 63
Verily, in Citibank, N.A. v. Court of Appeals,64 this Court has always
reminded that jurisdiction of the court over the subject matter of the action
is determined by the allegations of the complaint, irrespective of whether or
not the plaintiffs are entitled to recover upon all or some of the claims
asserted therein. The jurisdiction of the court cannot be made to depend
upon the defenses set up in the answer or upon the motion to dismiss, for
otherwise, the question of jurisdiction would almost entirely depend upon
the defendants. What determines the jurisdiction of the court is the nature
of the action pleaded as appearing from the allegations in the complaint.
The averments therein and the character of the relief sought are the ones
to be consulted.
Clearly then, the acts and/or omissions attributed to the defendant
companies constitute a quasi-delict which is the basis for the claim for
damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims
of approximately P2.7 million for each plaintiff claimant, which obviously
falls within the purview of the civil action jurisdiction of the RTCs.
CONFLICTS | 03Dec | 47
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et
al., allegedly suffered resulted from their exposure to DBCP while they were
employed in the banana plantations located in the Philippines or while they
were residing within the agricultural areas also located in the Philippines.
The factual allegations in the Amended Joint-Complaints all point to their
cause of action, which undeniably occurred in the Philippines. The RTC of
General Santos City and the RTC of Davao City obviously have reasonable
basis to assume jurisdiction over the cases.
It is, therefore, error on the part of the courts a quo when they dismissed
the cases on the ground of lack of jurisdiction on the mistaken assumption
that the cause of action narrated by NAVIDA, et al., and ABELLA, et al.,
took place abroad and had occurred outside and beyond the territorial
boundaries of the Philippines, i.e., "the manufacture of the pesticides, their
packaging in containers, their distribution through sale or other disposition,
resulting in their becoming part of the stream of commerce,"65 and, hence,
outside the jurisdiction of the RTCs.
Certainly, the cases below are not criminal cases where territoriality, or the
situs of the act complained of, would be determinative of jurisdiction and
venue for trial of cases. In personal civil actions, such as claims for
payment of damages, the Rules of Court allow the action to be commenced
and tried in the appropriate court, where any of the plaintiffs or defendants
resides, or in the case of a non-resident defendant, where he may be
found, at the election of the plaintiff.66
In a very real sense, most of the evidence required to prove the claims of
NAVIDA, et al., and ABELLA, et al., are available only in the Philippines.
First, plaintiff claimants are all residents of the Philippines, either in General
Santos City or in Davao City. Second, the specific areas where they were
allegedly exposed to the chemical DBCP are within the territorial jurisdiction
of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed
their claims for damages. Third, the testimonial and documentary evidence
from important witnesses, such as doctors, co-workers, family members
and other members of the community, would be easier to gather in the
Philippines. Considering the great number of plaintiff claimants involved in
this case, it is not far-fetched to assume that voluminous records are
involved in the presentation of evidence to support the claim of plaintiff
claimants. Thus, these additional factors, coupled with the fact that the
alleged cause of action of NAVIDA, et al., and ABELLA, et al., against the
defendant companies for damages occurred in the Philippines, demonstrate
that, apart from the RTC of General Santos City and the RTC of Davao City
having jurisdiction over the subject matter in the instant civil cases, they
are, indeed, the convenient fora for trying these cases.67
The RTC of General Santos City and the RTC of Davao City validly acquired
jurisdiction over the persons of all the defendant companies

It is well to stress again that none of the parties claims that the courts a
quo lack jurisdiction over the cases filed before them. All parties are one in
asserting that the RTC of General Santos City and the RTC of Davao City
have validly acquired jurisdiction over the persons of the defendant
companies in the action below. All parties voluntarily, unconditionally and
knowingly appeared and submitted themselves to the jurisdiction of the
courts a quo.
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that
"[t]he defendants voluntary appearance in the action shall be equivalent to
service of summons." In this connection, all the defendant companies
designated and authorized representatives to receive summons and to
represent them in the proceedings before the courts a quo. All the
defendant companies submitted themselves to the jurisdiction of the courts
a quo by making several voluntary appearances, by praying for various
affirmative reliefs, and by actively participating during the course of the
proceedings below.
In line herewith, this Court, in Meat Packing Corporation of the Philippines
v. Sandiganbayan,68 held that jurisdiction over the person of the defendant
in civil cases is acquired either by his voluntary appearance in court and his
submission to its authority or by service of summons. Furthermore, the
active participation of a party in the proceedings is tantamount to an
invocation of the courts jurisdiction and a willingness to abide by the
resolution of the case, and will bar said party from later on impugning the
court or bodys jurisdiction.69
Thus, the RTC of General Santos City and the RTC of Davao City have
validly acquired jurisdiction over the persons of the defendant companies,
as well as over the subject matter of the instant case. What is more, this
jurisdiction, which has been acquired and has been vested on the courts a
quo, continues until the termination of the proceedings.
It may also be pertinently stressed that "jurisdiction" is different from the
"exercise of jurisdiction." Jurisdiction refers to the authority to decide a
case, not the orders or the decision rendered therein. Accordingly, where a
court has jurisdiction over the persons of the defendants and the subject
matter, as in the case of the courts a quo, the decision on all questions
arising therefrom is but an exercise of such jurisdiction. Any error that the
court may commit in the exercise of its jurisdiction is merely an error of
judgment, which does not affect its authority to decide the case, much less
divest the court of the jurisdiction over the case.70
Plaintiffs purported bad faith in filing the subject civil cases in Philippine
courts
CONFLICTS | 03Dec | 48
Anent the insinuation by DOLE that the plaintiff claimants filed their cases
in bad faith merely to procure a dismissal of the same and to allow them to
return to the forum of their choice, this Court finds such argument much
too speculative to deserve any merit.
It must be remembered that this Court does not rule on allegations that are
unsupported by evidence on record. This Court does not rule on allegations
which are manifestly conjectural, as these may not exist at all. This Court
deals with facts, not fancies; on realities, not appearances. When this Court
acts on appearances instead of realities, justice and law will be short-
lived.71 This is especially true with respect to allegations of bad faith, in
line with the basic rule that good faith is always presumed and bad faith
must be proved.72
In sum, considering the fact that the RTC of General Santos City and the
RTC of Davao City have jurisdiction over the subject matter of the amended
complaints filed by NAVIDA, et al., and ABELLA, et al., and that the courts a
quo have also acquired jurisdiction over the persons of all the defendant
companies, it therefore, behooves this Court to order the remand of Civil
Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the
RTC of Davao City, respectively.
On the issue of the dropping of DOW, OCCIDENTAL and SHELL as
respondents in view of their amicable settlement with NAVIDA, et al., and
ABELLA, et al.
NAVIDA, et al., and ABELLA, et al., are further praying that DOW,
OCCIDENTAL and SHELL be dropped as respondents in G.R. Nos. 125078
and 126654, as well as in Civil Case Nos. 5617 and 24,251-96. The non-
settling defendants allegedly manifested that they intended to file their
cross-claims against their co-defendants who entered into compromise
agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling
defendants did not aver any cross-claim in their answers to the complaint
and that they subsequently sought to amend their answers to plead their
cross-claims only after the settlement between the plaintiff claimants and
DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and ABELLA,
et al., therefore, assert that the cross-claims are already barred.
In their Memoranda, CHIQUITA and DOLE are opposing the above motion of
NAVIDA, et al., and ABELLA, et al., since the latters Amended Complaints
cited several instances of tortious conduct that were allegedly committed
jointly and severally by the defendant companies. This solidary obligation
on the part of all the defendants allegedly gives any co-defendant the
statutory right to proceed against the other co-defendants for the payment
of their respective shares. Should the subject motion of NAVIDA, et al., and
ABELLA, et al., be granted, and the Court subsequently orders the remand
of the action to the trial court for continuance, CHIQUITA and DOLE would

allegedly be deprived of their right to prosecute their cross-claims against
their other co-defendants. Moreover, a third party complaint or a separate
trial, according to CHIQUITA, would only unduly delay and complicate the
proceedings. CHIQUITA and DOLE similarly insist that the motion of
NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL
as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case
Nos. 5617 and 24,251-96, be denied.
Incidentally, on April 2, 2007, after the parties have submitted their
respective memoranda, DEL MONTE filed a Manifestation and Motion73
before the Court, stating that similar settlement agreements were allegedly
executed by the plaintiff claimants with DEL MONTE and CHIQUITA
sometime in 1999. Purportedly included in the agreements were Civil Case
Nos. 5617 and 24,251-96. Attached to the said manifestation were copies
of the Compromise Settlement, Indemnity, and Hold Harmless Agreement
between DEL MONTE and the settling plaintiffs, as well as the Release in
Full executed by the latter.74 DEL MONTE specified therein that there were
"only four (4) plaintiffs in Civil Case No. 5617 who are claiming against the
Del Monte parties"75 and that the latter have executed amicable
settlements which completely satisfied any claims against DEL MONTE. In
accordance with the alleged compromise agreements with the four plaintiffs
in Civil Case No. 5617, DEL MONTE sought the dismissal of the Amended
Joint-Complaint in the said civil case. Furthermore, in view of the above
settlement agreements with ABELLA, et al., in Civil Case No. 24,251-96,
DEL MONTE stated that it no longer wished to pursue its petition in G.R. No.
127856 and accordingly prayed that it be allowed to withdraw the same.
Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be
remanded to the RTC of General Santos City and the RTC of Davao City,
respectively, the Court deems that the Consolidated Motions (to Drop Party-
Respondents) filed by NAVIDA, et al., and ABELLA, et al., should likewise be
referred to the said trial courts for appropriate disposition.
Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby
the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced." Like any other contract, an extrajudicial
compromise agreement is not excepted from rules and principles of a
contract. It is a consensual contract, perfected by mere consent, the latter
being manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.76 Judicial
approval is not required for its perfection.77 A compromise has upon the
parties the effect and authority of res judicata78 and this holds true even if
the agreement has not been judicially approved.79 In addition, as a binding
contract, a compromise agreement determines the rights and obligations of
only the parties to it.80
CONFLICTS | 03Dec | 49
In light of the foregoing legal precepts, the RTC of General Santos City and
the RTC of Davao City should first receive in evidence and examine all of
the alleged compromise settlements involved in the cases at bar to
determine the propriety of dropping any party as a defendant therefrom.
The Court notes that the Consolidated Motions (to Drop Party-Respondents)
that was filed by NAVIDA, et al., and ABELLA, et al., only pertained to DOW,
OCCIDENTAL and SHELL in view of the latter companies alleged
compromise agreements with the plaintiff claimants. However, in
subsequent developments, DEL MONTE and CHIQUITA supposedly reached
their own amicable settlements with the plaintiff claimants, but DEL MONTE
qualified that it entered into a settlement agreement with only four of the
plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were
allegedly the only ones who were asserting claims against DEL MONTE.
However, the said allegation of DEL MONTE was simply stipulated in their
Compromise Settlement, Indemnity, and Hold Harmless Agreement and its
truth could not be verified with certainty based on the records elevated to
this Court. Significantly, the 336 plaintiff claimants in Civil Case No. 5617
jointly filed a complaint without individually specifying their claims against
DEL MONTE or any of the other defendant companies. Furthermore, not one
plaintiff claimant filed a motion for the removal of either DEL MONTE or
CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96.
There is, thus, a primary need to establish who the specific parties to the
alleged compromise agreements are, as well as their corresponding rights
and obligations therein. For this purpose, the courts a quo may require the
presentation of additional evidence from the parties. Thereafter, on the
basis of the records of the cases at bar and the additional evidence
submitted by the parties, if any, the trial courts can then determine who
among the defendants may be dropped from the said cases.
It is true that, under Article 2194 of the Civil Code, the responsibility of two
or more persons who are liable for the same quasi-delict is solidary. A
solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction
of the whole obligation from any or all of the debtors.81
In solidary obligations, the paying debtors right of reimbursement is
provided for under Article 1217 of the Civil Code, to wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim from his co-debtors only the share
which corresponds to each, with the interest for the payment already made.
 CONFLICTS | 03Dec | 50

If the payment is made before the debt is due, no interest for the agreements allegedly entered into by NAVIDA, et al., and ABELLA, et al.,
intervening period may be demanded. with some of the defendant companies.

When one of the solidary debtors cannot, because of his insolvency,
reimburse his share to the debtor paying the obligation, such share shall be
borne by all his co-debtors, in proportion to the debt of each.1avvphil
The above right of reimbursement of a paying debtor, and the
corresponding liability of the co-debtors to reimburse, will only arise,
however, if a solidary debtor who is made to answer for an obligation
actually delivers payment to the creditor. As succinctly held in Lapanday
Agricultural Development Corporation v. Court of Appeals,82 "[p]ayment,
which means not only the delivery of money but also the performance, in
any other manner, of the obligation, is the operative fact which will entitle
either of the solidary debtors to seek reimbursement for the share which
corresponds to each of the [other] debtors."83
In the cases at bar, there is no right of reimbursement to speak of as yet. A
trial on the merits must necessarily be conducted first in order to establish
whether or not defendant companies are liable for the claims for damages
filed by the plaintiff claimants, which would necessarily give rise to an
obligation to pay on the part of the defendants.
At the point in time where the proceedings below were prematurely halted,
no cross-claims have been interposed by any defendant against another
defendant. If and when such a cross-claim is made by a non-settling
defendant against a settling defendant, it is within the discretion of the trial
court to determine the propriety of allowing such a cross-claim and if the
settling defendant must remain a party to the case purely in relation to the
cross claim.
WHEREFORE, the Court hereby GRANTS the petitions for review on
certiorari in G.R. Nos. 125078, 126654, and 128398. We REVERSE and SET
ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General
Santos City, Branch 37, in Civil Case No. 5617, and the Order dated
October 1, 1996 of the Regional Trial Court of Davao City, Branch 16, and
its subsequent Order dated December 16, 1996 denying reconsideration in
Civil Case No. 24,251-96, and REMAND the records of this case to the
respective Regional Trial Courts of origin for further and appropriate
proceedings in line with the ruling herein that said courts have jurisdiction
over the subject matter of the amended complaints in Civil Case Nos. 5617
and 24,251-96.
The Court likewise GRANTS the motion filed by Del Monte to withdraw its
petition in G.R. No. 127856. In view of the previous grant of the motion to
withdraw the petition in G.R. No. 125598, both G.R. Nos. 127856 and
125598 are considered CLOSED AND TERMINATED.
No pronouncement as to costs.
SO ORDERED.

In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court

of Appeals,84 the Court had the occasion to state that "where there are,
along with the parties to the compromise, other persons involved in the
litigation who have not taken part in concluding the compromise agreement
but are adversely affected or feel prejudiced thereby, should not be
precluded from invoking in the same proceedings an adequate relief
therefor."85

Relevantly, in Philippine International Surety Co., Inc. v. Gonzales,86 the

Court upheld the ruling of the trial court that, in a joint and solidary
obligation, the paying debtor may file a third-party complaint and/or a
cross-claim to enforce his right to seek contribution from his co-debtors.

Hence, the right of the remaining defendant(s) to seek reimbursement in

the above situation, if proper, is not affected by the compromise G.R. No. 149177 November 23, 2007

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS
CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the April 18, 2001 Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 60827, and the July 25, 2001 Resolution2 denying
the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd.
(Nippon), a Japanese consultancy firm providing technical and management
support in the infrastructure projects of foreign governments,3 entered into
an Independent Contractor Agreement (ICA) with respondent Minoru
Kitamura, a Japanese national permanently residing in the Philippines.4 The
agreement provides that respondent was to extend professional services to
Nippon for a year starting on April 1, 1999.5 Nippon then assigned
respondent to work as the project manager of the Southern Tagalog Access
Road (STAR) Project in the Philippines, following the company's consultancy
contract with the Philippine Government.6
When the STAR Project was near completion, the Department of Public
Works and Highways (DPWH) engaged the consultancy services of Nippon,
on January 28, 2000, this time for the detailed engineering and
construction supervision of the Bongabon-Baler Road Improvement (BBRI)
Project.7 Respondent was named as the project manager in the contract's
Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general
manager for its International Division, informed respondent that the
company had no more intention of automatically renewing his ICA. His
services would be engaged by the company only up to the substantial
completion of the STAR Project on March 31, 2000, just in time for the
ICA's expiry.9
Threatened with impending unemployment, respondent, through his lawyer, correct in applying instead the principle of lex loci solutionis.23
requested a negotiation conference and demanded that he be assigned to
the BBRI project. Nippon insisted that respondents contract was for a fixed
term that had already expired, and refused to negotiate for the renewal of Petitioners' motion for reconsideration was subsequently denied by the CA
the ICA.10
As he was not able to generate a positive response from the petitioners,
respondent consequently initiated on June 1, 2000 Civil Case No. 00-0264
CONFLICTS | 03Dec | 51
for specific performance and damages with the Regional Trial Court of Lipa
City.11
For their part, petitioners, contending that the ICA had been perfected in
Japan and executed by and between Japanese nationals, moved to dismiss
the complaint for lack of jurisdiction. They asserted that the claim for
improper pre-termination of respondent's ICA could only be heard and
ventilated in the proper courts of Japan following the principles of lex loci
celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request
for the replacement of Kitamura by a certain Y. Kotake as project manager
of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v.
Frank14 that matters connected with the performance of contracts are
regulated by the law prevailing at the place of performance,15 denied the
motion to dismiss.16 The trial court subsequently denied petitioners' motion
for reconsideration,17 prompting them to file with the appellate court, on
August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed
as CA-G.R. SP No. 60205].18 On August 23, 2000, the CA resolved to
dismiss the petition on procedural groundsfor lack of statement of
material dates and for insufficient verification and certification against
forum shopping.19 An Entry of Judgment was later issued by the appellate
court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September
19, 2000, still within the reglementary period, a second Petition for
Certiorari under Rule 65 already stating therein the material dates and
attaching thereto the proper verification and certification. This second
petition, which substantially raised the same issues as those in the first,
was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered
the assailed April 18, 2001 Decision22 finding no grave abuse of discretion
in the trial court's denial of the motion to dismiss. The CA ruled, among
others, that the principle of lex loci celebrationis was not applicable to the
case, because nowhere in the pleadings was the validity of the written
agreement put in issue. The CA thus declared that the trial court was
in the assailed July 25, 2001 Resolution.24

Remaining steadfast in their stance despite the series of denials, petitioners
instituted the instant Petition for Review on Certiorari25 imputing the
following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
THE TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER
OF THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO
JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE
AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE
OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN
PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the
subject matter jurisdiction of Philippine courts in civil cases for specific
performance and damages involving contracts executed outside the country
by foreign nationals may be assailed on the principles of lex loci
celebrationis, lex contractus, the "state of the most significant relationship
rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural
matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-
G.R. SP No. 60205 has already barred the filing of the second petition
docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues
as those in the first one) and the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account
of the petition's defective certification of non-forum shopping, it was a
dismissal without prejudice.27 The same holds true in the CA's dismissal of
the said case due to defects in the formal requirement of verification28 and
in the other requirement in Rule 46 of the Rules of Court on the statement
of the material dates.29 The dismissal being without prejudice, petitioners
can re-file the petition, or file a second petition attaching thereto the
appropriate verification and certificationas they, in fact didand stating
therein the material dates, within the prescribed period30 in Section 4, Rule
65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision
on the merits and leaves the parties free to litigate the matter in a
subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the merits
CONFLICTS | 03Dec | 52
does not bar another action involving the same parties, on the same
subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res
judicata effect, and even if petitioners still indicated in the verification and
certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,33 petitioners are no longer required by
the Rules to indicate in their certification of non-forum shopping in the
instant petition for review of the second certiorari petition, the status of the
aforesaid first petition before the CA. In any case, an omission in the
certificate of non-forum shopping about any event that will not constitute
res judicata and litis pendentia, as in the present case, is not a fatal defect.
It will not warrant the dismissal and nullification of the entire proceedings,
considering that the evils sought to be prevented by the said certificate are
no longer present.34
The Court also finds no merit in respondent's contention that petitioner
Hasegawa is only authorized to verify and certify, on behalf of Nippon, the
certiorari petition filed with the CA and not the instant petition. True, the
Authorization35 dated September 4, 2000, which is attached to the second
certiorari petition and which is also attached to the instant petition for
review, is limited in scopeits wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition
filed with the appellate court, and that authority cannot extend to the
instant petition for review.36 In a plethora of cases, however, this Court has
liberally applied the Rules or even suspended its application whenever a
satisfactory explanation and a subsequent fulfillment of the requirements
have been made.37 Given that petitioners herein sufficiently explained their
misgivings on this point and appended to their Reply38 an updated
Authorization39 for Hasegawa to act on behalf of the company in the
instant petition, the Court finds the same as sufficient compliance with the
Rules.
However, the Court cannot extend the same liberal treatment to the defect
in the verification and certification. As respondent pointed out, and to which
we agree, Hasegawa is truly not authorized to act on behalf of Nippon in
this case. The aforesaid September 4, 2000 Authorization and even the
subsequent August 17, 2001 Authorization were issued only by Nippon's
president and chief executive officer, not by the company's board of
directors. In not a few cases, we have ruled that corporate powers are
exercised by the board of directors; thus, no person, not even its officers,
can bind the corporation, in the absence of authority from the board.40
Considering that Hasegawa verified and certified the petition only on his
behalf and not on behalf of the other petitioner, the petition has to be
denied pursuant to Loquias v. Office of the Ombudsman.41 Substantial
compliance will not suffice in a matter that demands strict observance of
the Rules.42 While technical rules of procedure are designed not to

frustrate the ends of justice, nonetheless, they are intended to effect the
proper and orderly disposition of cases and effectively prevent the clogging
of court dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule 65
petition to question the trial court's denial of their motion to dismiss. It is a
well-established rule that an order denying a motion to dismiss is
interlocutory, and cannot be the subject of the extraordinary petition for
certiorari or mandamus. The appropriate recourse is to file an answer and
to interpose as defenses the objections raised in the motion, to proceed to
trial, and, in case of an adverse decision, to elevate the entire case by
appeal in due course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners
question its jurisdiction to hear and resolve the civil case for specific
performance and damages filed by the respondent. The ICA subject of the
litigation was entered into and perfected in Tokyo, Japan, by Japanese
nationals, and written wholly in the Japanese language. Thus, petitioners
posit that local courts have no substantial relationship to the parties46
following the [state of the] most significant relationship rule in Private
International Law.47
The Court notes that petitioners adopted an additional but different theory
when they elevated the case to the appellate court. In the Motion to
Dismiss48 filed with the trial court, petitioners never contended that the
RTC is an inconvenient forum. They merely argued that the applicable law
which will determine the validity or invalidity of respondent's claim is that of
Japan, following the principles of lex loci celebrationis and lex contractus.49
While not abandoning this stance in their petition before the appellate
court, petitioners on certiorari significantly invoked the defense of forum
non conveniens.50 On petition for review before this Court, petitioners
dropped their other arguments, maintained the forum non conveniens
defense, and introduced their new argument that the applicable principle is
the [state of the] most significant relationship rule.51
Be that as it may, this Court is not inclined to deny this petition merely on
the basis of the change in theory, as explained in Philippine Ports Authority
v. City of Iloilo.52 We only pointed out petitioners' inconstancy in their
arguments to emphasize their incorrect assertion of conflict of laws
principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. Corresponding to these phases are the
CONFLICTS | 03Dec | 53
following questions: (1) Where can or should litigation be initiated? (2)
Which law will the court apply? and (3) Where can the resulting judgment
be enforced?53
Analytically, jurisdiction and choice of law are two distinct concepts.54
Jurisdiction considers whether it is fair to cause a defendant to travel to this
state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both
parties. The power to exercise jurisdiction does not automatically give a
state constitutional authority to apply forum law. While jurisdiction and the
choice of the lex fori will often coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the other.55 The
question of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state have
jurisdiction to enter a judgment.56
In this case, only the first phase is at issuejurisdiction.1wphi1
Jurisdiction, however, has various aspects. For a court to validly exercise its
power to adjudicate a controversy, it must have jurisdiction over the
plaintiff or the petitioner, over the defendant or the respondent, over the
subject matter, over the issues of the case and, in cases involving property,
over the res or the thing which is the subject of the litigation.57 In assailing
the trial court's jurisdiction herein, petitioners are actually referring to
subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by
the sovereign authority which establishes and organizes the court. It is
given only by law and in the manner prescribed by law.58 It is further
determined by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted therein.59 To
succeed in its motion for the dismissal of an action for lack of jurisdiction
over the subject matter of the claim,60 the movant must show that the
court or tribunal cannot act on the matter submitted to it because no law
grants it the power to adjudicate the claims.61
In the instant case, petitioners, in their motion to dismiss, do not claim that
the trial court is not properly vested by law with jurisdiction to hear the
subject controversy for, indeed, Civil Case No. 00-0264 for specific
performance and damages is one not capable of pecuniary estimation and is
properly cognizable by the RTC of Lipa City.62 What they rather raise as
grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the "state of the most significant
relationship rule."
The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the "law of the place of the ceremony"63 or
the law of the place where a contract is made.64 The doctrine of lex
contractus or lex loci contractus means the "law of the place where a
contract is executed or to be performed."65 It controls the nature,
construction, and validity of the contract66 and it may pertain to the law
voluntarily agreed upon by the parties or the law intended by them either
expressly or implicitly.67 Under the "state of the most significant
relationship rule," to ascertain what state law to apply to a dispute, the
court should determine which state has the most substantial connection to
the occurrence and the parties. In a case involving a contract, the court
should consider where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of incorporation of
the parties.68 This rule takes into account several contacts and evaluates
them according to their relative importance with respect to the particular
issue to be resolved.69
Since these three principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the second phase, the
choice of law.70 They determine which state's law is to be applied in
resolving the substantive issues of a conflicts problem.71 Necessarily, as
the only issue in this case is that of jurisdiction, choice-of-law rules are not
only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed
by the fact that they have not yet pointed out any conflict between the laws
of Japan and ours. Before determining which law should apply, first there
should exist a conflict of laws situation requiring the application of the
conflict of laws rules.72 Also, when the law of a foreign country is invoked
to provide the proper rules for the solution of a case, the existence of such
law must be pleaded and proved.73
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are three
CONFLICTS | 03Dec | 54
alternatives open to the latter in disposing of it: (1) dismiss the case, either
because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of
the forum; or (3) assume jurisdiction over the case and take into account
or apply the law of some other State or States.74 The courts power to hear
cases and controversies is derived from the Constitution and the laws.
While it may choose to recognize laws of foreign nations, the court is not
limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to
deprive the trial court of its jurisdiction herein. First, it is not a proper basis
for a motion to dismiss because Section 1, Rule 16 of the Rules of Court
does not include it as a ground.77 Second, whether a suit should be
entertained or dismissed on the basis of the said doctrine depends largely
upon the facts of the particular case and is addressed to the sound
discretion of the trial court.78 In this case, the RTC decided to assume
jurisdiction. Third, the propriety of dismissing a case based on this principle
requires a factual determination; hence, this conflicts principle is more
properly considered a matter of defense.79
Accordingly, since the RTC is vested by law with the power to entertain and
hear the civil case filed by respondent and the grounds raised by petitioners
to assail that jurisdiction are inappropriate, the trial and appellate courts
correctly denied the petitioners motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is
DENIED.
SO ORDERED.