Sie sind auf Seite 1von 84

DONALD BAER vs. HON. TITO V.

TIZON and EDGARDO motion to dismiss the opposition to the application for a writ of
GENER; FERNANDO, J; G.R. No. L-24294 May 3, 1974 preliminary injunction.

There is nothing novel about the question raised in this certiorari A motion for reconsideration having proved futile, this petition for
proceeding against the then Judge Tito V. Tizon, filed by petitioner certiorari was filed with this Court. The prayer was for the
Donald Baer, then Commander of the United States Naval Base, nullification and setting aside of the writ of preliminary injunction
Subic Bay, Olongapo, Zambales, seeking to nullify the orders of issued by respondent Judge in the aforesaid Civil Case No. 2984
respondent Judge denying his motion to dismiss a complaint filed of the Court of First Instance of Bataan. A resolution of March 17,
against him by the private respondent, Edgardo Gener, on the 1965 was issued by this Court requiring respondents to file an
ground of sovereign immunity of a foreign power, his contention answer and upon petitioner's posting a bond of P5,000.00
being that it was in effect a suit against the United States, which enjoining them from enforcing such writ of preliminary injunction.
had not given its consent. The answer given is supplied by a The answer was duly forthcoming. It sought to meet the judicial
number of cases coming from this Tribunal starting from a 1945 question raised by the legal proposition that a private citizen
decision, Raquiza v. Bradford to Johnson v. Turner promulgated in claiming title and right of possession of a certain property may, to
1954. The doctrine of immunity from suit is of undoubted recover the same, sue as individuals officers and agents of the
applicability in this jurisdiction. It cannot be otherwise, for under the government alleged to be illegally withholding such property even if
1935 Constitution, as now, it is expressly made clear that the there is an assertion on their part that they are acting for the
Philippines "adopts the generally accepted principles of government. Support for such a view is found in the American
international law as part of the law of the Nation." As will Supreme Court decisions of United States v. Lee10 and Land v.
subsequently be shown, there was a failure on the part of the lower Dollar.11 Thus the issue is squarely joined whether or not the
court to accord deference and respect to such a basic doctrine, a doctrine of immunity from suit without consent is applicable.
failure compounded by its refusal to take note of the absence of Thereafter, extensive memoranda were filed both by petitioner and
any legal right on the part of petitioner. Hence, certiorari is the respondents. In addition, there was a manifestation and
proper remedy. memorandum of the Republic of the Philippines as amicus curiae
where, after a citation of American Supreme Court decisions going
The facts are not in dispute. On November 17, 1964, respondent back to Schooner Exchange v. M'faddon,12 an 1812 decision, to
Edgardo Gener, as plaintiff, filed a complaint for injunction with the United States v. Belmont,13 decided in 1937, the plea was made
that the petition for certiorari be granted..
Court of First Instance of Bataan against petitioner, Donald Baer,
Commander of the United States Naval Base in Olongapo. It was
docketed as Civil Case No. 2984 of the Court of First Instance of A careful study of the crucial issue posed in this dispute yields the
Bataan. He alleged that he was engaged in the business of logging conclusion, as already announced, that petitioner should prevail.
in an area situated in Barrio Mabayo, Municipality of Morong,
Bataan and that the American Naval Base authorities stopped his 1. The invocation of the doctrine of immunity from suit of a foreign
logging operations. He prayed for a writ of preliminary injunction
state without its consent is appropriate. More specifically, insofar
restraining petitioner from interfering with his logging operations. A as alien armed forces is concerned, the starting point is Raquiza v.
restraining order was issued by respondent Judge on November Bradford, a 1945 decision.14 In dismissing a habeas corpus
23, 1964. Counsel for petitioner, upon instructions of the American petition for the release of petitioners confined by American army
Ambassador to the Philippines, entered their appearance for the authorities, Justice Hilado, speaking for the Court, cited from
purpose of contesting the jurisdiction of respondent Judge on the Coleman v. Tennessee,15 where it was explicitly declared: "It is
ground that the suit was one against a foreign sovereign without its well settled that a foreign army, permitted to march through a
consent. Then, on December 12, 1964, petitioner filed a motion to
friendly country or to be stationed in it, by permission of its
dismiss, wherein such ground was reiterated. It was therein government or sovereign, is exempt from the civil and criminal
pointed out that he is the chief or head of an agency or
jurisdiction of the place."16 Two years later, in Tubb and Tedrow v.
instrumentality of the United States of America, with the subject Griess,17 this Court relied on the ruling in Raquiza v. Bradford and
matter of the action being official acts done by him for and in behalf
cited in support thereof excerpts from the works of the following
of the United States of America. It was added that in directing the authoritative writers: Vattel, Wheaton, Hall, Lawrence, Oppenhein,
cessation of logging operations by respondent Gener within the Westlake, Hyde, and McNair and Lauterpacht.18 Accuracy
Naval Base, petitioner was entirely within the scope of his authority demands the clarification that after the conclusion of the Philippine-
and official duty, the maintenance of the security of the Naval Base American Military Bases Agreement, the treaty provisions should
and of the installations therein being the first concern and most control on such matter, the assumption being that there was a
important duty of the Commander of the Base. There was, on manifestation of the submission to jurisdiction on the part of the
December 14, 1964, an opposition and reply to petitioner's motion
foreign power whenever appropriate.19 More to the point is Syquia
to dismiss by respondent Gener, relying on the principle that "a v. Almeda Lopez,20 where plaintiffs as lessors sued the
private citizen claiming title and right of possession of certain
Commanding General of the United States Army in the Philippines,
property may, to recover possession of said property, sue as seeking the restoration to them of the apartment buildings they
individuals, officers and agents of the Government, who are said to owned leased to United States armed forces stationed in the
be illegally withholding the same from him, though in doing so, said Manila area. A motion to dismiss on the ground of non-suability
officers and agents claim that they are acting for the Government." was filed and upheld by respondent Judge. The matter was taken
That was his basis for sustaining the jurisdiction of respondent to this Court in a mandamus proceeding. It failed. It was the ruling
Judge. Petitioner, thereafter, on January 12, 1965, made a written that respondent Judge acted correctly considering that the "action
offer of documentary evidence, including certified copies of must be considered as one against the U.S. Government."21 The
telegrams of the Forestry Director to Forestry personnel in opinion of Justice Montemayor continued: "It is clear that the
Balanga, Bataan dated January 8, and January 11, 1965, directing
courts of the Philippines including the Municipal Court of Manila
immediate investigation of illegal timber cutting in Bataan and have no jurisdiction over the present case for unlawful detainer.
calling attention to the fact that the records of the office show no
The question of lack of jurisdiction was raised and interposed at
new renewal of timber license or temporary extension permits. The the very beginning of the action. The U.S. Government has not
above notwithstanding, respondent Judge, on January 12, 1965, given its consent to the filing of this suit which is essentially against
issued an order granting respondent Gener's application for the her, though not in name. Moreover, this is not only a case of a
issuance of a writ of preliminary injunction and denying petitioner's citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign
Page 1 of 84
government without said government's consent, which renders personal capacity, or when the action taken by him cannot be
more obvious the lack of jurisdiction of the courts of his country. imputed to the government which he represents. Thus, after the
The principles of law behind this rule are so elementary and of Military Bases Agreement, in Miquiabas v. Commanding
such general acceptance that we deem it unnecessary to cite General33 and Dizon v. The Commanding General of the
authorities in support thereof."22 Then came Marvel Building Philippine-Ryukus Command,34 both of them being habeas corpus
Corporation v. Philippine War Damage Commission,23 where petitions, there was no question as to the submission to jurisdiction
respondent, a United States agency established to compensate of the respondents. As a matter of fact, in Miquiabas v.
damages suffered by the Philippines during World War II was held Commanding General,35 the immediate release of the petitioner
as falling within the above doctrine as the suit against it "would was ordered, it being apparent that the general court martial
eventually be a charge against or financial liability of the United appointed by respondent Commanding General was without
States Government because ..., the Commission has no funds of jurisdiction to try petitioner. Thereafter, in the cited cases of
its own for the purpose of paying money judgments."24 The Syquia, Marquez Lim, and Johnson, the parties proceeded against
Syquia ruling was again explicitly relied upon in Marquez Lim v. were American army commanding officers stationed in the
Nelson,25 involving a complaint for the recovery of a motor launch, Philippines. The insuperable obstacle to the jurisdiction of
plus damages, the special defense interposed being "that the respondent Judge is that a foreign sovereign without its consent is
vessel belonged to the United States Government, that the haled into court in connection with acts performed by it pursuant to
defendants merely acted as agents of said Government, and that treaty provisions and thus impressed with a governmental
the United States Government is therefore the real party in character.
interest."26 So it was in Philippine Alien Property Administration v.
Castelo,27 where it was held that a suit against the Alien Property 3. The infirmity of the actuation of respondent Judge becomes
Custodian and the Attorney General of the United States involving even more glaring when it is considered that private respondent
vested property under the Trading with the Enemy Act is in
had ceased to have any right of entering within the base area. This
substance a suit against the United States. To the same effect is is made clear in the petition in these words: "In 1962, respondent
Parreno v. McGranery,28 as the following excerpt from the opinion
Gener was issued by the Bureau of Forestry an ordinary timber
of Justice Tuason clearly shows: "It is a widely accepted principle license to cut logs in Barrio Mabayo, Morong, Bataan. The license
of international law, which is made a part of the law of the land
was renewed on July 10, 1963. In 1963, he commenced logging
(Article II, Section 3 of the Constitution), that a foreign state may operation inside the United States Naval Base, Subic Bay, but in
not be brought to suit before the courts of another state or its own November 1963 he was apprehended and stopped by the Base
courts without its consent."29 Finally, there is Johnson v. authorities from logging inside the Base. The renewal of his license
Turner,30 an appeal by the defendant, then Commanding General, expired on July 30, 1964, and to date his license has not been
Philippine Command (Air Force, with office at Clark Field) from a renewed by the Bureau of Forestry. .. In July 1964, the Mutual
decision ordering the return to plaintiff of the confiscated military Defense Board, a joint Philippines-United States agency
payment certificates known as scrip money. In reversing the lower
established pursuant to an exchange of diplomatic notes between
court decision, this Tribunal, through Justice Montemayor, relied the Secretary of Foreign Affairs and the United States Ambassador
on Syquia v. Almeda Lopez,31 explaining why it could not be
to provide "direct liaison and consultation between appropriate
sustained. Philippine and United States authorities on military matters of
mutual concern,' advised the Secretary of Foreign Affairs in writing
The solidity of the stand of petitioner is therefore evident. What that: "The enclosed map shows that the area in which Mr. Gener
was sought by private respondent and what was granted by was logging definitely falls within the boundaries of the base. This
respondent Judge amounted to an interference with the map also depicts certain contiguous and overlapping areas whose
performance of the duties of petitioner in the base area in functional usage would be interfered with by the logging
accordance with the powers possessed by him under the operations.'"36 Nowhere in the answer of respondents, nor in their
Philippine-American Military Bases Agreement. This point was memorandum, was this point met. It remained unrefuted.
made clear in these words: "Assuming, for purposes of argument,
that the Philippine Government, through the Bureau of Forestry, WHEREFORE, the writ of certiorari prayed for is granted, nullifying
possesses the "authority to issue a Timber License to cut logs" and setting aside the writ of preliminary injunction issued by
inside a military base, the Bases Agreement subjects the exercise respondent Judge in Civil Case No. 2984 of the Court of First
of rights under a timber license issued by the Philippine
Instance of Bataan. The injunction issued by this Court on March
Government to the exercise by the United States of its rights, 18, 1965 enjoining the enforcement of the aforesaid writ of
power and authority of control within the bases; and the findings of
preliminary injunction of respondent Judge is hereby made
the Mutual Defense Board, an agency of both the Philippine and
permanent. Costs against private respondent Edgardo Gener.
United States Governments, that "continued logging operation by
Mr. Gener within the boundaries of the U.S. Naval Base would not
be consistent with the security and operation of the Base," is [G.R. No. 122191. October 8, 1998]
conclusive upon the respondent Judge. .. The doctrine of state
immunity is not limited to cases which would result in a pecuniary
charge against the sovereign or would require the doing of an SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
affirmative act by it. Prevention of a sovereign from doing an APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
affirmative act pertaining directly and immediately to the most ORTIZ, in his capacity as Presiding Judge of Branch 89,
important public function of any government - the defense of the Regional Trial Court of Quezon City, respondents.;
state — is equally as untenable as requiring it to do an affirmative QUISUMBING, J.:
act."32 That such an appraisal is not opposed to the interpretation
of the relevant treaty provision by our government is made clear in This petition for certiorari pursuant to Rule 45 of the Rules of Court
the aforesaid manifestation and memorandum as amicus curiae, seeks to annul and set aside the Resolution[1] dated September
wherein it joined petitioner for the grant of the remedy prayed for. 27, 1995 and the Decision[2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated
2. There should be no misinterpretation of the scope of the August 29, 1994[6] and February 2, 1995[7] that were issued by
decision reached by this Court. Petitioner, as the Commander of the trial court in Civil Case No. Q-93-18394.[8]
the United States Naval Base in Olongapo, does not possess
diplomatic immunity. He may therefore be proceeded against in his
Page 2 of 84
The pertinent antecedent facts which gave rise to the instant so after receiving assurance from SAUDIAs Manila
petition, as stated in the questioned Decision[9], are as follows: manager, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
On January 21, 1988 defendant SAUDIA hired plaintiff In Jeddah, a SAUDIA legal officer brought plaintiff to
as a Flight Attendant for its airlines based in Jeddah, the same Saudi court on June 27, 1993. Nothing
Saudi Arabia. x x x happened then but on June 28, 1993, a Saudi judge
On April 27, 1990, while on a lay-over in Jakarta, interrogated plaintiff through an interpreter about the
Indonesia, plaintiff went to a disco dance with fellow Jakarta incident. After one hour of interrogation, they let
crew members Thamer Al-Gazzawi and Allah Al- her go. At the airport, however, just as her plane was
Gazzawi, both Saudi nationals. Because it was almost about to take off, a SAUDIA officer told her that the
morning when they returned to their hotels, they agreed airline had forbidden her to take flight. At the Inflight
to have breakfast together at the room of Thamer. Service Office where she was told to go, the secretary
of Mr. Yahya Saddick took away her passport and told
When they were in te (sic) room, Allah left on some
pretext. Shortly after he did, Thamer attempted to rape her to remain in Jeddah, at the crew quarters, until
further orders.
plaintiff. Fortunately, a roomboy and several security
personnel heard her cries for help and rescued her. On July 3, 1993 a SAUDIA legal officer again escorted
Later, the Indonesian police came and arrested Thamer plaintiff to the same court where the judge, to her
and Allah Al-Gazzawi, the latter as an accomplice. astonishment and shock, rendered a decision,
When plaintiff returned to Jeddah a few days later, translated to her in English, sentencing her to five
several SAUDIA officials interrogated her about the months imprisonment and to 286 lashes. Only then did
Jakarta incident. They then requested her to go back to she realize that the Saudi court had tried her, together
with Thamer and Allah, for what happened in Jakarta.
Jakarta to help arrange the release of Thamer and
Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad The court found plaintiff guilty of (1) adultery; (2) going
to a disco, dancing and listening to the music in
and base manager Baharini negotiated with the police
for the immediate release of the detained crew violation of Islamic laws; and (3) socializing with the
members but did not succeed because plaintiff refused male crew, in contravention of Islamic tradition.[10]
to cooperate. She was afraid that she might be tricked
into something she did not want because of her inability Facing conviction, private respondent sought the help of her
to understand the local dialect. She also declined to employer, petitioner SAUDIA. Unfortunately, she was denied any
sign a blank paper and a document written in the local assistance. She then asked the Philippine Embassy in Jeddah to
dialect. Eventually, SAUDIA allowed plaintiff to return to help her while her case is on appeal. Meanwhile, to pay for her
Jeddah but barred her from the Jakarta flights. upkeep, she worked on the domestic flight of SAUDIA, while
Thamer and Allah continued to serve in the international flights.[11]
Plaintiff learned that, through the intercession of the
Saudi Arabian government, the Indonesian authorities
agreed to deport Thamer and Allah after two weeks of Because she was wrongfully convicted, the Prince of Makkah
detention. Eventually, they were again put in service by dismissed the case against her and allowed her to leave Saudi
defendant SAUDI (sic). In September 1990, defendant Arabia. Shortly before her return to Manila,[12] she was terminated
SAUDIA transferred plaintiff to Manila. from the service by SAUDIA, without her being informed of the
cause.
On January 14, 1992, just when plaintiff thought that
the Jakarta incident was already behind her, her On November 23, 1993, Morada filed a Complaint[13] for damages
superiors requested her to see Mr. Ali Meniewy, Chief against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country
Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. manager.
When she saw him, he brought her to the police station
where the police took her passport and questioned her
about the Jakarta incident. Miniewy simply stood by as On January 19, 1994, SAUDIA filed an Omnibus Motion To
the police put pressure on her to make a statement Dismiss[14] which raised the following grounds, to wit: (1) that the
dropping the case against Thamer and Allah. Not until Complaint states no cause of action against Saudia; (2) that
she agreed to do so did the police return her passport defendant Al-Balawi is not a real party in interest; (3) that the claim
and allowed her to catch the afternoon flight out of or demand set forth in the Complaint has been waived, abandoned
Jeddah. or otherwise extinguished; and (4) that the trial court has no
jurisdiction to try the case.
One year and a half later or on June 16, 1993, in
Riyadh, Saudi Arabia, a few minutes before the
On February 10, 1994, Morada filed her Opposition (To Motion to
departure of her flight to Manila, plaintiff was not
Dismiss)[15] Saudia filed a reply[16] thereto on March 3, 1994.
allowed to board the plane and instead ordered to take
a later flight to Jeddah to see Mr. Miniewy, the Chief
Legal Officer of SAUDIA. When she did, a certain On June 23, 1994, Morada filed an Amended Complaint[17]
Khalid of the SAUDIA office brought her to a Saudi wherein Al-Balawi was dropped as party defendant. On August 11,
court where she was asked to sign a document written 1994, Saudia filed its Manifestation and Motion to Dismiss
in Arabic. They told her that this was necessary to close Amended Complaint[18].
the case against Thamer and Allah. As it turned out,
plaintiff signed a notice to her to appear before the The trial court issued an Order[19] dated August 29, 1994 denying
court on June 27, 1993. Plaintiff then returned to the Motion to Dismiss Amended Complaint filed by Saudia.
Manila.
Shortly afterwards, defendant SAUDIA summoned From the Order of respondent Judge[20] denying the Motion to
plaintiff to report to Jeddah once again and see Miniewy Dismiss, SAUDIA filed on September 20, 1994, its Motion for
on June 27, 1993 for further investigation. Plaintiff did Reconsideration[21] of the Order dated August 29, 1994. It alleged
Page 3 of 84
that the trial court has no jurisdiction to hear and try the case on However, during the pendency of the instant Petition, respondent
the basis of Article 21 of the Civil Code, since the proper law Court of Appeals rendered the Decision[30] dated April 10, 1996,
applicable is the law of the Kingdom of Saudi Arabia. On October now also assailed. It ruled that the Philippines is an appropriate
14, 1994, Morada filed her Opposition[22] (To Defendants Motion forum considering that the Amended Complaints basis for recovery
for Reconsideration). of damages is Article 21 of the Civil Code, and thus, clearly within
the jurisdiction of respondent Court. It further held that certiorari is
In the Reply[23] filed with the trial court on October 24, 1994, not the proper remedy in a denial of a Motion to Dismiss, inasmuch
SAUDIA alleged that since its Motion for Reconsideration raised as the petitioner should have proceeded to trial, and in case of an
lack of jurisdiction as its cause of action, the Omnibus Motion Rule adverse ruling, find recourse in an appeal.
does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not On May 7, 1996, SAUDIA filed its Supplemental Petition for
have any substantial interest in the prosecution of the instant case, Review with Prayer for Temporary Restraining Order[31] dated
and hence, without jurisdiction to adjudicate the same. April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda,[32] the instant case is now deemed
Respondent Judge subsequently issued another Order[24] dated submitted for decision.
February 2, 1995, denying SAUDIAs Motion for Reconsideration.
The pertinent portion of the assailed Order reads as follows: Petitioner SAUDIA raised the following issues:

Acting on the Motion for Reconsideration of defendant I. The trial court has no jurisdiction to hear and try Civil Case No.
Saudi Arabian Airlines filed, thru counsel, on Q-93-18394 based on Article 21 of the New Civil Code since the
September 20, 1994, and the Opposition thereto of the proper law applicable is the law of the Kingdom of Saudi Arabia
plaintiff filed, thru counsel, on October 14, 1994, as inasmuch as this case involves what is known in private
well as the Reply therewith of defendant Saudi Arabian international law as a conflicts problem. Otherwise, the Republic of
Airlines filed, thru counsel, on October 24, 1994, the Philippines will sit in judgment of the acts done by another
considering that a perusal of the plaintiffs Amended sovereign state which is abhorred.
Complaint, which is one for the recovery of actual,
moral and exemplary damages plus attorneys fees,
II. Leave of court before filing a supplemental pleading is not a
upon the basis of the applicable Philippine law, Article jurisdictional requirement. Besides, the matter as to absence of
21 of the New Civil Code of the Philippines, is, clearly,
leave of court is now moot and academic when this Honorable
within the jurisdiction of this Court as regards the Court required the respondents to comment on petitioners April 30,
subject matter, and there being nothing new of 1996 Supplemental Petition For Review With Prayer For A
substance which might cause the reversal or Temporary Restraining Order Within Ten (10) Days From Notice
modification of the order sought to be reconsidered, Thereof. Further, the Revised Rules of Court should be construed
the motion for reconsideration of the defendant, is with liberality pursuant to Section 2, Rule 1 thereof.
DENIED.
SO ORDERED.[25] III. Petitioner received on April 22, 1996 the April 10, 1996 decision
in CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon.
Consequently, on February 20, 1995, SAUDIA filed its Petition for Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental
Certiorari and Prohibition with Prayer for Issuance of Writ of Petition For Review With Prayer For A Temporary Restraining
Preliminary Injunction and/or Temporary Restraining Order[26] with Order on May 7, 1996 at 10:29 a.m. or within the 15-day
the Court of Appeals. reglementary period as provided for under Section 1, Rule 45 of
the Revised Rules of Court. Therefore, the decision in CA-G.R. SP
NO. 36533 has not yet become final and executory and this
Respondent Court of Appeals promulgated a Resolution with Honorable Court can take cognizance of this case.[33]
Temporary Restraining Order[27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim. From the foregoing factual and procedural antecedents, the
following issues emerge for our resolution:

In another Resolution[28] promulgated on September 27, 1995,


now assailed, the appellate court denied SAUDIAs Petition for the I. WHETHER RESPONDENT APPELLATE COURT
Issuance of a Writ of Preliminary Injunction dated February 18, ERRED IN HOLDING THAT THE REGIONAL
1995, to wit: TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE
NO. Q-93-18394 ENTITLED MILAGROS P.
The Petition for the Issuance of a Writ of Preliminary MORADA V. SAUDI ARABIAN AIRLINES.
Injunction is hereby DENIED, after considering the II. WHETHER RESPONDENT APPELLATE
Answer, with Prayer to Deny Writ of Preliminary COURT ERRED IN RULING THAT IN THE
Injunction (Rollo, p. 135) the Reply and Rejoinder, it CASE PHILIPPINE LAW SHOULD GOVERN.
appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et. Al., v. Court
of Appeals, et. Al., 100335, April 7, 1993, Second Petitioner SAUDIA claims that before us is a conflict of laws that
Division). must be settled at the outset. It maintains that private respondents
claim for alleged abuse of rights occurred in the Kingdom of Saudi
SO ORDERED. Arabia. It alleges that the existence of a foreign element qualifies
the instant case for the application of the law of the Kingdom of
Saudi Arabia, by virtue of the lex loci delicti commissi rule.[34]
On October 20, 1995, SAUDIA filed with this Honorable Court the
instant Petition[29] for Review with Prayer for Temporary
Restraining Order dated October 13, 1995. On the other hand, private respondent contends that since her
Amended Complaint is based on Articles 19[35] and 21[36] of the
Page 4 of 84
Civil Code, then the instant case is properly a matter of domestic Inflight Service Office where she was told to go, the
law.[37] secretary of Mr. Yahya Saddick took away her
passport and told her to remain in Jeddah, at the crew
quarters, until further orders.
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the 11. On July 3, 1993 a SAUDIA legal officer again
Philippines and Saudi Arabia. escorted plaintiff to the same court where the judge, to
her astonishment and shock, rendered a decision,
As stated by private respondent in her Amended Complaint[38] translated to her in English, sentencing her to five
dated June 23, 1994: months imprisonment and to 286 lashes. Only then did
she realize that the Saudi court had tried her, together
with Thamer and Allah, for what happened in Jakarta.
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA
The court found plaintiff guilty of (1) adultery; (2) going
is a foreign airlines corporation doing business in the to a disco, dancing, and listening to the music in
Philippines. It may be served with summons and other
violation of Islamic laws; (3) socializing with the male
court processes at Travel Wide Associated Sales crew, in contravention of Islamic tradition.
(Phils.), Inc., 3rd Floor, Cougar Building, 114 Valero
St., Salcedo Village, Makati, Metro Manila. 12. Because SAUDIA refused to lend her a hand in the
case, plaintiff sought the help of the Philippine
xxx xxx xxx Embassy in Jeddah. The latter helped her pursue an
appeal from the decision of the court. To pay for her
upkeep, she worked on the domestic flights of
6. Plaintiff learned that, through the intercession of defendant SAUDIA while, ironically, Thamer and Allah
the Saudi Arabian government, the Indonesian freely served the international flights.[39]
authorities agreed to deport Thamer and Allah after
two weeks of detention. Eventually, they were again
put in service by defendant SAUDIA. In September Where the factual antecedents satisfactorily establish the
1990, defendant SAUDIA transferred plaintiff to existence of a foreign element, we agree with petitioner that the
Manila. problem herein could present a conflicts case.

7. On January 14, 1992, just when plaintiff thought


A factual situation that cuts across territorial lines and is affected
that the Jakarta incident was already behind her, her
by the diverse laws of two or more states is said to contain a
superiors requested her to see MR. Ali Meniewy, Chief
foreign element. The presence of a foreign element is inevitable
Legal Officer of SAUDIA, in Jeddah, Saudi Arabia.
since social and economic affairs of individuals and associations
When she saw him, he brought her to the police are rarely confined to the geographic limits of their birth or
station where the police took her passport and
conception.[40]
questioned her about the Jakarta incident. Miniewy
simply stood by as the police put pressure on her to
make a statement dropping the case against Thamer The forms in which this foreign element may appear are many.[41]
and Allah. Not until she agreed to do so did the police The foreign element may simply consist in the fact that one of the
return her passport and allowed her to catch the parties to a contract is an alien or has a foreign domicile, or that a
afternoon flight out of Jeddah. contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may
8. One year and a half later or on June 16, 1993, in assume a complex form.[42]
Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not
In the instant case, the foreign element consisted in the fact that
allowed to board the plane and instead ordered to take
a later flight to Jeddah to see Mr. Meniewy, the Chief private respondent Morada is a resident Philippine national, and
Legal Officer of SAUDIA. When she did, a certain that petitioner SAUDIA is a resident foreign corporation. Also, by
Khalid of the SAUDIA office brought her to a Saudi virtue of the employment of Morada with the petitioner Saudia as a
court where she was asked to sign a document written flight stewardess, events did transpire during her many occasions
in Arabic. They told her that this was necessary to of travel across national borders, particularly from Manila,
close the case against Thamer and Allah. As it turned Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a
out, plaintiff signed a notice to her to appear before the conflicts situation to arise.
court on June 27, 1993. Plaintiff then returned to
Manila. We thus find private respondents assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and
9. Shortly afterwards, defendant SAUDIA summoned the question of jurisdiction[43] confronts the court a quo.
plaintiff to report to Jeddah once again and see
Miniewy on June 27, 1993 for further investigation.
Plaintiff did so after receiving assurance from After a careful study of the private respondents Amended
SAUDIAs Manila manager, Aslam Saleemi, that the Complaint,[44] and the Comment thereon, we note that she aptly
investigation was routinary and that it posed no danger predicated her cause of action on Articles 19 and 21 of the New
to her. Civil Code.

10. In Jeddah, a SAUDIA legal officer brought plaintiff On one hand, Article 19 of the New Civil Code provides;
to the same Saudi court on June 27, 1993. Nothing
happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about the Art. 19. Every person must, in the exercise of his rights
Jakarta incident. After one hour of interrogation, they and in the performance of his duties, act with justice
let her go. At the airport, however, just as her plane give everyone his due and observe honesty and good
was about to take off, a SAUDIA officer told her that faith.
the airline had forbidden her to take that flight. At the
Page 5 of 84
On the other hand, Article 21 of the New Civil Code provides: Enforceability of a judgment if one is obtained is quite obvious.
Relative advantages and obstacles to a fair trial are equally
Art. 21. Any person who willfully causes loss or injury important. Plaintiff may not, by choice of an inconvenient forum,
vex, harass, or oppress the defendant, e.g. by inflicting upon him
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for needless expense or disturbance. But unless the balance is
damages. strongly in favor of the defendant, the plaintiffs choice of forum
should rarely be disturbed.[49]

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


this Court held that: Weighing the relative claims of the parties, the court a quo found it
best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
The aforecited provisions on human relations were respondent now) to seek remedial action elsewhere, i.e. in the
intended to expand the concept of torts in this Kingdom of Saudi Arabia where she no longer maintains
jurisdiction by granting adequate legal remedy for the substantial connections. That would have caused a fundamental
untold number of moral wrongs which is impossible for unfairness to her.
human foresight to specifically provide in the statutes.
Moreover, by hearing the case in the Philippines no unnecessary
Although Article 19 merely declares a principle of law, Article 21 difficulties and inconvenience have been shown by either of the
gives flesh to its provisions. Thus, we agree with private parties. The choice of forum of the plaintiff (now private
respondents assertion that violations of Articles 19 and 21 are respondent) should be upheld.
actionable, with judicially enforceable remedies in the municipal
forum.
Similarly, the trial court also possesses jurisdiction over the
persons of the parties herein. By filing her Complaint and
Based on the allegations[46] in the Amended Complaint, read in Amended Complaint with the trial court, private respondent has
the light of the Rules of Court on jurisdiction[47] we find that the voluntary submitted herself to the jurisdiction of the court.
Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit.[48] Its authority to try and hear
the case is provided for under Section 1 of Republic Act No. 7691, The records show that petitioner SAUDIA has filed several
to wit: motions[50] praying for the dismissal of Moradas Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and
Section 1. Section 19 of Batas Pambansa Blg. 129, explicit from the motions filed, is that SAUDIA prayed for other
otherwise known as the Judiciary Reorganization Act reliefs under the premises. Undeniably, petitioner SAUDIA has
of 1980, is hereby amended to read as follows: effectively submitted to the trial courts jurisdiction by praying for
the dismissal of the Amended Complaint on grounds other than
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall lack of jurisdiction.
exercise exclusive jurisdiction:
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
xxx xxxxx
We observe that the motion to dismiss filed on April
(8) In all other cases in which demand, exclusive of interest, 14, 1962, aside from disputing the lower courts
damages of whatever kind, attorneys fees, litigation expenses, and jurisdiction over defendants person, prayed for
costs or the value of the property in controversy exceeds One dismissal of the complaint on the ground that plaintiffs
hundred thousand pesos (P100,000.00) or, in such other cases in cause of action has prescribed. By interposing such
Metro Manila, where the demand, exclusive of the above- second ground in its motion to dismiss, Ker and Co.,
mentioned items exceeds Two hundred Thousand pesos Ltd. availed of an affirmative defense on the basis of
(P200,000.00). (Emphasis ours) which it prayed the court to resolve controversy in its
favor. For the court to validly decide the said plea of
defendant Ker & Co., Ltd., it necessarily had to acquire
xxx xxxxx jurisdiction upon the latters person, who, being the
proponent of the affirmative defense, should be
And following Section 2 (b), Rule 4 of the Revised Rules of deemed to have abandoned its special appearance
Courtthe venue, Quezon City, is appropriate: and voluntarily submitted itself to the jurisdiction of the
court.
SEC. 2 Venue in Courts of First Instance. [Now Regional
Trial Court] Similarly, the case of De Midgely vs. Ferandos, held that:

(a) x x x xxx xxx When the appearance is by motion for the purpose of
objecting to the jurisdiction of the court over the
(b) Personal actions. All other actions may be person, it must be for the sole and separate purpose of
commenced and tried where the defendant or any of objecting to the jurisdiction of the court. If his motion is
the defendants resides or may be found, or where the for any other purpose than to object to the jurisdiction
plaintiff or any of the plaintiff resides, at the election of of the court over his person, he thereby submits
the plaintiff. himself to the jurisdiction of the court. A special
appearance by motion made for the purpose of
Pragmatic considerations, including the convenience of the parties, objecting to the jurisdiction of the court over the person
also weigh heavily in favor of the RTC Quezon City assuming will be held to be a general appearance, if the party in
jurisdiction. Paramount is the private interest of the litigant. said motion should, for example, ask for a dismissal of

Page 6 of 84
the action upon the further ground that the court had have seen earlier, matters of procedure not going to
no jurisdiction over the subject matter.[52] the substance of the claim involved are governed by it;
and because the lex fori applies whenever the content
of the otherwise applicable foreign law is excluded
Clearly, petitioner had submitted to the jurisdiction of the Regional
Trial Court of Quezon City. Thus, we find that the trial court has from application in a given case for the reason that it
jurisdiction over the case and that its exercise thereof, justified. falls under one of the exceptions to the applications of
foreign law; and

As to the choice of applicable law, we note that choice-of-law (8) the flag of a ship, which in many cases is decisive
problems seek to answer two important questions: (1) What legal of practically all legal relationships of the ship and of
system should control a given situation where some of the its master or owner as such. It also covers contractual
significant facts occurred in two or more states; and (2) to what relationships particularly contracts of affreightment.[60]
extent should the chosen legal system regulate the situation.[53] (Underscoring ours.)

Several theories have been propounded in order to identify the After a careful study of the pleadings on record, including
legal system that should ultimately control. Although ideally, all allegations in the Amended Complaint deemed submitted for
choice-of-law theories should intrinsically advance both notions of purposes of the motion to dismiss, we are convinced that there is
justice and predictability, they do not always do so. The forum is reasonable basis for private respondents assertion that although
then faced with the problem of deciding which of these two she was already working in Manila, petitioner brought her to
important values should be stressed.[54] Jeddah on the pretense that she would merely testify in an
investigation of the charges she made against the two SAUDIA
crew members for the attack on her person while they were in
Before a choice can be made, it is necessary for us to determine
Jakarta. As it turned out, she was the one made to face trial for
under what category a certain set of facts or rules fall. This process
very serious charges, including adultery and violation of Islamic
is known as characterization, or the doctrine of qualification. It is
laws and tradition.
the process of deciding whether or not the facts relate to the kind
of question specified in a conflicts rule.[55] The purpose of
characterization is to enable the forum to select the proper law.[56] There is likewise logical basis on record for the claim that the
handing over or turning over of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as
Our starting point of analysis here is not a legal relation, but a
employer. Petitioners purported act contributed to and amplified or
factual situation, event, or operative fact.[57] An essential element
even proximately caused additional humiliation, misery and
of conflict rules is the indication of a test or connecting factor or
suffering of private respondent. Petitioner thereby allegedly
point of contact. Choice-of-law rules invariably consist of a factual facilitated the arrest, detention and prosecution of private
relationship (such as property right, contract claim) and a
respondent under the guise of petitioners authority as employer,
connecting factor or point of contact, such as the situs of the res, taking advantage of the trust, confidence and faith she reposed
the place of celebration, the place of performance, or the place of
upon it. As purportedly found by the Prince of Makkah, the alleged
wrongdoing.[58]
conviction and imprisonment of private respondent was wrongful.
But these capped the injury or harm allegedly inflicted upon her
Note that one or more circumstances may be present to serve as person and reputation, for which petitioner could be liable as
the possible test for the determination of the applicable law.[59] claimed, to provide compensation or redress for the wrongs done,
These test factors or points of contact or connecting factors could once duly proven.
be any of the following:
Considering that the complaint in the court a quo is one involving
(1) The nationality of a person, his domicile, his torts, the connecting factor or point of contact could be the place or
residence, his place of sojourn, or his origin; places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the
(2) the seat of a legal or juridical person, such as a Philippines could be said as a situs of the tort (the place where the
corporation; alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent,
(3) the situs of a thing, that is, the place where a thing
a Filipina residing and working here. According to her, she had
is, or is deemed to be situated. In particular, the lex
honestly believed that petitioner would, in the exercise of its rights
situs is decisive when real rights are involved;
and in the performance of its duties, act with justice, give her her
(4) the place where an act has been done, the due and observe honesty and good faith. Instead, petitioner failed
locus actus, such as the place where a contract to protect her, she claimed. That certain acts or parts of the injury
has been made, a marriage celebrated, a will allegedly occurred in another country is of no moment. For in our
signed or a tort committed. The lex loci actus is view what is important here is the place where the over-all harm or
particularly important in contracts and torts; the fatality of the alleged injury to the person, reputation, social
standing and human rights of complainant, had lodged, according
(5) the place where an act is intended to come into to the plaintiff below (herein private respondent). All told, it is not
effect, e.g., the place of performance of contractual without basis to identify the Philippines as the situs of the alleged
duties, or the place where a power of attorney is to be tort.
exercised;
(6) the intention of the contracting parties as to the law Moreover, with the widespread criticism of the traditional rule of lex
that should govern their agreement, the lex loci loci delicti commissi, modern theories and rules on tort liability[61]
intentionis; have been advanced to offer fresh judicial approaches to arrive at
just results. In keeping abreast with the modern theories on tort
(7) the place where judicial or administrative liability, we find here an occasion to apply the State of the most
proceedings are instituted or done. The lex forithe law significant relationship rule, which in our view should be
of the forumis particularly important because, as we appropriate to apply now, given the factual context of this case.

Page 7 of 84
In applying said principle to determine the State which has the Before the Court is a petition for review on certiorari under Rule 45
most significant relationship, the following contacts are to be taken of the Rules of Court assailing the April 18, 2001 Decision of the
into account and evaluated according to their relative importance Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
with respect to the particular issue: (a) the place where the injury 2001 Resolution denying the motion for reconsideration thereof.
occurred; (b) the place where the conduct causing the injury
occurred; (c) the domicile, residence, nationality, place of On March 30, 1999, petitioner Nippon Engineering Consultants
incorporation and place of business of the parties, and (d) the Co., Ltd. (Nippon), a Japanese consultancy firm providing technical
place where the relationship, if any, between the parties is and management support in the infrastructure projects of foreign
centered.[62] governments, entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
As already discussed, there is basis for the claim that over-all permanently residing in the Philippines. The agreement provides
injury occurred and lodged in the Philippines. There is likewise no that respondent was to extend professional services to Nippon for
question that private respondent is a resident Filipina national, a year starting on April 1, 1999. Nippon then assigned respondent
working with petitioner, a resident foreign corporation engaged to work as the project manager of the Southern Tagalog Access
here in the business of international air carriage. Thus, the Road (STAR) Project in the Philippines, following the company's
relationship between the parties was centered here, although it consultancy contract with the Philippine Government.
should be stressed that this suit is not based on mere labor law
violations. From the record, the claim that the Philippines has the When the STAR Project was near completion, the Department of
most significant contact with the matter in this dispute,[63] raised
Public Works and Highways (DPWH) engaged the consultancy
by private respondent as plaintiff below against defendant (herein services of Nippon, on January 28, 2000, this time for the detailed
petitioner), in our view, has been properly established. engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project. Respondent was named as the
Prescinding from this premise that the Philippines is the situs of the project manager in the contract's Appendix 3.1
tort complaint of and the place having the most interest in the
problem, we find, by way of recapitulation, that the Philippine law On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
on tort liability should have paramount application to and control in general manager for its International Division, informed respondent
the resolution of the legal issues arising out of this case. Further, that the company had no more intention of automatically renewing
we hold that the respondent Regional Trial Court has jurisdiction his ICA. His services would be engaged by the company only up to
over the parties and the subject matter of the complaint; the the substantial completion of the STAR Project on March 31, 2000,
appropriate venue is in Quezon City, which could properly apply just in time for the ICA's expiry.
Philippine law. Moreover, we find untenable petitioners insistence
that [s]ince private respondent instituted this suit, she has the
burden of pleading and proving the applicable Saudi law on the Threatened with impending unemployment, respondent, through
matter.[64] As aptly said by private respondent, she has no his lawyer, requested a negotiation conference and demanded that
obligation to plead and prove the law of the Kingdom of Saudi he be assigned to the BBRI project. Nippon insisted that
Arabia since her cause of action is based on Articles 19 and 21 of respondents contract was for a fixed term that had already expired,
the Civil Code of the Philippines. In her Amended Complaint and and refused to negotiate for the renewal of the ICA.
subsequent pleadings she never alleged that Saudi law should
govern this case.[65] And as correctly held by the respondent As he was not able to generate a positive response from the
appellate court, considering that it was the petitioner who was petitioners, respondent consequently initiated on June 1, 2000 Civil
invoking the applicability of the law of Saudi Arabia, thus the Case No. 00-0264 for specific performance and damages with the
burden was on it [petitioner] to plead and to establish what the law Regional Trial Court of Lipa City.
of Saudi Arabia is.[66]
For their part, petitioners, contending that the ICA had been
Lastly, no error could be imputed to the respondent appellate court perfected in Japan and executed by and between Japanese
in upholding the trial courts denial of defendants (herein nationals, moved to dismiss the complaint for lack of jurisdiction.
petitioners) motion to dismiss the case. Not only was jurisdiction in They asserted that the claim for improper pre-termination of
order and venue properly laid, but appeal after trial was obviously respondent's ICA could only be heard and ventilated in the proper
available, and the expeditious trial itself indicated by the nature of courts of Japan following the principles of lex loci celebrationis and
the case at hand. Indubitably, the Philippines is the state intimately lex contractus.
concerned with the ultimate outcome of the case below not just for
the benefit of all the litigants, but also for the vindication of the
countrys system of law and justice in a transnational setting. With In the meantime, on June 20, 2000, the DPWH approved Nippon's
these guidelines in mind, the trial court must proceed to try and request for the replacement of Kitamura by a certain Y. Kotake as
adjudge the case in the light of relevant Philippine law, with due project manager of the BBRI Project.
consideration of the foreign element or elements involved. Nothing
said herein, of course, should be construed as prejudging the On June 29, 2000, the RTC, invoking our ruling in Insular
results of the case in any manner whatsoever. Government v. Frank that matters connected with the performance
of contracts are regulated by the law prevailing at the place of
WHEREFORE, the instant petition for certiorari is hereby performance, denied the motion to dismiss.
DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P.
Morada vs. Saudi Arabia Airlines is hereby REMANDED to The trial court subsequently denied petitioners' motion for
Regional Trial Court of Quezon City, Branch 89 for further reconsideration, prompting them to file with the appellate court, on
proceedings. SO ORDERED August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205]. On August 23, 2000, the CA
resolved to dismiss the petition on procedural grounds for lack of
KAZUHIRO HASEGAWA and NIPPON ENGINEERING statement of material dates and for insufficient verification and
CONSULTANTS CO., LTD., - versus - MINORU KITAMURA; certification against forum shopping. An Entry of Judgment was
G.R. No. 149177; November 23, 2007; NACHURA, J.: later issued by the appellate court on September 20, 2000.
Page 8 of 84
Aggrieved by this development, petitioners filed with the CA, on petitioners can re-file the petition, or file a second petition attaching
September 19, 2000, still within the reglementary period, a second thereto the appropriate verification and certification as they, in fact
Petition for Certiorari under Rule 65 already stating therein the did and stating therein the material dates, within the prescribed
material dates and attaching thereto the proper verification and period[30] in Section 4, Rule 65 of the said Rules.
certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP The dismissal of a case without prejudice signifies the
No. 60827. absence of a decision on the merits and leaves the parties free to
litigate the matter in a subsequent action as though the dismissed
Ruling on the merits of the second petition, the appellate court action had not been commenced. In other words, the termination of
rendered the assailed April 18, 2001 Decision finding no grave a case not on the merits does not bar another action involving the
abuse of discretion in the trial court's denial of the motion to same parties, on the same subject matter and theory.
dismiss. The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in Necessarily, because the said dismissal is without
the pleadings was the validity of the written agreement put in issue. prejudice and has no res judicata effect, and even if petitioners still
The CA thus declared that the trial court was correct in applying indicated in the verification and certification of the second certiorari
instead the principle of lex loci solutionis. petition that the first had already been dismissed on procedural
grounds,[33] petitioners are no longer required by the Rules to
Petitioners' motion for reconsideration was subsequently denied by indicate in their certification of non-forum shopping in the instant
the CA in the assailed July 25, 2001 Resolution. 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
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review on Certiorari constitute res judicata and litis pendentia, as in the present case, is
not a fatal defect. It will not warrant the dismissal and nullification
imputing the following errors to the appellate court:
of the entire proceedings, considering that the evils sought to be
prevented by the said certificate are no longer present.
A. THE HONORABLE COURT OF
APPEALS GRAVELY ERRED IN FINDING
The Court also finds no merit in respondent's contention
THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE 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 CONTROVERSY, DESPITE THE
FACT THAT THE CONTRACT SUBJECT instant petition. True, the Authorization dated September 4, 2000,
MATTER OF THE PROCEEDINGS A QUO which is attached to the second certiorari petition and which is also
WAS ENTERED INTO BY AND BETWEEN attached to the instant petition for review, is limited in scope its
TWO JAPANESE NATIONALS, WRITTEN wordings indicate that Hasegawa is given the authority to sign for
WHOLLY IN THE JAPANESE LANGUAGE and act on behalf of the company only in the petition filed with the
AND EXECUTED IN TOKYO, JAPAN. appellate court, and that authority cannot extend to the instant
petition for review. In a plethora of cases, however, this Court has
B. THE HONORABLE COURT OF liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment
APPEALS GRAVELY ERRED IN
OVERLOOKING THE NEED TO REVIEW OUR of the requirements have been made. Given that petitioners herein
ADHERENCE TO THE PRINCIPLE OF LEX sufficiently explained their misgivings on this point and appended
LOCI SOLUTIONIS IN THE LIGHT OF to their Reply an updated Authorization for Hasegawa to act on
RECENT DEVELOPMENT[S] IN PRIVATE behalf of the company in the instant petition, the Court finds the
INTERNATIONAL LAWS. same as sufficient compliance with the Rules.

The pivotal question that this Court is called upon to resolve is However, the Court cannot extend the same liberal
whether the subject matter jurisdiction of Philippine courts in civil treatment to the defect in the verification and certification. As
cases for specific performance and damages involving contracts respondent pointed out, and to which we agree, Hasegawa is truly
executed outside the country by foreign nationals may be assailed not authorized to act on behalf of Nippon in this case. The
on the principles of lex loci celebrationis, lex contractus, the state aforesaid September 4, 2000 Authorization and even the
of the most significant relationship rule, or forum non conveniens. 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
However, before ruling on this issue, we must first dispose of the that corporate powers are exercised by the board of directors;
procedural matters raised by the respondent. thus, no person, not even its officers, can bind the corporation, in
the absence of authority from the board.[40] Considering that
Kitamura contends that the finality of the appellate court's Hasegawa verified and certified the petition only on his behalf and
decision in CA-G.R. SP No. 60205 has already barred the filing of not on behalf of the other petitioner, the petition has to be denied
the second petition docketed as CA-G.R. SP No. 60827 pursuant to Loquias v. Office of the Ombudsman.[41] Substantial
(fundamentally raising the same issues as those in the first one) compliance will not suffice in a matter that demands strict
and the instant petition for review thereof. 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
We do not agree. When the CA dismissed CA-G.R. SP and effectively prevent the clogging of court dockets.
No. 60205 on account of the petition's defective certification of
non-forum shopping, it was a dismissal without prejudice. The
same holds true in the CA's dismissal of the said case due to Further, the Court has observed that petitioners
defects in the formal requirement of verification[28] and in the other incorrectly filed a Rule 65 petition to question the trial court's denial
requirement in Rule 46 of the Rules of Court on the statement of of their motion to dismiss. It is a well-established rule that an order
the material dates.[29] The dismissal being without prejudice, denying a motion to dismiss is interlocutory, and cannot be the
subject of the extraordinary petition for certiorari or
Page 9 of 84
mandamus. The appropriate recourse is to file an answer and to jurisdiction herein, petitioners are actually referring to subject
interpose as defenses the objections raised in the motion, to matter jurisdiction.
proceed to trial, and, in case of an adverse decision, to elevate the
entire case by appeal in due course. While there are recognized
Jurisdiction over the subject matter in a judicial
exceptions to this rule, petitioners' case does not fall among them. proceeding is conferred by the sovereign authority which
establishes and organizes the court. It is given only by law and in
This brings us to the discussion of the substantive issue the manner prescribed by law. It is further determined by the
of the case. allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein. To succeed in
Asserting that the RTC of Lipa City is an inconvenient its motion for the dismissal of an action for lack of jurisdiction over
forum, petitioners question its jurisdiction to hear and resolve the the subject matter of the claim, the movant must show that the
civil case for specific performance and damages filed by the court or tribunal cannot act on the matter submitted to it because
respondent. The ICA subject of the litigation was entered into and no law grants it the power to adjudicate the claims.
perfected in Tokyo, Japan, by Japanese nationals, and written
wholly in the Japanese language. Thus, petitioners posit that local In the instant case, petitioners, in their motion to dismiss,
courts have no substantial relationship to the parties following the do not claim that the trial court is not properly vested by law with
[state of the] most significant relationship rule in Private jurisdiction to hear the subject controversy for, indeed, Civil Case
International Law. No. 00-0264 for specific performance and damages is one not
capable of pecuniary estimation and is properly cognizable by the
The Court notes that petitioners adopted an additional RTC of Lipa City. What they rather raise as grounds to question
subject matter jurisdiction are the principles of lex loci celebrationis
but different theory when they elevated the case to the appellate
court. In the Motion to Dismiss filed with the trial court, petitioners and lex contractus, and the state of the most significant
relationship rule.
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 Court finds the invocation of these grounds unsound.
the principles of lex loci celebrationis and lex contractus. While not
abandoning this stance in their petition before the appellate court,
Lex loci celebrationis relates to the law of the place of the
petitioners on certiorari significantly invoked the defense of forum ceremony or the law of the place where a contract is made. The
non conveniens. On petition for review before this Court,
doctrine of lex contractus or lex loci contractus means the law of
petitioners dropped their other arguments, maintained the forum the place where a contract is executed or to be performed. It
non conveniens defense, and introduced their new argument that controls the nature, construction, and validity of the contract and it
the applicable principle is the [state of the] most significant may pertain to the law voluntarily agreed upon by the parties or the
relationship rule. law intended by them either expressly or implicitly. Under the state
of the most significant relationship rule, to ascertain what state law
Be that as it may, this Court is not inclined to deny this to apply to a dispute, the court should determine which state has
petition merely on the basis of the change in theory, as explained the most substantial connection to the occurrence and the parties.
in Philippine Ports Authority v. City of Iloilo. We only pointed out In a case involving a contract, the court should consider where the
petitioners' inconstancy in their arguments to emphasize their contract was made, was negotiated, was to be performed, and the
incorrect assertion of conflict of laws principles. domicile, place of business, or place of incorporation of the parties.
This rule takes into account several contacts and evaluates them
To elucidate, in the judicial resolution of conflicts according to their relative importance with respect to the particular
issue to be resolved.
problems, three consecutive phases are involved: jurisdiction,
choice of law, and recognition and enforcement of judgments.
Corresponding to these phases are the following questions: (1) Since these three principles in conflict of laws make
Where can or should litigation be initiated? (2) Which law will the reference to the law applicable to a dispute, they are rules proper
court apply? and (3) Where can the resulting judgment be for the second phase, the choice of law. They determine which
enforced? state's law is to be applied in resolving the substantive issues of a
conflicts problem. Necessarily, as the only issue in this case is that
Analytically, jurisdiction and choice of law are two distinct of jurisdiction, choice-of-law rules are not only inapplicable but also
concepts. Jurisdiction considers whether it is fair to cause a not yet called for.
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will Further, petitioners' premature invocation of choice-of-
determine the merits of the case is fair to both parties. The power law rules is exposed by the fact that they have not yet pointed out
to exercise jurisdiction does not automatically give a state any conflict between the laws of Japan and ours. Before
constitutional authority to apply forum law. While jurisdiction and determining which law should apply, first there should exist a
the choice of the lex fori will often coincide, the minimum contacts conflict of laws situation requiring the application of the conflict of
for one do not always provide the necessary significant contacts laws rules. Also, when the law of a foreign country is invoked to
for the other. The question of whether the law of a state can be provide the proper rules for the solution of a case, the existence of
applied to a transaction is different from the question of whether such law must be pleaded and proved.
the courts of that state have jurisdiction to enter a judgment.
It should be noted that when a conflicts case, one
In this case, only the first phase is at issue jurisdiction. involving a foreign element, is brought before a court or
Jurisdiction, however, has various aspects. For a court to validly administrative agency, there are three alternatives open to the
exercise its power to adjudicate a controversy, it must have latter in disposing of it: (1) dismiss the case, either because of lack
jurisdiction over the plaintiff or the petitioner, over the defendant or of jurisdiction or refusal to assume jurisdiction over the case; (2)
the respondent, over the subject matter, over the issues of the assume jurisdiction over the case and apply the internal law of the
case and, in cases involving property, over the res or the thing forum; or (3) assume jurisdiction over the case and take into
which is the subject of the litigation. In assailing the trial court's account or apply the law of some other State or States. The courts
Page 10 of 84
power to hear cases and controversies is derived from the consolidated in, the Federal District Court for the Southern District
Constitution and the laws. While it may choose to recognize laws of Texas, Houston Division. The cases therein that involved
of foreign nations, the court is not limited by foreign sovereign law plaintiffs from the Philippines were "Jorge Colindres Carcamo, et
short of treaties or other formal agreements, even in matters al. v. Shell Oil Co., et al.," which was docketed as Civil Action No.
regarding rights provided by foreign sovereigns. 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
Neither can the other ground raised, forum non defendants in the consolidated cases prayed for the dismissal of all
conveniens, be used to deprive the trial court of its jurisdiction the actions under the doctrine of forum non conveniens.
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 In a Memorandum and Order dated July 11, 1995, the Federal
it as a ground. Second, whether a suit should be entertained or District Court conditionally granted the defendants’ motion to
dismissed on the basis of the said doctrine depends largely upon dismiss. Pertinently, the court ordered that:
the facts of the particular case and is addressed to the sound
discretion of the trial court. In this case, the RTC decided to Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be
assume jurisdiction. Third, the propriety of dismissing a case dismissed 90 days after the entry of this Memorandum and Order
based on this principle requires a factual determination; hence, this provided that defendants and third- and fourth-party defendants
conflicts principle is more properly considered a matter of defense.
have:

Accordingly, since the RTC is vested by law with the (1) participated in expedited discovery in the United
power to entertain and hear the civil case filed by respondent and States xxx;
the grounds raised by petitioners to assail that jurisdiction are
inappropriate, the trial and appellate courts correctly denied the
petitioners motion to dismiss. (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
WHEREFORE, premises considered, the petition for review on
action commenced by a plaintiff in these actions in his
certiorari is DENIED. SO ORDERED. home country or the country in which his injury occurred.
Any plaintiff desiring to bring such an action will do so
BERNABE L. NAVIDA ET AL. vs . DIZON ET AL; LEONARDO- within 30 days after the entry of this Memorandum and
DE CASTRO, J.: G.R. No. 125078 May 30, 2011; Order;

Before the Court are consolidated Petitions for Review on (3) waived within 40 days after the entry of this
Certiorari under Rule 45 of the Rules of Court, which arose out of Memorandum and Order any limitations-based defense
two civil cases that were filed in different courts but whose factual that has matured since the commencement of these
background and issues are closely intertwined. actions in the courts of Texas;

The petitions in G.R. Nos. 1250781 and 1255982 both assail the (4) stipulated within 40 days after the entry of this
Order3 dated May 20, 1996 of the Regional Trial Court (RTC) of Memorandum and Order that any discovery conducted
General Santos City, Branch 37, in Civil Case No. 5617. The said during the pendency of these actions may be used in any
Order decreed the dismissal of the case in view of the perceived foreign proceeding to the same extent as if it had been
lack of jurisdiction of the RTC over the subject matter of the conducted in proceedings initiated there; and
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 (5) submitted within 40 days after the entry of this
RTC of General Santos City no longer had jurisdiction to proceed Memorandum and Order an agreement binding them to
with Civil Case No. 5617. satisfy any final judgment rendered in favor of plaintiffs
by a foreign court.
On the other hand, the petitions in G.R. Nos.
126654,6 127856,7 and 1283988 seek the reversal of the xxxx
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
Notwithstanding the dismissals that may result from this
the ground of lack of jurisdiction.
Memorandum and Order, in the event that the highest court of any
foreign country finally affirms the dismissal for lack of jurisdiction of
G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were an action commenced by a plaintiff in these actions in his home
consolidated in the Resolutions dated February 10, 1997, 10 April country or the country in which he was injured, that plaintiff may
28, 199711 and March 10, 1999.12 return to this court and, upon proper motion, the court will resume
jurisdiction over the action as if the case had never been dismissed
The factual antecedents of the petitions are as follows: for [forum non conveniens].13

Proceedings before the Texas Courts Civil Case No. 5617 before the RTC of General Santos City and
G.R. Nos. 125078 and 125598

Beginning 1993, a number of personal injury suits were filed in


different Texas state courts by citizens of twelve foreign countries, In accordance with the above Memorandum and Order, a total of
including the Philippines. The thousands of plaintiffs sought 336 plaintiffs from General Santos City (the petitioners in G.R. No.
damages for injuries they allegedly sustained from their exposure 125078, hereinafter referred to as NAVIDA, et al.) filed a Joint
to dibromochloropropane (DBCP), a chemical used to kill Complaint14 in the RTC of General Santos City on August 10,
nematodes (worms), while working on farms in 23 foreign 1995. The case was docketed as Civil Case No. 5617. Named as
countries. The cases were eventually transferred to, and defendants therein were: Shell Oil Co. (SHELL); Dow Chemical
Page 11 of 84
Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole THE TORT ASSERTED IN THE PRESENT COMPLAINT
Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit Co., Standard AGAINST DEFENDANT FOREIGN COMPANIES IS NOT WITHIN
Fruit and Steamship Co. (hereinafter collectively referred to as THE SUBJECT MATTER JURISDICTION OF THE REGIONAL
DOLE); Chiquita Brands, Inc. and Chiquita Brands International, TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY
Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte WITHIN THE PURVIEW OF THE PHILIPPINE LAW
Tropical Fruit Co. (hereinafter collectively referred to as DEL
MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine The specific tort asserted against defendant foreign companies in
Compounds, Ltd.; and Amvac Chemical Corp. (The the present complaint is product liability tort. When the averments
aforementioned defendants are hereinafter collectively referred to in the present complaint are examined in terms of the particular
as defendant companies.) categories of tort recognized in the Philippine Civil Code, it
becomes stark clear that such averments describe and identify the
Navida, et al., prayed for the payment of damages in view of the category of specific tort known as product liability tort. This is
illnesses and injuries to the reproductive systems which they necessarily so, because it is the product manufactured by
allegedly suffered because of their exposure to DBCP. They defendant foreign companies, which is asserted to be the
claimed, among others, that they were exposed to this chemical proximate cause of the damages sustained by the plaintiff workers,
during the early 1970’s up to the early 1980’s when they used the and the liability of the defendant foreign companies, is premised on
same in the banana plantations where they worked at; and/or being the manufacturer of the pesticides.
when they resided within the agricultural area where such chemical
was used. Navida, et al., claimed that their illnesses and injuries
It is clear, therefore, that the Regional Trial Court has jurisdiction
were due to the fault or negligence of each of the defendant over the present case, if and only if the Civil Code of the
companies in that they produced, sold and/or otherwise put into Philippines, or a suppletory special law prescribes a product
the stream of commerce DBCP-containing products. According to liability tort, inclusive of and comprehending the specific tort
NAVIDA, et al., they were allowed to be exposed to the said described in the complaint of the plaintiff workers.20
products, which the defendant companies knew, or ought to have
known, were highly injurious to the former’s health and well-being.
Third, the RTC of General Santos City adjudged that Navida, et al.,
were coerced into submitting their case to the Philippine courts,
Instead of answering the complaint, most of the defendant viz:
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 FILING OF CASES IN THE PHILIPPINES - COERCED AND
Complaint,16 excluding Dead Sea Bromine Co., Ltd., Ameribrom, ANOMALOUS
Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as
party defendants. 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
Again, the remaining defendant companies filed their various with the U.S. District Court’s Order dated July 11, 1995, and in
Motions for Bill of Particulars.17 On May 15, 1996, DOW filed an order to keep open to the plaintiffs the opportunity to return to the
Answer with Counterclaim.18 U.S. District Court.21

On May 20, 1996, without resolving the motions filed by the Fourth, the trial court ascribed little significance to the voluntary
parties, the RTC of General Santos City issued an Order appearance of the defendant companies therein, thus:
dismissing the complaint. First, the trial court determined that it did
not have jurisdiction to hear the case, to wit: THE DEFENDANTS’ SUBMISSION TO JURISDICTION IS
CONDITIONAL AS IT IS ILLUSORY
THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL
TRIAL COURT SHOULD BE DISMISSED FOR LACK OF Defendants have appointed their agents authorized to accept
JURISDICTION service of summons/processes in the Philippines pursuant to the
agreement in the U.S. court that defendants will voluntarily submit
xxxx 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
The substance of the cause of action as stated in the complaint of the defendants in this case is conditional. Thus in the
against the defendant foreign companies cites activity on their part "Defendants’ Amended Agreement Regarding Conditions of
which took place abroad and had occurred outside and beyond the Dismissal for Forum Non Conveniens" (Annex to the Complaint)
territorial domain of the Philippines. These acts of defendants cited filed with the U.S. District Court, defendants declared that "(t)he
in the complaint included the manufacture of pesticides, their
authority of each designated representative to accept service of
packaging in containers, their distribution through sale or other process will become effective upon final dismissal of these actions
disposition, resulting in their becoming part of the stream of
by the Court". The decision of the U.S. District Court dismissing
commerce. the case is not yet final and executory since both the plaintiffs and
defendants appealed therefrom (par. 3(h), 3(i), Amended
Accordingly, the subject matter stated in the complaint and which Complaint). Consequently, since the authority of the agent of the
is uniquely particular to the present case, consisted of activity or defendants in the Philippines is conditioned on the final
course of conduct engaged in by foreign defendants outside adjudication of the case pending with the U.S. courts, the
Philippine territory, hence, outside and beyond the jurisdiction of acquisition of jurisdiction by this court over the persons of the
Philippine Courts, including the present Regional Trial Court.19 defendants is also conditional. x x x.

Second, the RTC of General Santos City declared that the tort The appointment of agents by the defendants, being subject to a
alleged by Navida, et al., in their complaint is a tort category that is suspensive condition, thus produces no legal effect and is
not recognized in Philippine laws. Said the trial court: ineffective at the moment.22
Page 12 of 84
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, On June 4, 1996, the RTC of General Santos City likewise issued
et al., of filing the case in the Philippine courts violated the rules on an Order,25 dismissing DOW’s Answer with Counterclaim.
forum shopping and litis pendencia. The trial court expounded:
CHIQUITA, DEL MONTE and SHELL each filed a motion for
THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM reconsideration26 of the RTC Order dated May 20, 1996, while
SHOPPING 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,
This court frowns upon the fact that the parties herein are both
vigorously pursuing their appeal of the decision of the U.S. District 1996.
court dismissing the case filed thereat. To allow the parties to
litigate in this court when they are actively pursuing the same In an Order29 dated July 9, 1996, the RTC of General Santos City
cases in another forum, violates the rule on ‘forum shopping’ so declared that it had already lost its jurisdiction over the case as it
abhorred in this jurisdiction. x x x. took into consideration the Manifestation of the counsel of
NAVIDA, et al., which stated that the latter had already filed a
xxxx petition for review on certiorari before this Court.

THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF CHIQUITA and SHELL filed their motions for reconsideration 30 of
the above order.
ITS OWN JURISDICTION

On July 11, 1996, NAVIDA, et al., filed a Petition for Review on


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. Certiorari in order to assail the RTC Order dated May 20, 1996,
which was docketed as G.R. No. 125078.
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 The RTC of General Santos City then issued an Order 31 dated
case, the U.S. District Court has, in essence, concurrent August 14, 1996, which merely noted the incidents still pending in
jurisdiction with this court over the subject matter of this case. It is Civil Case No. 5617 and reiterated that it no longer had any
settled that initial acquisition of jurisdiction divests another of its jurisdiction over the case.
own jurisdiction. x x x.
On August 30, 1996, DOW and OCCIDENTAL filed their Petition
xxxx 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.
THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"

In their petition, DOW and OCCIDENTAL aver that the RTC of


Furthermore, the case filed in the U.S. court involves the same
parties, same rights and interests, as in this case. There exists litis 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
pendencia since there are two cases involving the same parties
and interests. The court would like to emphasize that in defendant companies.
accordance with the rule on litis pendencia x x x; the subsequent
case must be dismissed. Applying the foregoing [precept] to the In a Resolution33 dated October 7, 1996, this Court resolved to
case-at-bar, this court concludes that since the case between the consolidate G.R. No. 125598 with G.R. No. 125078.
parties in the U.S. is still pending, then this case is barred by the
rule on "litis pendencia."23 CHIQUITA filed a Petition for Review on Certiorari,34 which sought
the reversal of the RTC Orders dated May 20, 1996, July 9, 1996
In fine, the trial court held that: and August 14, 1996. The petition was docketed as G.R. No.
126018. In a Resolution35 dated November 13, 1996, the Court
It behooves this Court, then to dismiss this case. For to continue dismissed the aforesaid petition for failure of CHIQUITA to show
with these proceedings, would be violative of the constitutional that the RTC committed grave abuse of discretion. CHIQUITA filed
provision on the Bill of Rights guaranteeing speedy disposition of a Motion for Reconsideration,36 but the same was denied through a
cases (Ref. Sec. 16, Article III, Constitution). The court has no Resolution37 dated January 27, 1997.
other choice. To insist on further proceedings with this case, as it is
now presented, might accord this court a charming appearance. Civil Case No. 24,251-96 before the RTC of Davao City and G.R.
But the same insistence would actually thwart the very ends of Nos. 126654, 127856, and 128398
justice which it seeks to achieve.
Another joint complaint for damages against SHELL, DOW,
This evaluation and action is made not on account of but rather OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed
with due consideration to the fact that the dismissal of this case before Branch 16 of the RTC of Davao City by 155 plaintiffs from
does not necessarily deprive the parties – especially the plaintiffs – Davao City. This case was docketed as Civil Case No. 24,251-96.
of their possible remedies. The court is cognizant that the Federal These plaintiffs (the petitioners in G.R. No. 126654, hereinafter
Court may resume proceedings of that earlier case between the referred to as ABELLA, et al.) amended their Joint-Complaint on
herein parties involving the same acts or omissions as in this case. May 21, 1996.38

WHEREFORE, in view of the foregoing considerations, this case is Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged
now considered DISMISSED.24 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
Page 13 of 84
injuries to their health, including, but not limited to, sterility and 1. Former Justice Secretary Demetrio Demetria in a May
severe injuries to their reproductive capacities." 39 ABELLA, et al., 1995 opinion said: The Philippines should be an
claimed that the defendant companies manufactured, produced, inconvenient forum to file this kind of damage suit against
sold, distributed, used, and/or made available in commerce, DBCP foreign companies since the causes of action alleged in
without warning the users of its hazardous effects on health, and the petition do not exist under Philippine laws. There has
without providing instructions on its proper use and application, been no decided case in Philippine Jurisprudence
which the defendant companies knew or ought to have known, had awarding to those adversely affected by DBCP. This
they exercised ordinary care and prudence. means there is no available evidence which will prove
and disprove the relation between sterility and DBCP.
Except for DOW, the other defendant companies filed their
respective motions for bill of particulars to which ABELLA, et al., 2. Retired Supreme Court Justice Abraham Sarmiento
filed their opposition. DOW and DEL MONTE filed their respective opined that while a class suit is allowed in the Philippines
Answers dated May 17, 1996 and June 24, 1996. the device has been employed strictly. Mass sterility will
not qualify as a class suit injury within the contemplation
The RTC of Davao City, however, junked Civil Case No. 24,251-96 of Philippine statute.
in its Order dated October 1, 1996, which, in its entirety, reads:
3. Retired High Court Justice Rodolfo Nocom stated that
Upon a thorough review of the Complaint and Amended Complaint there is simply an absence of doctrine here that permits
For: Damages filed by the plaintiffs against the defendants Shell these causes to be heard. No product liability ever filed
Oil Company, DOW Chemicals Company, Occidental Chemical or tried here.
Corporation, Standard Fruit Company, Standard Fruit and
Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Case ordered dismissed.40
Chiquita Brands, Inc., Chiquita Brands International, Del Monte
Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign Docketed as G.R. No. 126654, the petition for review, filed on
corporations with Philippine Representatives, the Court, as
November 12, 1996 by ABELLA, et al., assails before this Court
correctly pointed out by one of the defendants, is convinced that the above-quoted order of the RTC of Davao City.
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 ABELLA, et al., claim that the RTC of Davao City erred in
Tropical Fruit Co., Reply to Opposition dated July 22, 1996). dismissing Civil Case No. 24,251-96 on the ground of lack of
Consider these: jurisdiction.

1) In the original Joint Complaint, plaintiffs state that: defendants According to ABELLA, et al., the RTC of Davao City has
have no properties in the Philippines; they have no agents as well jurisdiction over the subject matter of the case since Articles 2176
(par. 18); plaintiffs are suing the defendants for tortuous acts and 2187 of the Civil Code are broad enough to cover the acts
committed by these foreign corporations on their respective complained of and to support their claims for damages.
countries, as plaintiffs, after having elected to sue in the place of
defendants’ residence, are now compelled by a decision of a ABELLA, et al., further aver that the dismissal of the case, based
Texas District Court to file cases under torts in this jurisdiction on the opinions of legal luminaries reported in a newspaper, by the
for causes of actions which occurred abroad (par. 19); a petition RTC of Davao City is bereft of basis. According to them, their
was filed by same plaintiffs against same defendants in the Courts cause of action is based on quasi-delict under Article 2176 of the
of Texas, USA, plaintiffs seeking for payment of damages based Civil Code. They also maintain that the absence of jurisprudence
on negligence, strict liability, conspiracy and international tort regarding the award of damages in favor of those adversely
theories (par. 27); upon defendants’ Motion to Dismiss on Forum affected by the DBCP does not preclude them from presenting
non [conveniens], said petition was provisionally dismissed on evidence to prove their allegations that their exposure to DBCP
condition that these cases be filed in the Philippines or before 11 caused their sterility and/or infertility.
August 1995 (Philippine date; Should the Philippine Courts refuse
or deny jurisdiction, the U. S. Courts will reassume jurisdiction.)
SHELL, DOW, and CHIQUITA each filed their respective motions
for reconsideration of the Order dated October 1, 1996 of the RTC
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July of Davao City. DEL MONTE also filed its motion for
1995, the Federal District Court issued a Memorandum and Order reconsideration, which contained an additional motion for the
conditionally dismissing several of the consolidated actions inhibition of the presiding judge.
including those filed by the 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. The presiding judge of Branch 16 then issued an Order 41 dated
Notwithstanding, the Memorandum and [O]rder further provided December 2, 1996, voluntarily inhibiting himself from trying the
that should the highest court of any foreign country affirm the case. Thus, the case was re-raffled to Branch 13 of the RTC of
dismissal for lack of jurisdictions over these actions filed by the Davao City.
plaintiffs in their home countries [or] the countries where they were
injured, the said plaintiffs may return to that court and, upon proper In an Order42 dated December 16, 1996, the RTC of Davao City
motion, the Court will resume jurisdiction as if the case had never affirmed the Order dated October 1, 1996, and denied the
been dismissed for forum non conveniens. respective motions for reconsideration filed by defendant
companies.
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 Thereafter, CHIQUITA filed a Petition for Review dated March 5,
of legal experts given in the interview made by the Inquirer in its 1997, questioning the Orders dated October 1, 1996 and
Special report "Pesticide Cause Mass Sterility," to wit: December 16, 1996 of the RTC of Davao City. This case was
docketed as G.R. No. 128398.
Page 14 of 84
In its petition, CHIQUITA argues that the RTC of Davao City erred The Motion to Withdraw Petition for Review in G.R. No. 125598
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 On July 13, 2004, DOW and OCCIDENTAL filed a Motion to
defendant companies which voluntarily appeared before it.
Withdraw Petition for Review in G.R. No. 125598, 53explaining that
CHIQUITA also claims that the RTC of Davao City cannot dismiss the said petition "is already moot and academic and no longer
the case simply on the basis of opinions of alleged legal experts presents a justiciable controversy" since they have already entered
appearing in a newspaper article. into an amicable settlement with NAVIDA, et al. DOW and
OCCIDENTAL added that they have fully complied with their
Initially, this Court in its Resolution43 dated July 28, 1997, obligations set forth in the 1997 Compromise Agreements.
dismissed the petition filed by CHIQUITA for submitting a defective
certificate against forum shopping. CHIQUITA, however, filed a DOLE filed its Manifestation dated September 6,
motion for reconsideration, which was granted by this Court in the 2004,54 interposing no objection to the withdrawal of the petition,
Resolution44 dated October 8, 1997. and further stating that they maintain their position that DOW and
OCCIDENTAL, as well as other settling defendant companies,
On March 7, 1997, DEL MONTE also filed its petition for review on should be retained as defendants for purposes of prosecuting the
certiorari before this Court assailing the above-mentioned orders of cross-claims of DOLE, in the event that the complaint below is
the RTC of Davao City. Its petition was docketed as G.R. No. reinstated.
127856.
NAVIDA, et al., also filed their Comment dated September 14,
DEL MONTE claims that the RTC of Davao City has jurisdiction 2004,55 stating that they agree with the view of DOW and
over Civil Case No. 24,251-96, as defined under the law and that OCCIDENTAL that the petition in G.R. No. 125598 has become
the said court already obtained jurisdiction over its person by its moot and academic because Civil Case No. 5617 had already
voluntary appearance and the filing of a motion for bill of been amicably settled by the parties in 1997.
particulars and, later, an answer to the complaint. According to
DEL MONTE, the RTC of Davao City, therefore, acted beyond its
On September 27, 2004, DEL MONTE filed its Comment on
authority when it dismissed the case motu proprio or without any Motion to Withdraw Petition for Review Filed by Petitioners in G.R.
motion to dismiss from any of the parties to the case.
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 the Resolutions dated February 10, 1997, April 28, 1997, and
March 10, 1999, this Court consolidated G.R. Nos. 125078, In a Resolution57 dated October 11, 2004, this Court granted,
125598, 126654, 127856, and 128398.
among others, the motion to withdraw petition for review filed by
DOW and OCCIDENTAL.
The Consolidated Motion to Drop DOW, OCCIDENTAL, and
SHELL as Party-Respondents filed by NAVIDA, et al. and THE ISSUES
ABELLA, et al.

In their Consolidated Memorandum, NAVIDA, et al., and ABELLA,


On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed et al., presented the following issues for our consideration:
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 IN REFUTATION
SHELL sometime in July 1997. This settlement agreement was
evidenced by facsimiles of the "Compromise Settlement, I. THE COURT DISMISSED THE CASE DUE TO LACK OF
Indemnity, and Hold Harmless Agreement," which were attached JURISDICTION.
to the said motion. Pursuant to said agreement, the plaintiff
claimants sought to withdraw their petitions as against DOW,
OCCIDENTAL, and SHELL. 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.
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. b) The court dismissed the case because it was
convinced that it did not have jurisdiction.
The Memoranda of the Parties
IN SUPPORT OF THE PETITION
Considering the allegations, issues, and arguments adduced by
the parties, this Court, in a Resolution dated June 22, II. THE TRIAL COURT HAS JURISDICTION OVER THE
1998,46 required all the parties to submit their respective SUBJECT MATTER OF THE CASE.
memoranda.
a. The acts complained of occurred within Philippine
CHIQUITA filed its Memorandum on August 28, 1998; 47 SHELL territory.
asked to be excused from the filing of a memorandum alleging that
it had already executed a compromise agreement with the plaintiff b. Art. 2176 of the Civil Code of the Philippines is broad
claimants.48 DOLE filed its Memorandum on October 12, enough to cover the acts complained of.
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 c. Assumption of jurisdiction by the U.S. District Court
Memorandum on December 23, 1999.52 over petitioner[s’] claims did not divest Philippine [c]ourts
of jurisdiction over the same.
Page 15 of 84
d. The Compromise Agreement and the subsequent in damages for each plaintiff claimant, which amount falls within
Consolidated Motion to Drop Party Respondents Dow, the jurisdiction of the RTC. CHIQUITA avers that the pertinent
Occidental and Shell does not unjustifiably prejudice matter is the place of the alleged exposure to DBCP, not the place
remaining respondents Dole, Del Monte and Chiquita. 58 of manufacture, packaging, distribution, sale, etc., of the said
chemical. This is in consonance with the lex loci delicti commisi
DISCUSSION 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
On the issue of jurisdiction submitted themselves to the jurisdiction of the RTC by making
voluntary appearances and seeking for affirmative reliefs during
Essentially, the crux of the controversy in the petitions at bar is the course of the proceedings. None of the defendant companies
whether the RTC of General Santos City and the RTC of Davao ever objected to the exercise of jurisdiction by the courts a quo
City erred in dismissing Civil Case Nos. 5617 and 24,251-96, over their persons. CHIQUITA, thus, prays for the remand of Civil
respectively, for lack of jurisdiction. Case Nos. 5617 and 24,251-96 to the RTC of General Santos City
and the RTC of Davao City, respectively.
Remarkably, none of the parties to this case claims that the courts
a quo are bereft of jurisdiction to determine and resolve the above- The RTC of General Santos City and the RTC of Davao City have
stated cases. All parties contend that the RTC of General Santos jurisdiction over Civil Case Nos. 5617 and 24,251-96, respectively
City and the RTC of Davao City have jurisdiction over the action for
damages, specifically for approximately ₱2.7 million for each of the The rule is settled that jurisdiction over the subject matter of a case
plaintiff claimants. is conferred by law and is determined by the allegations in the
complaint and the character of the relief sought, irrespective of
NAVIDA, et al., and ABELLA, et al., argue that the allegedly whether the plaintiffs are entitled to all or some of the claims
tortious acts and/or omissions of defendant companies occurred asserted therein.59 Once vested by law, on a particular court or
within Philippine territory. Specifically, the use of and exposure to body, the jurisdiction over the subject matter or nature of the action
DBCP that was manufactured, distributed or otherwise put into the cannot be dislodged by anybody other than by the legislature
stream of commerce by defendant companies happened in the through the enactment of a law.
Philippines. Said fact allegedly constitutes reasonable basis for our
courts to assume jurisdiction over the case. Furthermore, NAVIDA, At the time of the filing of the complaints, the jurisdiction of the
et al., and ABELLA, et al., assert that the provisions of Chapter 2 RTC in civil cases under Batas Pambansa Blg. 129, as amended
of the Preliminary Title of the Civil Code, as well as Article 2176 by Republic Act No. 7691, was:
thereof, are broad enough to cover their claim for damages. Thus,
NAVIDA, et al., and ABELLA, et al., pray that the respective rulings
SEC. 19. Jurisdiction in civil cases. – Regional Trial Courts shall
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 exercise exclusive original jurisdiction:
cases be remanded to the courts a quo for further proceedings.
xxxx
DOLE similarly maintains that the acts attributed to defendant
companies constitute a quasi-delict, which falls under Article 2176 (8) In all other cases in which the demand, exclusive of interest,
of the Civil Code. In addition, DOLE states that if there were no damages of whatever kind, attorney’s fees, litigation expenses,
actionable wrongs committed under Philippine law, the courts a and costs or the value of the property in controversy exceeds One
quo should have dismissed the civil cases on the ground that the hundred thousand pesos (₱100,000.00) or, in such other cases in
Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., Metro Manila, where the demand, exclusive of the
stated no cause of action against the defendant companies. DOLE abovementioned items exceeds Two hundred thousand pesos
also argues that if indeed there is no positive law defining the (₱200,000.00).60
alleged acts of defendant companies as actionable wrong, Article 9
of the Civil Code dictates that a judge may not refuse to render a Corollary thereto, Supreme Court Administrative Circular No. 09-
decision on the ground of insufficiency of the law. The court may 94, states:
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 2. The exclusion of the term "damages of whatever kind" in
by defendant companies as NAVIDA, et al., and ABELLA, et al., determining the jurisdictional amount under Section 19 (8) and
point to their alleged exposure to DBCP which occurred in the Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691,
Philippines, as the cause of the sterility and other reproductive applies to cases where the damages are merely incidental to or a
system problems that they allegedly suffered. Finally, DOLE adds consequence of the main cause of action. However, in cases
that the RTC of Davao City gravely erred in relying upon where the claim for damages is the main cause of action, or one of
newspaper reports in dismissing Civil Case No. 24,251-96 given the causes of action, the amount of such claim shall be considered
that newspaper articles are hearsay and without any evidentiary in determining the jurisdiction of the court.
value. Likewise, the alleged legal opinions cited in the newspaper
reports were taken judicial notice of, without any notice to the Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-
parties. DOLE, however, opines that the dismissal of Civil Case worded Amended Joint-Complaints filed before the courts a quo,
Nos. 5617 and 24,251-96 was proper, given that plaintiff claimants the following prayer:
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. PRAYER

In a similar vein, CHIQUITA argues that the courts a quo had WHEREFORE, premises considered, it is most respectfully prayed
jurisdiction over the subject matter of the cases filed before them. that after hearing, judgment be rendered in favor of the plaintiffs
The Amended Joint-Complaints sought approximately ₱2.7 million ordering the defendants:
Page 16 of 84
a) TO PAY EACH PLAINTIFF moral damages in the a. Failed to adequately warn Plaintiffs of the dangerous
amount of One Million Five Hundred Thousand Pesos characteristics of DBCP, or to cause their subsidiaries or
(₱1,500,00.00); affiliates to so warn plaintiffs;

b) TO PAY EACH PLAINTIFF nominal damages in the b. Failed to provide plaintiffs with information as to what
amount of Four Hundred Thousand Pesos (₱400,000.00) should be reasonably safe and sufficient clothing and
each; proper protective equipment and appliances, if any, to
protect plaintiffs from the harmful effects of exposure to
c) TO PAY EACH PLAINTIFF exemplary damages in the DBCP, or to cause their subsidiaries or affiliates to do so;
amount of Six Hundred Thousand Pesos (₱600,000.00);
c. Failed to place adequate warnings, in a language
understandable to the worker, on containers of DBCP-
d) TO PAY EACH PLAINTIFF attorneys fees of Two
Hundred Thousand Pesos (₱200,000.00); and 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;
e) TO PAY THE COSTS of the suit.61
d. Failed to take reasonable precaution or to exercise
From the foregoing, it is clear that the claim for damages is the reasonable care to publish, adopt and enforce a safety
main cause of action and that the total amount sought in the plan and a safe method of handling and applying DBCP,
complaints is approximately ₱2.7 million for each of the plaintiff or to cause their subsidiaries or affiliates to do so;
claimants. The RTCs unmistakably have jurisdiction over the cases
filed in General Santos City and Davao City, as both claims by
e. Failed to test DBCP prior to releasing these products
NAVIDA, et al., and ABELLA, et al., fall within the purview of the
definition of the jurisdiction of the RTC under Batas Pambansa Blg. for sale, or to cause their subsidiaries or affiliates to do
129. so; and

f. Failed to reveal the results of tests conducted on DBCP


Moreover, the allegations in both Amended Joint-Complaints
narrate that: to each plaintiff, governmental agencies and the public,
or to cause their subsidiaries or affiliate to do so.

THE CAUSES OF ACTION


8. The illnesses and injuries of each plaintiff are also due to the
FAULT or negligence of defendants Standard Fruit Company, Dole
4. The Defendants manufactured, sold, distributed, used, AND/OR Fresh Fruit Company, Dole Food Company, Inc., Chiquita Brands,
MADE AVAILABLE IN COMMERCE nematocides containing the Inc. and Chiquita Brands International, Inc. in that they failed to
chemical dibromochloropropane, commonly known as DBCP. THE exercise reasonable care to prevent each plaintiff’s harmful
CHEMICAL WAS USED AGAINST the parasite known as the exposure to DBCP-containing products which defendants knew or
nematode, which plagued banana plantations, INCLUDING should have known were hazardous to each plaintiff in that they,
THOSE in the Philippines. AS IT TURNED OUT, DBCP not only AMONG OTHERS:
destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE
HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human
reproductive system as well. a. Failed to adequately supervise and instruct Plaintiffs in
the safe and proper application of DBCP-containing
products;
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 b. Failed to implement proper methods and techniques of
within the agricultural area WHERE IT WAS USED. As a result of application of said products, or to cause such to be
such exposure, the plaintiffs suffered serious and permanent implemented;
injuries TO THEIR HEALTH, including, but not limited to,
STERILITY and severe injuries to their reproductive capacities. c. Failed to warn Plaintiffs of the hazards of exposure to
said products or to cause them to be so warned;
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT
IN THAT THEY MANUFACTURED, produced, sold, and/or USED d. Failed to test said products for adverse health effects,
DBCP and/or otherwise, PUT THE SAME into the stream of or to cause said products to be tested;
commerce, WITHOUT INFORMING THE USERS OF ITS
HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT e. Concealed from Plaintiffs information concerning the
INSTRUCTIONS ON ITS PROPER USE AND APPLICATION. observed effects of said products on Plaintiffs;
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 f. Failed to monitor the health of plaintiffs exposed to said
injurious to the Plaintiffs’ health and well-being. products;

7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, g. Failed to place adequate labels on containers of said
DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE products to warn them of the damages of said products;
STREAM OF COMMERCE were negligent OR AT FAULT in that and
they, AMONG OTHERS:
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.)
Page 17 of 84
Quite evidently, the allegations in the Amended Joint-Complaints Certainly, the cases below are not criminal cases where
of NAVIDA, et al., and ABELLA, et al., attribute to defendant territoriality, or the situs of the act complained of, would be
companies certain acts and/or omissions which led to their determinative of jurisdiction and venue for trial of cases. In
exposure to nematocides containing the chemical DBCP. personal civil actions, such as claims for payment of damages, the
According to NAVIDA, et al., and ABELLA, et al., such exposure to Rules of Court allow the action to be commenced and tried in the
the said chemical caused ill effects, injuries and illnesses, appropriate court, where any of the plaintiffs or defendants resides,
specifically to their reproductive system. or in the case of a non-resident defendant, where he may be
found, at the election of the plaintiff.66
Thus, these allegations in the complaints constitute the cause of
action of plaintiff claimants – a quasi-delict, which under the Civil In a very real sense, most of the evidence required to prove the
Code is defined as an act, or omission which causes damage to claims of NAVIDA, et al., and ABELLA, et al., are available only in
another, there being fault or negligence. To be precise, Article the Philippines. First, plaintiff claimants are all residents of the
2176 of the Civil Code provides: Philippines, either in General Santos City or in Davao City.
Second, the specific areas where they were allegedly exposed to
Article 2176. Whoever by act or omission causes damage to the chemical DBCP are within the territorial jurisdiction of the
another, there being fault or negligence, is obliged to pay for the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially
filed their claims for damages. Third, the testimonial and
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict documentary evidence from important witnesses, such as doctors,
co-workers, family members and other members of the community,
and is governed by the provisions of this Chapter.
would be easier to gather in the Philippines. Considering the great
number of plaintiff claimants involved in this case, it is not far-
As specifically enumerated in the amended complaints, NAVIDA, fetched to assume that voluminous records are involved in the
et al., and ABELLA, et al., point to the acts and/or omissions of the presentation of evidence to support the claim of plaintiff claimants.
defendant companies in manufacturing, producing, selling, using, Thus, these additional factors, coupled with the fact that the
and/or otherwise putting into the stream of commerce, alleged cause of action of NAVIDA, et al., and ABELLA, et al.,
nematocides which contain DBCP, "without informing the users of against the defendant companies for damages occurred in the
its hazardous effects on health and/or without instructions on its Philippines, demonstrate that, apart from the RTC of General
proper use and application." 63 Santos City and the RTC of Davao City having jurisdiction over the
subject matter in the instant civil cases, they are, indeed, the
Verily, in Citibank, N.A. v. Court of Appeals, 64 this Court has convenient fora for trying these cases.67
always reminded that jurisdiction of the court over the subject
matter of the action is determined by the allegations of the The RTC of General Santos City and the RTC of Davao City validly
complaint, irrespective of whether or not the plaintiffs are entitled to acquired jurisdiction over the persons of all the defendant
recover upon all or some of the claims asserted therein. The companies
jurisdiction of the court cannot be made to depend upon the
defenses set up in the answer or upon the motion to dismiss, for
It is well to stress again that none of the parties claims that the
otherwise, the question of jurisdiction would almost entirely depend
upon the defendants. What determines the jurisdiction of the court courts a quo lack jurisdiction over the cases filed before them. All
parties are one in asserting that the RTC of General Santos City
is the nature of the action pleaded as appearing from the
allegations in the complaint. The averments therein and the and the RTC of Davao City have validly acquired jurisdiction over
character of the relief sought are the ones to be consulted. 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.
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 Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides
individual claims of approximately ₱2.7 million for each plaintiff that "[t]he defendant’s voluntary appearance in the action shall be
claimant, which obviously falls within the purview of the civil action equivalent to service of summons." In this connection, all the
jurisdiction of the RTCs. 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
Moreover, the injuries and illnesses, which NAVIDA, et al., and themselves to the jurisdiction of the courts a quo by making
ABELLA, et al., allegedly suffered resulted from their exposure to several voluntary appearances, by praying for various affirmative
DBCP while they were employed in the banana plantations located reliefs, and by actively participating during the course of the
in the Philippines or while they were residing within the agricultural proceedings below.
areas also located in the Philippines. The factual allegations in the
Amended Joint-Complaints all point to their cause of action, which
In line herewith, this Court, in Meat Packing Corporation of the
undeniably occurred in the Philippines. The RTC of General
Santos City and the RTC of Davao City obviously have reasonable Philippines v. Sandiganbayan, 68 held that jurisdiction over the
person of the defendant in civil cases is acquired either by his
basis to assume jurisdiction over the cases.
voluntary appearance in court and his submission to its authority or
by service of summons. Furthermore, the active participation of a
It is, therefore, error on the part of the courts a quo when they party in the proceedings is tantamount to an invocation of the
dismissed the cases on the ground of lack of jurisdiction on the court’s jurisdiction and a willingness to abide by the resolution of
mistaken assumption that the cause of action narrated by NAVIDA, the case, and will bar said party from later on impugning the court
et al., and ABELLA, et al., took place abroad and had occurred or body’s jurisdiction.69
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, Thus, the RTC of General Santos City and the RTC of Davao City
resulting in their becoming part of the stream of commerce,"65 and, have validly acquired jurisdiction over the persons of the defendant
hence, outside the jurisdiction of the RTCs. companies, as well as over the subject matter of the instant case.
What is more, this jurisdiction, which has been acquired and has
Page 18 of 84
been vested on the courts a quo, continues until the termination of the remand of the action to the trial court for continuance,
the proceedings. 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
It may also be pertinently stressed that "jurisdiction" is different
from the "exercise of jurisdiction." Jurisdiction refers to the CHIQUITA, would only unduly delay and complicate the
authority to decide a case, not the orders or the decision rendered proceedings. CHIQUITA and DOLE similarly insist that the motion
therein. Accordingly, where a court has jurisdiction over the of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and
persons of the defendants and the subject matter, as in the case of OCCIDENTAL as respondents in G.R. Nos. 125078 and 126654,
the courts a quo, the decision on all questions arising therefrom is as well as in Civil Case Nos. 5617 and 24,251-96, be denied.
but an exercise of such jurisdiction. Any error that the court may
commit in the exercise of its jurisdiction is merely an error of Incidentally, on April 2, 2007, after the parties have submitted their
judgment, which does not affect its authority to decide the case, respective memoranda, DEL MONTE filed a Manifestation and
much less divest the court of the jurisdiction over the case.70 Motion73 before the Court, stating that similar settlement
agreements were allegedly executed by the plaintiff claimants with
Plaintiffs’ purported bad faith in filing the subject civil cases in DEL MONTE and CHIQUITA sometime in 1999. Purportedly
Philippine courts 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
Anent the insinuation by DOLE that the plaintiff claimants filed their Agreement between DEL MONTE and the settling plaintiffs, as well
cases in bad faith merely to procure a dismissal of the same and to as the Release in Full executed by the latter.74 DEL MONTE
allow them to return to the forum of their choice, this Court finds specified therein that there were "only four (4) plaintiffs in Civil
such argument much too speculative to deserve any merit. Case No. 5617 who are claiming against the Del Monte
parties"75 and that the latter have executed amicable settlements
It must be remembered that this Court does not rule on allegations which completely satisfied any claims against DEL MONTE. In
that are unsupported by evidence on record. This Court does not accordance with the alleged compromise agreements with the four
rule on allegations which are manifestly conjectural, as these may plaintiffs in Civil Case No. 5617, DEL MONTE sought the dismissal
not exist at all. This Court deals with facts, not fancies; on realities, of the Amended Joint-Complaint in the said civil case.
not appearances. When this Court acts on appearances instead of Furthermore, in view of the above settlement agreements with
realities, justice and law will be short-lived.71 This is especially true ABELLA, et al., in Civil Case No. 24,251-96, DEL MONTE stated
with respect to allegations of bad faith, in line with the basic rule that it no longer wished to pursue its petition in G.R. No. 127856
that good faith is always presumed and bad faith must be proved. 72 and accordingly prayed that it be allowed to withdraw the same.

In sum, considering the fact that the RTC of General Santos City Having adjudged that Civil Case Nos. 5617 and 24,251-96 should
and the RTC of Davao City have jurisdiction over the subject be remanded to the RTC of General Santos City and the RTC of
matter of the amended complaints filed by NAVIDA, et al., and Davao City, respectively, the Court deems that the Consolidated
ABELLA, et al., and that the courts a quo have also acquired Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and
jurisdiction over the persons of all the defendant companies, it ABELLA, et al., should likewise be referred to the said trial courts
therefore, behooves this Court to order the remand of Civil Case for appropriate disposition.
Nos. 5617 and 24,251-96 to the RTC of General Santos City and
the RTC of Davao City, respectively. Under Article 2028 of the Civil Code, "[a] compromise is a contract
whereby the parties, by making reciprocal concessions, avoid a
On the issue of the dropping of DOW, OCCIDENTAL and SHELL litigation or put an end to one already commenced." Like any other
as respondents in view of their amicable settlement with NAVIDA, contract, an extrajudicial compromise agreement is not excepted
et al., and ABELLA, et al. 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
NAVIDA, et al., and ABELLA, et al., are further praying that DOW, cause which are to constitute the contract.76 Judicial approval is
OCCIDENTAL and SHELL be dropped as respondents in G.R. not required for its perfection.77 A compromise has upon the
Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and parties the effect and authority of res judicata78 and this holds true
24,251-96. The non-settling defendants allegedly manifested that even if the agreement has not been judicially approved. 79 In
they intended to file their cross-claims against their co-defendants addition, as a binding contract, a compromise agreement
who entered into compromise agreements. NAVIDA, et al., and determines the rights and obligations of only the parties to it.80
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- In light of the foregoing legal precepts, the RTC of General Santos
claims only after the settlement between the plaintiff claimants and City and the RTC of Davao City should first receive in evidence
DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and examine all of the alleged compromise settlements involved in
and ABELLA, et al., therefore, assert that the cross-claims are the cases at bar to determine the propriety of dropping any party
already barred. as a defendant therefrom.

In their Memoranda, CHIQUITA and DOLE are opposing the above The Court notes that the Consolidated Motions (to Drop Party-
motion of NAVIDA, et al., and ABELLA, et al., since the latter’s Respondents) that was filed by NAVIDA, et al., and ABELLA, et al.,
Amended Complaints cited several instances of tortious conduct only pertained to DOW, OCCIDENTAL and SHELL in view of the
that were allegedly committed jointly and severally by the latter companies’ alleged compromise agreements with the plaintiff
defendant companies. This solidary obligation on the part of all the claimants. However, in subsequent developments, DEL MONTE
defendants allegedly gives any co-defendant the statutory right to and CHIQUITA supposedly reached their own amicable
proceed against the other co-defendants for the payment of their settlements with the plaintiff claimants, but DEL MONTE qualified
respective shares. Should the subject motion of NAVIDA, et al., that it entered into a settlement agreement with only four of the
and ABELLA, et al., be granted, and the Court subsequently orders plaintiff claimants in Civil Case No. 5617. These four plaintiff
claimants were allegedly the only ones who were asserting claims
Page 19 of 84
against DEL MONTE. However, the said allegation of DEL MONTE allowing such a cross-claim and if the settling defendant must
was simply stipulated in their Compromise Settlement, Indemnity, remain a party to the case purely in relation to the cross claim.
and Hold Harmless Agreement and its truth could not be verified
with certainty based on the records elevated to this Court.
In Armed Forces of the Philippines Mutual Benefit Association, Inc.
Significantly, the 336 plaintiff claimants in Civil Case No. 5617 v. Court of Appeals,84 the Court had the occasion to state that
jointly filed a complaint without individually specifying their claims "where there are, along with the parties to the compromise, other
against DEL MONTE or any of the other defendant companies. persons involved in the litigation who have not taken part in
Furthermore, not one plaintiff claimant filed a motion for the concluding the compromise agreement but are adversely affected
removal of either DEL MONTE or CHIQUITA as defendants in Civil or feel prejudiced thereby, should not be precluded from invoking
Case Nos. 5617 and 24,251-96. in the same proceedings an adequate relief therefor." 85

There is, thus, a primary need to establish who the specific parties Relevantly, in Philippine International Surety Co., Inc. v.
to the alleged compromise agreements are, as well as their Gonzales,86 the Court upheld the ruling of the trial court that, in a
corresponding rights and obligations therein. For this purpose, the joint and solidary obligation, the paying debtor may file a third-party
courts a quo may require the presentation of additional evidence complaint and/or a cross-claim to enforce his right to seek
from the parties. Thereafter, on the basis of the records of the contribution from his co-debtors.
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. Hence, the right of the remaining defendant(s) to seek
reimbursement in the above situation, if proper, is not affected by
the compromise agreements allegedly entered into by NAVIDA, et
It is true that, under Article 2194 of the Civil Code, the
al., and ABELLA, et al., with some of the defendant companies.
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 WHEREFORE, the Court hereby GRANTS the petitions for review
creditors is entitled to demand the satisfaction of the whole on certiorari in G.R. Nos. 125078, 126654, and 128398. We
obligation from any or all of the debtors.81 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
In solidary obligations, the paying debtor’s right of reimbursement Regional Trial Court of Davao City, Branch 16, and its subsequent
is provided for under Article 1217 of the Civil Code, to wit:
Order dated December 16, 1996 denying reconsideration in Civil
Case No. 24,251-96, and REMAND the records of this case to the
Art. 1217. Payment made by one of the solidary debtors respective Regional Trial Courts of origin for further and
extinguishes the obligation. If two or more solidary debtors offer to appropriate proceedings in line with the ruling herein that said
pay, the creditor may choose which offer to accept. courts have jurisdiction over the subject matter of the amended
complaints in Civil Case Nos. 5617 and 24,251-96.
He who made the payment may claim from his co-debtors only the
share which corresponds to each, with the interest for the payment The Court likewise GRANTS the motion filed by Del Monte to
already made. If the payment is made before the debt is due, no withdraw its petition in G.R. No. 127856. In view of the previous
interest for the intervening period may be demanded. grant of the motion to withdraw the petition in G.R. No. 125598,
both G.R. Nos. 127856 and 125598 are considered CLOSED AND
When one of the solidary debtors cannot, because of his TERMINATED.
insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the No pronouncement as to costs.
debt of each.1avvphil
SO ORDERED.
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 G.R. Nos. 178382-83, September 23, 2015
obligation actually delivers payment to the creditor. As succinctly
held in Lapanday Agricultural Development Corporation v. Court of CONTINENTAL MICRONESIA, INC., Petitioner, v. JOSEPH
Appeals,82 "[p]ayment, which means not only the delivery of money BASSO, Respondent.; JARDELEZA, J.:
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 This is a Petition for Review on Certiorari1 under Rule 45 of the
the [other] debtors."83 levised Rules of Court assailing the Decision2 dated May 23, 2006
and Resolution3 dated June 19, 2007 of the Court of Appeals in the
consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No.
In the cases at bar, there is no right of reimbursement to speak of 84281. These assailed Decision and Resolution set aside the
as yet. A trial on the merits must necessarily be conducted first in Decision4 dated November 28, 2003 of the National Labor
order to establish whether or not defendant companies are liable Relations Commission (NLRC) declaring Joseph Basso's (Basso)
for the claims for damages filed by the plaintiff claimants, which dismissal illegal, and ordering the payment of separation pay as
would necessarily give rise to an obligation to pay on the part of alternative to reinstatement and full backwages until the date of the
the defendants. Decision.

At the point in time where the proceedings below were prematurely The Facts
halted, no cross-claims have been interposed by any defendant
against another defendant. If and when such a cross-claim is made Petitioner Continental Micronesia, Inc. (CMI) is a foreign
by a non-settling defendant against a settling defendant, it is within corporation organized and existing under the laws of and domiciled
the discretion of the trial court to determine the propriety of in the United States of America (US). It is licensed to do business
Page 20 of 84
in the Philippines.5 Basso, a US citizen, resided in the Philippines
prior to his death.6 The Labor Arbiter agreed with CMI that the employment contract
was xecuted in the US "since the letter-offer was under the Texas
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. letterhead and the acceptance of Complainant was returned
Braden), Managing Director-Asia of Continental Airlines, Inc. there."19 Thus, applying the doctrine of lex loci celebrationis, US
(Continental), offered Basso the position of General Manager of laws apply. Also, applying lex loci contractus, the Labor Arbiter
the Philippine Branch of Continental. Basso accepted the offer. 7 ruled that the parties did not intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is
It was not until much later that Mr. Braden, who had since returned obvious that Philippine laws were not written into it. More
to the US, sent Basso the employment contract8 dated February 1, specifically, the Philippine law on taxes and the Labor Code were
1991, which Mr. Braden had already signed. Basso then signed not intended by the parties to apply, otherwise Par. 7 on the
the employment contract and returned it to Mr. Braden as payment by Complainant U.S. Federal and Home State income
instructed. taxes, and Pars. 22/23 on termination by 30-day prior notice, will
not be there. The contract was prepared in contemplation of Texas
On November 7, 1992, CMI took over the Philippine operations of or U.S. laws where Par. 7 is required and Pars. 22/23 is allowed. 20
Continental, with Basso retaining his position as General
The Labor Arbiter also ruled that Basso was terminated for a valid
Manager.9
cause based on the allegations of CMI that Basso committed a
series of acts that constitute breach of trust and loss of
On December 20, 1995, Basso received a letter from Mr. Ralph
confidence.21
Schulz (Mr. Schulz), who was then CMI's Vice President of
Marketing and Sales, informing Basso that he has agreed to work
The Labor Arbiter, however, found CMI to have voluntarily
in CMI as a consultant on an "as needed basis" effective February
submitted to his office's jurisdiction. CMI participated in the
1, 1996 to July 31, 1996. The letter also informed Basso that: (1)
proceedings, submitted evidence on the merits of the case, and
he will not receive any monetary compensation but will continue
sought affirmative relief through a motion to dismiss.22
being covered by the insurance provided by CMI; (2) he will enjoy
travel privileges; and (3) CMI will advance Php1,140,000.00 for the
payment of housing lease for 12 months.10 NLRC's Ruling

On January 11, 1996, Basso wrote a counter-proposal11 to Mr. On appeal, the NLRC Third Division promulgated its
Schulz regarding his employment status in CMI. On March 14, Decision23 dated November 28, 2003, the decretal portion of which
1996, Basso wrote another letter addressed to Ms. Marty reads:
Woodward (Ms. Woodward) of CMI's Human Resources WHEREFORE, the decision dated 24 September 1999 is
Department inquiring about the status of his employment. 12 On the VACATED and SET ASIDE. Respondent CMI is ordered to pay
same day, Ms. Woodward responded that pursuant to the complainant the amount of US$5,416.00 for failure to comply with
employment contract dated February 1, 1991, Basso could be the due notice requirement. The other claims are dismissed.
terminated at will upon a thirty-day notice. This notice was
allegedly the letter Basso received from Mr. Schulz on December SO ORDERED.24
20, 1995. Ms. Woodward also reminded Basso of the telephone The NLRC did not agree with the pronouncement of the Labor
conversation between him, Mr. Schulz and Ms. Woodward on Arbiter that his office has no jurisdiction over the controversy. It
December 19, 1995, where they informed him of the company's ruled that the Labor Arbiter acquired jurisdiction over the case
decision to relieve him as General Manager. Basso, instead, was when CMI voluntarily submitted to his office's jurisdiction by
offered the position of consultant to CMI. Ms. Woodward also presenting evidence, advancing arguments in support of the
informed Basso that CMI rejected his counter-proposal and, thus, legality of its acts, and praying for reliefs on the merits of the
terminated his employment effective January 31, 1996. CMI case.25cralawred
offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him. 13 On the merits, the NLRC agreed with the Labor Arbiter that Basso
was dismissed for just and valid causes on the ground of breach of
Basso filed a Complaint for Illegal Dismissal with Moral and trust and loss of confidence. The NLRC ruled that under the
Exemplary Damages against CMI on December 19, applicable rules on loss of trust and confidence of a managerial
1996.14 Alleging the presence of foreign elements, CMI filed a employee, such as Basso, mere existence of a basis for believing
Motion to Dismiss15 dated February 10, 1997 on the ground of lack that such employee has breached the trust of his employer
of jurisdiction over the person of CMI and the subject matter of the suffices. However, the NLRC found that CMI denied Basso the
controversy. In an Order16 dated August 27, 1997, the Labor required due process notice in his dismissal. 26
Arbiter granted the Motion to Dismiss. Applying the doctrine of lex
loci contractus, the Labor Arbiter held that the terms and provisions Both CMI and Basso filed their respective Motions for
of the employment contract show that the parties did not intend to Reconsideration dated January 15, 200427 and January 8,
apply our Labor Code (Presidential Decree No. 442). The Labor 2004.28 Both motions were dismissed in separate Resolutions
Arbiter also held that no employer-employee relationship existed dated March 15, 200429 and February 27, 2004,30 respectively.
between Basso and the branch office of CMI in the Philippines, but
between Basso and the foreign corporation itself. Basso filed a Petition for Certiorari dated April 16, 2004 with the
Court of Appeals docketed as CA-G.R. SP No. 83938.31 Basso
On appeal, the NLRC remanded the case to the Labor Arbiter for imputed grave abuse of discretion on the part of the NLRC in ruling
the determination of certain facts to settle the issue on jurisdiction. that he was validiy dismissed. CMI filed its own Petition
NLRC ruled that the issue on whether the principle of lex loci for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No.
contractus or lex loci celebrationis should apply has to be further 84281,32 alleging that the NLRC gravely abused its discretion when
threshed out.17 it assumed jurisdiction over the person of CMI and the subject
matter of the case.
Labor Arbiter's Ruling
In its Resolution dated October 7, 2004, the Court of Appeals
Labor Arbiter Madjayran H. Ajan in his Decision18 dated September consolidated the two cases33 and ordered the parties to file their
24, 1999 dismissed the case for lack of merit and jurisdiction. respective Memoranda.
Page 21 of 84
The Court of Appeal's Decision We begin with the second issue on the jurisdiction of the Labor
Arbiter and the NLRC in the illegal dismissal case. The first and
The Court of Appeals promulgated the now assailed third issues will be discussed jointly.
Decision34 dated May 23, 2006, the relevant dispositive portion of
which reads: The labor tribunals had jurisdiction over the parties and the
WHEREFORE, the petition of Continental docketed as CA-G.R. subject matter of the case.
SP No. 84281 is DENIED DUE COURSE and DISMISSED.
CMI maintains that there is a conflict-of-laws issue that must be
On the other hand the petition of Basso docketed as CA-G.R. SP settled to determine proper jurisdiction over the parties and the
No. 83938 is GIVEN DUE COURSE and GRANTED, and subject matter of the case. It also alleges that the existence of
accordingly, the assailed Decision dated November 28, 2003 and foreign elements calls or the application of US laws and the
Resolution dated February 27, 2004 of the NLRC are SET doctrines of lex loci celebrationis (the law of the place of the
ASIDE and VACATED. Instead judgment is rendered hereby ceremony), lex loci contractus (law of the place where a contract is
declaring the dismissal of Basso illegal and ordering Continental to executed), and lex loci intentionis(the intention of the parties as to
pay him separation pay equivalent to one (1) month pay for every the law that should govern their agreement). CMI also invokes the
year of service as an alternative to reinstatement. Further, ordering application of the rule of forum non conveniens to determine the
Continental to pay Basso his full backwages from the date of his propriety of the assumption of jurisdiction by the labor tribunals.
said illegal dismissal until date of this decision. The claim for moral
and exemplary damages as well as attorney's fees are We agree with CMI that there is a conflict-of-laws issue that needs
dismissed.35 to be resolved first. Where the facts establish the existence of
foreign elements, he case presents a conflict-of-laws issue.39 The
The Court of Appeals ruled that the Labor Arbiter and the NLRC
foreign element in a case nay appear in different forms, such as in
had jurisdiction over the subject matter of the case and over the
this case, where one of the parties s an alien and the other is
parties. The Court of Appeals explained that jurisdiction over the
domiciled in another state.
subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution
termination dispute that is "undoubtedly cognizable by the labor
of conflict-of-laws problems, three consecutive phases are
tribunals", the Labor Arbiter and the NLRC had jurisdiction to rule
involved: jurisdiction, choice of law, and recognition and
on the merits of the case. On the issue of jurisdiction over he
enforcement of judgments. In resolving the conflicts problem,
person of the parties, who are foreigners, the Court of Appeals
courts should ask the following questions:
ruled that jurisdiction over the person of Basso was acquired when
1. "Under the law, do I have jurisdiction over the subject matter
he filed the complaint for illegal dismissal, while jurisdiction over
and the parties to this case?
the person of CMI was acquired through coercive process of
service of summons to its agent in the Philippines. The Court of
2. "If the answer is yes, is this a convenient forum to the parties, in
Appeals also agreed that the active participation of CMI in the case
light of the facts?
rendered moot the issue on jurisdiction.
3. "If the answer is yes, what is the conflicts rule for this particular
On the merits of the case, the Court of Appeals declared that CMI
problem?
illegally dismissed Basso. The Court of Appeals found that CMI's
allegations of loss of trust and confidence were not established.
4. "If the conflicts rule points to a foreign law, has said law been
CMI "failed to prove its claim of the incidents which were its
properly pleaded and proved by the one invoking it?
alleged bases for loss of trust or confidence." 36 While managerial
employees can be dismissed for loss of trust and confidence, there
5. "If so, is the application or enforcement of the foreign law in the
must be a basis for such loss, beyond mere whim or caprice.
forum one of the basic exceptions to the application of foreign law?
In short, is there any strong policy or vital interest of the forum that
After the parties filed their Motions for Reconsideration, 37 the Court
is at stake in this case and which should preclude the application
of Appeals promulgated Resolution38dated June 19, 2007 denying
of foreign law?41
CMI's motion, while partially granting Basso's as to the
computation of backwages. Jurisdiction is defined as the power and authority of the courts to
hear, try and decide cases. Jurisdiction over the subject matter is
Hence, this petition, which raises the following issues: conferred by the Constitution or by law and by the material
I. allegations in the complaint, regardless of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs
WHETHER OR NOT THE COURT OF APPEALS ERRED IN sought therein.42 It cannot be acquired through a waiver or
REVIEWING THE FACTUAL FINDINGS OF THE NLRC INSTEAD enlarged by the omission of the parties or conferred by the
OF LIMITING ITS INQUIRY INTO WHETHER OR NOT THE acquiescence of the court.43 That the employment contract of
NLRC COMMITTED GRAVE ABUSE OF DISCRETION. Basso was replete with references to US laws, and that it
originated from and was returned to the US, do not automatically
II. preclude our labor tribunals from exercising jurisdiction to hear and
try this case.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
RULING THAT THE LABOR ARBITER AND THE NLRC HAD This case stemmed from an illegal dismissal complaint. The Labor
JURISDICTION TO HEAR AND TRY THE ILLEGAL DISMISSAL Code, under Article 217, clearly vests original and exclusive
CASE. jurisdiction to hear and decide cases involving termination disputes
to the Labor Arbiter. Hence, the Labor Arbiter and the NLRC have
jurisdiction over the subject matter of the case.
III.
As regards jurisdiction over the parties, we agree with the Court of
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
Appeals that the Labor Arbiter acquired jurisdiction over the person
FINDING THAT BASSO WAS NOT VALIDLY DISMISSED ON
of Basso, notwithstanding his citizenship, when he filed his
THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
complaint against CMI. On the other hand, jurisdiction over the

Page 22 of 84
person of CMI was acquired through the coercive process of a. Foreign station allowance of forty percent (40%) using
service of summons. We note that CMI never denied that it was the "U.S. State Department Index, the base being
served with summons. CMI has, in fact, voluntarily appeared and Washington, D.C."
participated in the proceedings before the courts. Though a foreign
corporation, CMI is licensed to do business in the Philippines and b. Tax equalization that made Basso responsible for
has a local business address here. The purpose of the law in "federal and any home state income taxes."
requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations to the
c. Hardship allowance of fifteen percent (15%) of base pay
jurisdiction of our courts.44
based upon the "U.S. Department of State Indexes of
living costs abroad."
Considering that the Labor Arbiter and the NLRC have jurisdiction
over the parties and the subject matter of this case, these tribunals
may proceed to try the case even if the rules of conflict-of-laws or d. The employment arrangement is "one at will, terminable
the convenience of the parties point to a foreign forum, this being by either party without any further liability on thirty days
an exercise of sovereign prerogative of the country where the case prior written notice."50
is filed.45
CMI asserts that the US law on labor relations particularly, the US
The next question is whether the local forum is the convenient Railway Labor Act sanctions termination-at-will provisions in an
forum in light of the facts of the case. CMI contends that a employment contract. Thus, CMI concludes that if such laws were
Philippine court is an inconvenient forum. applied, there would have been no illegal dismissal to speak of
because the termination-at-will provision in Basso's employment
We disagree. contract would have been perfectly valid.

Under the doctrine of forum non conveniens, a Philippine court in a We disagree.


conflict-of-laws case may assume jurisdiction if it chooses to do so,
provided, that the following requisites are met: (1) that the In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized
Philippine Court is one to which the parties may conveniently that an essential element of conflict rules is the indication of a
resort to; (2) that the Philippine Court is in a position to make an "test" or "connecting factor" or "point of contact". Choice-of-law
intelligent decision as to the law and the facts; and (3) that the rules invariably consist of a factual relationship (such as property
Philippine Court has or is likely to have power to enforce its right, contract claim) and a connecting fact or point of contact, such
decision.46 All these requisites are present here. as the situs of the res, the place of celebration, the place of
performance, or the place of wrongdoing. Pursuant to Saudi
Basso may conveniently resort to our labor tribunals as he and Arabian Airlines, we hold that the "test factors," "points of contact"
CMI lad physical presence in the Philippines during the duration of or "connecting factors" in this case are the
the trial. CMI has a Philippine branch, while Basso, before his following:chanRoblesvirtualLawlibrary
death, was residing here. Thus, it could be reasonably expected
that no extraordinary measures were needed for the parties to (1) The nationality, domicile or residence of
make arrangements in advocating their respective cases. Basso;ChanRoblesVirtualawlibrary

The labor tribunals can make an intelligent decision as to the law (2) The seat of CMI;ChanRoblesVirtualawlibrary
and facts. The incident subject of this case (i.e. dismissal of Basso)
happened in the Philippines, the surrounding circumstances of (3) The place where the employment contract has been made,
which can be ascertained without having to leave the Philippines. the locus actus;ChanRoblesVirtualawlibrary
The acts that allegedly led to loss of trust and confidence and
Basso's eventual dismissal were committed in the Philippines. As (4) The place where the act is intended to come into effect, e.g.,
to the law, we hold that Philippine law is the proper law of he the place of performance of contractual
forum, as we shall discuss shortly. Also, the labor tribunals have duties;ChanRoblesVirtualawlibrary
the power to enforce their judgments because they acquired
jurisdiction over the persons of both parties. (5) The intention of the contracting parties as to the law that should
govern their agreement, the lex loci intentionis; and
Our labor tribunals being the convenient fora, the next question is
what law should apply in resolving this case. (6) The place where judicial or administrative proceedings are
instituted or done.52
The choice-of-law issue in a conflict-of-laws case seeks to answer
the following important questions: (1) What legal system should Applying the foregoing in this case, we conclude that Philippine law
control a given situation where some of the significant facts the applicable law. Basso, though a US citizen, was a resident
occurred in two or more states; and (2) to what extent should the here from he time he was hired by CMI until his death during the
chosen legal system regulate the situation. 47 These questions are pendency of the case. CMI, while a foreign corporation, has a
entirely different from the question of jurisdiction that only seeks to license to do business in the Philippines and maintains a branch
answer whether the courts of a state where the case is initiated here, where Basso was hired to work. The contract of employment
have jurisdiction to enter a judgment.48 As such, the power to was negotiated in the Philippines. A purely consensual contract, it
exercise jurisdiction does not automatically give a state was also perfected in the Philippines when Basso accepted the
constitutional authority to apply forum law.49 terms and conditions of his employment as offered by CMI. The
place of performance relative to Biasso's contractual duties was in
CMI insists that US law is the applicable choice-of-law under the the Philippines. The alleged prohibited acts of Basso that
principles of lex loci celebrationis and lex loci contractus. It argues warranted his dismissal were committed in the Philippines.
that the contract of employment originated from and was returned
to the US after Basso signed it, and hence, was perfected there. Clearly, the Philippines is the state with the most significant
CMI further claims that the references to US law in the relationship to the problem. Thus, we hold that CMI and Basso
employment contract show the parties' intention to apply US law intended Philippine law to govern, notwithstanding some
and not ours. These references are: references made to US laws and the fact that this intention was not
Page 23 of 84
expressly stated in the contract. We explained in Philippine Export may look into the records of the case and re-examine the
and Foreign Loan Guarantee Corporation v. V. P. Eusebio questioned findings. As a corollary, this Court is clothed with ample
Construction, Inc.53 that the law selected may be implied from such authority to review matters, even if they are not assigned as errors
factors as substantial connection with the transaction, or the in their appeal, if it finds that their consideration is necessary to
nationality or domicile of the parties.54 We cautioned, however, that arrive at a just decision of the case. The same principles are now
while Philippine courts would do well to adopt the first and most necessarily adhered to and are applied by the Court of Appeals in
basic rule in most legal systems, namely, to allow the parties to its expanded jurisdiction over labor cases elevated through a
select the law applicable to their contract, the selection is subject petition for certiorari; thus, we see no error on its part when it made
to the limitation that it is not against the law, morals, or public anew a factual determination of the matters and on that basis
policy of the forum.55 reversed the ruling of the NLRC. 63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual
Similarly, in Bank of America, NT&SA v. American Realty
hidings complained of are not supported by the evidence on
Corporation,56 we ruled that a foreign law, judgment or contract
record; when its necessary to prevent a substantial wrong or to do
contrary to a sound and established public policy of the forum shall
substantial justice; when the findings of the NLRC contradict those
not be applied. Thus:
of the Labor Arbiter; and when necessary to arrive at a just
Moreover, foreign law should not be applied when its application
decision of the case.64 To make these findings, the Court of
would work undeniable injustice to the citizens or residents of the
Appeals necessarily has to look at the evidence and make its own
forum. To give justice is the most important function of law; hence,
factual determination.65
a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57
Since the findings of the Labor Arbiter differ with that of the NLRC,
Termination-at-will is anathema to the public policies on labor we find that the Court of Appeals correctly exercised its power to
protection espoused by our laws and Constitution, which dictates review the evidence and the records of the illegal dismissal case.
that no worker shall be dismissed except for just and authorized
causes provided by law and after due process having been Basso was illegally dismissed.
complied with.58 Hence, the US Railway Labor Act, which
sanctions termination-at-will, should not be applied in this case. It is of no moment that Basso was a managerial employee of CMI
Managerial employees enjoy security of tenure and the right of the
Additionally, the rule is that there is no judicial notice of any foreign management to dismiss must be balanced against the managerial
law. As any other fact, it must be alleged and proved. 59 If the employee's right to security of tenure, which is not one of the
foreign law is not properly pleaded or proved, the presumption of guaranties he gives up.66
identity or similarity of the foreign law to our own laws, otherwise
known as processual presumption, applies. Here, US law may In Apo Cement Corporation v. Baptisma,67 we ruled that for an
have been properly pleaded but it was not proved in the labor employer to validly dismiss an employee on the ground of loss of
tribunals. trust and confidence under Article 282 (c) of the Labor Code, the
employer must observe the following guidelines: 1) loss of
Having disposed of the issue on jurisdiction, we now rule on the confidence should not be simulated; 2) it should not be used as
first and third issues. subterfuge for causes which are improper, illegal or unjustified; 3) it
may not be arbitrarily asserted in the face of overwhelming
The Court of Appeals may review the factual findings of the evidence to the contrary; and 4) it must be genuine, not a mere
NLRC in a Rule 65 petition. afterthought to justify earlier action taken in bad faith. More
importantly, it must be based on a willful breach of trust and
CMI submits that the Court of Appeals overstepped the boundaries founded on clearly established facts.
of the limited scope of its certiorarijurisdiction when instead of
ruling on the existence of grave abuse of discretion, it proceeded We agree with the Court of Appeals that the dismissal of Basso
to pass upon the legality and propriety of Basso's dismissal. was not founded on clearly established facts and evidence
Moreover, CMI asserts that it was error on the part of the Court of sufficient to warrant dismissal from employment. While proof
Appeals to re-evaluate the evidence and circumstances beyond reasonable doubt is not required to establish loss of trust
surrounding the dismissal of Basso. and confidence, substantial evidence is required and on the
employer rests the burden to establish it.68 There must be some
We disagree. basis for the loss of trust, or that the employer has reasonable
ground to believe that the employee is responsible for misconduct,
The power of the Court of Appeals to review NLRC decisions via a which renders him unworthy of the trust and confidence demanded
Petition for Certiorari under Rule 65 of the Revised Rules of Court by his position.69
was settled in our decision in St. Martin Funeral Home v.
NLRC.60 The general rule is that certiorari does not lie to review CMI alleges that Basso committed the
errors of judgment of the trial court, as well as that of a quasi- following:chanRoblesvirtualLawlibrary
judicial tribunal. In certiorari proceedings, judicial review does not
go as far as to examine and assess the evidence of the parties and (1) Basso delegated too much responsibility to the General Sales
to weigh their probative value.61 However, this rule admits of Agent and relied heavily on its judgments. 70
exceptions. In Globe Telecom, Inc. v. Florendo-Flores,62 we stated: (2) Basso excessively issued promotional tickets to his friends who
In the review of an NLRC decision through a special civil action had no direct business with CMI.71
for certiorari, resolution is confined only to issues of jurisdiction and (3) The advertising agency that CMI contracted had to deal directly
grave abuse of discretion on the part of the labor tribunal. Hence, with Guam because Basso was hardly available. 72 Mr. Schulz
the Court refrains from reviewing factual assessments of lower discovered that Basso exceeded the advertising budget by
courts and agencies exercising adjudicative functions, such as the $76,000.00 in 1994 and by $20,000.00 in 1995. 73
NLRC. Occasionally, however, the Court is constrained to delve (4) Basso spent more time and attention to his personal
into factual matters where, as in the instant case, the findings of businesses and was reputed to own nightclubs in the
the NLRC contradict those of the Labor Arbiter. Philippines.74
(5) Basso used free tickets and advertising money to promote his
In this instance, the Court in the exercise of its equity jurisdiction personal business,75 such as a brochure that jointly advertised
Page 24 of 84
one of Basso's nightclubs with CMI.
Finally, CMI violated procedural due process in terminating Basso.
We find that CMI failed to discharge its burden to prove the above In King of Kings Transport, Inc. v. Mamac 89 we detailed the
acts. CMI merely submitted affidavits of its officers, without any procedural due process steps in termination of employment:
other corroborating evidence. Basso, on the other hand, had To clarify, the following should be considered in terminating the
adequately explained his side. On the advertising agency and services of employees:chanRoblesvirtualLawlibrary
budget issues raised by CMI, he explained that these were blatant
lies as the advertising needs of CMI were centralized in its Guam (1) The first written notice to be served on the employees should
office and the Philippine office was not authorized to deal with contain the specific causes or grounds for termination against
CMI's advertising agency, except on minor issues.76 Basso further them, and a directive that the employees are given the opportunity
stated that under CMI's existing policy, ninety percent (90%) of the to submit their written explanation within a reasonable period.
advertising decisions were delegated to the advertising firm of "Reasonable opportunity" under the Omnibus Rules means every
McCann-Ericsson in Japan and only ten percent (10%) were left to kind of assistance that management must accord to the employees
the Philippine office.77 Basso also denied the allegations of owning to enable them to prepare adequately for their defense. This
nightclubs and promoting his personal businesses and explained should be construed as a period of at least five (5) calendar days
that it was illegal for foreigners in the Philippines to engage in retail from receipt of the notice to give the employees an opportunity to
trade in the first place. study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses
Apart from these accusations, CMI likewise presented the findings they will raise against the complaint. Moreover, in order to enable
of the audit team headed by Mr. Stephen D. Goepfert, showing the employees to intelligently prepare their explanation and
that "for the period of 1995 and 1996, personal passes for defenses, the notice should contain a detailed narration of the facts
Continental and other airline employees were noted (sic) to be and circumstances that will serve as basis for the charge against
issued for which no service charge was collected." 78 The audit the employees. A general description of the charge will not
cited the trip pass log of a total of 10 months. The trip log does not suffice. Lastly, the notice should specifically mention which
show, however, that Basso caused all the ticket issuances. More, company rules, if any, are violated and/or which among the
half of the trips in the log occurred from March to July of 1996, 79 a grounds under Art. 282 is being charged against the employees.
period beyond the tenure of Basso. Basso was terminated
effectively on January 31, 1996 as indicated in the letter of Ms. (2) After serving the first notice, the employers should schedule
Woodward.80 and conduct a hearing or conference wherein the employees will
be given the opportunity to: (1) explain and clarify their defenses to
CMI also accused Basso of making "questionable overseas phone the charge against them; (2) present evidence in support of their
calls". Basso, however, adequately explained in his Reply81 that defenses; and (3) rebut the evidence presented against them by
the phone calls to Italy and Portland, USA were made for the the management. During the hearing or conference, the
purpose of looking for a technical maintenance personnel with US employees are given the chance to defend themselves personally,
Federal Aviation Authority qualifications, which CMI needed at that with the assistance of a representative or counsel of their choice.
time. The calls to the US were also made in connection with his Moreover, this conference or hearing could be used by the parties
functions as General Manager, such as inquiries on his tax returns as an opportunity to come to an amicable settlement.
filed in Nevada. Biasso also explained that the phone lines 82were
open direct lines that all personnel were free to use to make direct (3) After determining that termination of employment is justified,
long distance calls.83 the employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the
Finally, CMI alleged that Basso approved the disbursement of charge against the employees have been considered; and (2)
Php80,000.00 to cover the transfer fee of the Manila Polo grounds have been established to justify the severance of their
Club share from Mr. Kenneth Glover, the previous General employment. (Emphasis in original.)
Manager, to him. CMI claimed that "nowhere in the said contract
Here, Mr. Schulz's and Ms. Woodward's letters dated December
was it likewise indicated that the Manila Polo Club share was part
19, 1995 and March 14, 1996, respectively, are not one of the valid
of the compensation package given by CMI to Basso." 84 CMI's
twin notices. Neither identified the alleged acts that CMI now
claims are not credible. Basso explained that the Manila Polo
claims as bases for Basso's termination. Ms. Woodward's letter
Club share was offered to him as a bonus to entice him to leave
even stressed that the original plan was to remove Basso as
his then employer, United Airlines. A letter from Mr. Paul J. Casey,
General Manager but with an offer to make him consultant. It was
former president of Continental, supports Basso.85 In the letter, Mr.
inconsistent of CMI to declare Basso as unworthy of its trust and
Casey explained:
confidence and, in the same breath, offer him the position of
As a signing bonus, and a perk to attract Mr. Basso to join
consultant. As the Court of Appeals pointed out:
Continental Airlines, he was given the Manila Polo Club share and
But mark well that Basso was clearly notified that the sole ground
authorized to have the share re-issued in his name. In addition to
for his dismissal was the exercise of the termination at will clause
giving Mr. Basso the Manila Polo Club share, Continental agreed
in the employment contract. The alleged loss of trust and
to pay the dues for a period of three years and this was embodied
confidence claimed by Continental appears to be a mere
in his contract with Continental. This was all clone with my
afterthought belatedly trotted out to save the day. 90
knowledge and approval.86
Clause 14 of the employment contract also states:
Basso is entitled to separation pay and full backwages.
Club Memberships: The Company will locally pay annual dues for
membership in a club in Manila that your immediate supervisor and Under Article 279 of the Labor Code, an employee who is unjustly
I agree is of at least that value to Continental through you in your dismissed from work shall be entitled to reinstatement without
role as our General Manager for the Philippines. 87 loss of eniority rights and other privileges, and to his full
Taken together, the above pieces of evidence suggest that backwages, inclusive of allowances and to his other benefits or
the Manila Polo Club share was part of Basso's compensation their monetary equivalent omputed from the time his compensation
package and thus he validly used company funds to pay for the was withheld up to the time of actual reinstatement.
transfer fees. If doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted Where reinstatement is no longer viable as an option, separation
in favor of the latter.88 pay equivalent to one (1) month salary for every year of service
Page 25 of 84
should be awarded as an alternative. The payment of separation On April 11, 1980, a writ of summons was
pay is in addition to payment of backwages. 91 In the case of Basso, issued by the 36th Civil Department, Tokyo
reinstatement is no longer possible since he has already passed District Court of Japan against defendant at its
away. Thus, Basso's separation pay with full backwages shall be office at the Taiheiyo Building, 3rd floor, 132,
paid to his heirs. Yamashita-cho, Naka-ku, Yokohoma,
Kanagawa Prefecture. The attempt to serve the
As to the computation of backwages, we agree with CMI that summons was unsuccessful because the bailiff
Basso was entitled to backwages only up to the time he reached was advised by a person in the office that Mr.
65 years old, the compulsory retirement age under the law. 92 This Dinozo, the person believed to be authorized to
is our consistent ruling.93 When Basso was illegally dismissed on receive court processes was in Manila and
January 31, 1996, he was already 58 years old. 94 He turned 65 would be back on April 24, 1980.
years old on October 2, 2002. Since backwages are granted on
grounds of equity for earnings lost by an employee due to his
On April 24, 1980, bailiff returned to the
illegal dismissal,95 Basso was entitled to backwages only for the defendant's office to serve the summons. Mr.
period he could have worked had he not been illegally
Dinozo refused to accept the same claiming
dismissed, i.e. from January 31, 1996 to October 2, 2002. that he was no longer an employee of the
defendant.
WHEREFORE, premises considered, the Decision of the Court of
Appeals dated May 23, 2006 and Resolution dated June 19, 2007
in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP After the two attempts of service were
No. 84281 are AFFIRMED, with MODIFICATION as to the award unsuccessful, the judge of the Tokyo District
of backwages. Petitioner Continental Micronesia, Inc. is hereby Court decided to have the complaint and the
ordered to pay Respondent Joseph Basso's heirs: 1) separation writs of summons served at the head office of
pay equivalent to one (1) month pay for every year of service, and the defendant in Manila. On July 11, 1980, the
2) full backwages from January 31, 1996, the date of his illegal Director of the Tokyo District Court requested
dismissal, to October 2, 2002, the date of his compulsory the Supreme Court of Japan to serve the
retirement age. summons through diplomatic channels upon
the defendant's head office in Manila.
SO ORDERED.chanroblesvirtuall
On August 28, 1980, defendant received from
Deputy Sheriff Rolando Balingit the writ of
NORTHWEST ORIENT AIRLINES, INC. petitioner,
summons (p. 276, Records). Despite receipt of
vs. COURT OF APPEALS and C.F. SHARP & COMPANY INC.;
the same, defendant failed to appear at the
G.R. No. 112573 February 9, 1995; PADILLA, JR., J.:
scheduled hearing. Thus, the Tokyo Court
proceeded to hear the plaintiff's complaint and
This petition for review on certiorari seeks to set aside the decision on [January 29, 1981], rendered judgment
of the Court of Appeals affirming the dismissal of the petitioner's ordering the defendant to pay the plaintiff the
complaint to enforce the judgment of a Japanese court. The sum of 83,158,195 Yen and damages for delay
principal issue here is whether a Japanese court can acquire at the rate of 6% per annum from August 28,
jurisdiction over a Philippine corporation doing business in Japan 1980 up to and until payment is completed (pp.
by serving summons through diplomatic channels on the Philippine 12-14, Records).
corporation at its principal office in Manila after prior attempts to
serve summons in Japan had failed.
On March 24, 1981, defendant received from
Deputy Sheriff Balingit copy of the judgment.
Petitioner Northwest Orient Airlines, Inc. (hereinafter Defendant not having appealed the judgment,
NORTHWEST), a corporation organized under the laws of the the same became final and executory.
State of Minnesota, U.S.A., sought to enforce in Civil Case No. 83-
17637 of the Regional Trial Court (RTC), Branch 54, Manila, a
Plaintiff was unable to execute the decision in
judgment rendered in its favor by a Japanese court against private
Japan, hence, on May 20, 1983, a suit for
respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a
enforcement of the judgment was filed by
corporation incorporated under Philippine laws.
plaintiff before the Regional Trial Court of
Manila Branch 54.2
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
On July 16, 1983, defendant filed its answer
antecedents of this controversy:
averring that the judgment of the Japanese
Court sought to be enforced is null and void
On May 9, 1974, plaintiff Northwest Airlines and and unenforceable in this jurisdiction having
defendant C.F. Sharp & Company, through its been rendered without due and proper notice to
Japan branch, entered into an International the defendant and/or with collusion or fraud
Passenger Sales Agency Agreement, whereby and/or upon a clear mistake of law and fact (pp.
the former authorized the latter to sell its air 41-45, Rec.).
transportation tickets. Unable to remit the
proceeds of the ticket sales made by defendant
Unable to settle the case amicably, the case
on behalf of the plaintiff under the said
was tried on the merits. After the plaintiff rested
agreement, plaintiff on March 25, 1980 sued
its case, defendant on April 21, 1989, filed a
defendant in Tokyo, Japan, for collection of the
Motion for Judgment on a Demurrer to
unremitted proceeds of the ticket sales, with
Evidence based on two grounds:
claim for damages.
(1) the foreign judgment sought to be enforced
is null and void for want of jurisdiction and (2)
Page 26 of 84
the said judgment is contrary to Philippine law in the Philippines and not in
and public policy and rendered without due Japan.
process of law. Plaintiff filed its opposition after
which the court a quo rendered the now
Unable to accept the said decision, plaintiff on
assailed decision dated June 21, 1989 granting July 11, 1989 moved for reconsideration of the
the demurrer motion and dismissing the decision, filing at the same time a conditional
complaint (Decision, pp. 376-378, Records). In Notice of Appeal, asking the court to treat the
granting the demurrer motion, the trial court said notice of appeal "as in effect after and
held that: upon issuance of the court's denial of the
motion for reconsideration."
The foreign judgment in the
Japanese Court sought in Defendant opposed the motion for
this action is null and void reconsideration to which a Reply dated August
for want of jurisdiction over 28, 1989 was filed by the plaintiff.
the person of the defendant
considering that this is an
action in personam; the On October 16, 1989, the lower court
Japanese Court did not disregarded the Motion for Reconsideration and
acquire jurisdiction over the gave due course to the plaintiff's Notice of
person of the defendant Appeal. 3
because jurisprudence
requires that the defendant In its decision, the Court of Appeals sustained the trial court. It
be served with summons in agreed with the latter in its reliance upon Boudard vs. Tait 4
Japan in order for the wherein it was held that "the process of the court has no
Japanese Court to acquire extraterritorial effect and no jurisdiction is acquired over the person
jurisdiction over it, the of the defendant by serving him beyond the boundaries of the
process of the Court in state." To support its position, the Court of Appeals further stated:
Japan sent to the
Philippines which is outside
Japanese jurisdiction cannot In an action strictly in personam, such as the
confer jurisdiction over the instant case, personal service of summons
defendant in the case before within the forum is required for the court to
the Japanese Court of the acquire jurisdiction over the defendant
case at bar. Boudard versus (Magdalena Estate Inc. vs. Nieto, 125 SCRA
Tait 67 Phil. 170. The 230). To confer jurisdiction on the court,
plaintiff contends that the personal or substituted service of summons on
Japanese Court acquired the defendant not extraterritorial service is
jurisdiction because the necessary (Dial Corp vs. Soriano, 161 SCRA
defendant is a resident of 739).
Japan, having four (4)
branches doing business But while plaintiff-appellant concedes that the
therein and in fact had a collection suit filed is an action in personam, it
permit from the Japanese is its theory that a distinction must be made
government to conduct between an action in personam against a
business in Japan (citing the resident defendant and an action in personam
exhibits presented by the against a non-resident defendant. Jurisdiction is
plaintiff); if this is so then acquired over a non-resident defendant only if
service of summons should he is served personally within the jurisdiction of
have been made upon the the court and over a resident defendant if by
defendant in Japan in any of personal, substituted or constructive service
these alleged four branches; conformably to statutory authorization. Plaintiff-
as admitted by the plaintiff appellant argues that since the defendant-
the service of the summons appellee maintains branches in Japan it is
issued by the Japanese considered a resident defendant. Corollarily,
Court was made in the personal, substituted or constructive service of
Philippines thru a Philippine summons when made in compliance with the
Sheriff. This Court agrees procedural rules is sufficient to give the court
that if the defendant in a jurisdiction to render judgment in personam.
foreign court is a resident in
the court of that foreign
court such court could Such an argument does not persuade.
acquire jurisdiction over the
person of the defendant but It is a general rule that processes of the court
it must be served upon the cannot lawfully be served outside the territorial
defendant in the territorial limits of the jurisdiction of the court from which
jurisdiction of the foreign it issues (Carter vs. Carter; 41 S.E. 2d 532,
court. Such is not the case 201) and this is regardless of the residence or
here because the defendant citizenship of the party thus served (Iowa-Rahr
was served with summons vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC,
NS, 292, Am. Case 1912 D680). There must be

Page 27 of 84
actual service within the proper territorial limits Unable to obtain a reconsideration of the decision, NORTHWEST
on defendant or someone authorized to accept elevated the case to this Court contending that the respondent
service for him. Thus, a defendant, whether a court erred in holding that SHARP was not a resident of Japan and
resident or not in the forum where the action is that summons on SHARP could only be validly served within that
filed, must be served with summons within that country.
forum.
A foreign judgment is presumed to be valid and binding in the
But even assuming a distinction between a country from which it comes, until the contrary is shown. It is also
resident defendant and non-resident defendant proper to presume the regularity of the proceedings and the giving
were to be adopted, such distinction applies of due notice therein.6
only to natural persons and not in the
corporations. This finds support in the concept Under Section 50, Rule 39 of the Rules of Court, a judgment in an
that "a corporation has no home or residence in action in personam of a tribunal of a foreign country having
the sense in which those terms are applied to jurisdiction to pronounce the same is presumptive evidence of a
natural persons" (Claude Neon Lights vs. Phil. right as between the parties and their successors-in-interest by a
Advertising Corp., 57 Phil. 607). Thus, as cited subsequent title. The judgment may, however, be assailed by
by the defendant-appellee in its brief:
evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under Section
Residence is said to be an attribute of a natural 3 of Rule 131, a court, whether of the Philippines or elsewhere,
person, and can be predicated on an artificial enjoys the presumption that it was acting in the lawful exercise of
being only by more or less imperfect analogy. jurisdiction and has regularly performed its official duty.
Strictly speaking, therefore, a corporation can
have no local residence or habitation. It has
Consequently, the party attacking a foreign judgment has the
been said that a corporation is a mere ideal burden of overcoming the presumption of its validity.7 Being the
existence, subsisting only in contemplation of party challenging the judgment rendered by the Japanese court,
law — an invisible being which can have, in SHARP had the duty to demonstrate the invalidity of such
fact, no locality and can occupy no space, and judgment. In an attempt to discharge that burden, it contends that
therefore cannot have a dwelling place. (18 Am. the extraterritorial service of summons effected at its home office in
Jur. 2d, p. 693 citing Kimmerle v. Topeka, 88 the Philippines was not only ineffectual but also void, and the
370, 128 p. 367; Wood v. Hartfold F. Ins. Co., Japanese Court did not, therefore acquire jurisdiction over it.
13 Conn 202)

It is settled that matters of remedy and procedure such as those


Jurisprudence so holds that the foreign or relating to the service of process upon a defendant are governed
domestic character of a corporation is to be by the lex fori or the internal law of the forum.8 In this case, it is the
determined by the place of its origin where its procedural law of Japan where the judgment was rendered that
charter was granted and not by the location of
determines the validity of the extraterritorial service of process on
its business activities (Jennings v. Idaho Rail SHARP. As to what this law is is a question of fact, not of law. It
Light & P. Co., 26 Idaho 703, 146 p. 101), A
may not be taken judicial notice of and must be pleaded and
corporation is a "resident" and an inhabitant of proved like any other fact.9 Sections 24 and 25, Rule 132 of the
the state in which it is incorporated and no Rules of Court provide that it may be evidenced by an official
other (36 Am. Jur. 2d, p. 49). publication or by a duly attested or authenticated copy thereof. It
was then incumbent upon SHARP to present evidence as to what
Defendant-appellee is a Philippine Corporation that Japanese procedural law is and to show that under it, the
duly organized under the Philippine laws. assailed extraterritorial service is invalid. It did not. Accordingly, the
Clearly, its residence is the Philippines, the presumption of validity and regularity of the service of summons
place of its incorporation, and not Japan. While and the decision thereafter rendered by the Japanese court must
defendant-appellee maintains branches in stand.
Japan, this will not make it a resident of Japan.
A corporation does not become a resident of Alternatively in the light of the absence of proof regarding
another by engaging in business there even Japanese
though licensed by that state and in terms given
law, the presumption of identity or similarity or the so-called
all the rights and privileges of a domestic processual presumption 10 may be invoked. Applying it, the
corporation (Galveston H. & S.A.R. Co. vs.
Japanese law on the matter is presumed to be similar with the
Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. Philippine law on service of summons on a private foreign
401). corporation doing business in the Philippines. Section 14, Rule 14
of the Rules of Court provides that if the defendant is a foreign
On this premise, defendant appellee is a non- corporation doing business in the Philippines, service may be
resident corporation. As such, court processes made: (1) on its resident agent designated in accordance with law
must be served upon it at a place within the for that purpose, or, (2) if there is no such resident agent, on the
state in which the action is brought and not government official designated by law to that effect; or (3) on any
elsewhere (St. Clair vs. Cox, 106 US 350, 27 L of its officers or agents within the Philippines.
ed. 222, 1 S. Ct. 354).5
If the foreign corporation has designated an agent to receive
It then concluded that the service of summons effected in Manila or summons, the designation is exclusive, and service of summons is
beyond the territorial boundaries of Japan was null and did not without force and gives the court no jurisdiction unless made upon
confer jurisdiction upon the Tokyo District Court over the person of him. 11
SHARP; hence, its decision was void.

Page 28 of 84
Where the corporation has no such agent, service shall be made The fundamental rule is that jurisdiction in
on the government official designated by law, to wit: (a) the personam over nonresidents, so as to sustain a
Insurance Commissioner in the case of a foreign insurance money judgment, must be based upon personal
company; (b) the Superintendent of Banks, in the case of a foreign service within the state which renders the
banking corporation; and (c) the Securities and Exchange judgment.
Commission, in the case of other foreign corporations duly
licensed to do business in the Philippines. Whenever service of xxx xxx xxx
process is so made, the government office or official served shall
transmit by mail a copy of the summons or other legal proccess to
the corporation at its home or principal office. The sending of such The process of a court, has no extraterritorial
copy is a necessary part of the service. 12 effect, and no jurisdiction is acquired over the
person of the defendant by serving him beyond
the boundaries of the state. Nor has a judgment
SHARP contends that the laws authorizing service of process upon of a court of a foreign country against a resident
the Securities and Exchange Commission, the Superintendent of of this country having no property in such
Banks, and the Insurance Commissioner, as the case may be, foreign country based on process served here,
presuppose a situation wherein the foreign corporation doing any effect here against either the defendant
business in the country no longer has any branches or offices
personally or his property situated here.
within the Philippines. Such contention is belied by the pertinent
provisions of the said laws. Thus, Section 128 of the Corporation
Code 13 and Section 190 of the Insurance Code 14 clearly Process issuing from the courts of one state or
contemplate two situations: (1) if the corporation had left the country cannot run into another, and although a
Philippines or had ceased to transact business therein, and (2) if nonresident defendant may have been
the corporation has no designated agent. Section 17 of the personally served with such process in the
General Banking Act 15 does not even speak a corporation which state or country of his domicile, it will not give
had ceased to transact business in the Philippines. such jurisdiction as to authorize a personal
judgment against him.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan. It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto
This silence could only mean, or least create an impression, that it 19 and Dial Corp. vs. Soriano, 20 as well as the principle laid down
had none. Hence, service on the designated government official or by the Iowa Supreme Court in the 1911 case of Raher vs. Raher.
on any of SHARP's officers or agents in Japan could be availed of. 21
The respondent, however, insists that only service of any of its
officers or employees in its branches in Japan could be resorted to. The first three cases are, however, inapplicable. Boudard involved
We do not agree. As found by the respondent court, two attempts the enforcement of a judgment of the civil division of the Court of
at service were made at SHARP's Yokohama branch. Both were First Instance of Hanoi, French Indo-China. The trial court
unsuccessful. On the first attempt, Mr. Dinozo, who was believed dismissed the case because the Hanoi court never acquired
to be the person authorized to accept court process, was in Manila. jurisdiction over the person of the defendant considering that "[t]he,
On the second, Mr. Dinozo was present, but to accept the evidence adduced at the trial conclusively proves that neither the
summons because, according to him, he was no longer an appellee [the defendant] nor his agent or employees were ever in
employee of SHARP. While it may be true that service could have Hanoi, French Indo-China; and that the deceased Marie Theodore
been made upon any of the officers or agents of SHARP at its Jerome Boudard had never, at any time, been his employee." In
three other branches in Japan, the availability of such a recourse Magdalena Estate, what was declared invalid resulting in the
would not preclude service upon the proper government official, as failure of the court to acquire jurisdiction over the person of the
stated above. defendants in an action in personam was the service of summons
through publication against non-appearing resident defendants. It
As found by the Court of Appeals, it was the Tokyo District Court was claimed that the latter concealed themselves to avoid personal
which ordered that summons for SHARP be served at its head service of summons upon them. In Dial, the defendants were
office in the Philippine's after the two attempts of service had foreign corporations which were not, domiciled and licensed to
failed. 16 The Tokyo District Court requested the Supreme Court of engage in business in the Philippines and which did not have
Japan to cause the delivery of the summons and other legal officers or agents, places of business, or properties here. On the
documents to the Philippines. Acting on that request, the Supreme other hand, in the instant case, SHARP was doing business in
Court of Japan sent the summons together with the other legal Japan and was maintaining four branches therein.
documents to the Ministry of Foreign Affairs of Japan which, in
turn, forwarded the same to the Japanese Embassy in Manila . Insofar as to the Philippines is concerned, Raher is a thing of the
Thereafter, the court processes were delivered to the Ministry (now past. In that case, a divided Supreme Court of Iowa declared that
Department) of Foreign Affairs of the Philippines, then to the the principle that there can be no jurisdiction in a court of a territory
Executive Judge of the Court of First Instance (now Regional Trial to render a personal judgment against anyone upon service made
Court) of Manila, who forthwith ordered Deputy Sheriff Rolando outside its limits was applicable alike to cases of residents and
Balingit to serve the same on SHARP at its principal office in non-residents. The principle was put at rest by the United States
Manila. This service is equivalent to service on the proper Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer
government official under Section 14, Rule 14 of the Rules of 22 that domicile in the state is alone sufficient to bring an absent
Court, in relation to Section 128 of the Corporation Code. Hence, defendant within the reach of the state's jurisdiction for purposes of
SHARP's contention that such manner of service is not valid under a personal judgment by means of appropriate substituted service
Philippine laws holds no water.17 or personal service without the state. This principle is embodied in
section 18, Rule 14 of the Rules of Court which allows service of
In deciding against the petitioner, the respondent court sustained summons on residents temporarily out of the Philippines to be
the trial court's reliance on Boudard vs. Tait 18 where this Court made out of the country. The rationale for this rule was explained
held: in Milliken as follows:

Page 29 of 84
[T]he authority of a state over one of its citizens called Philippine branches," in the same
is not terminated by the mere fact of his category as "commercial banks, savings
absence from the state. The state which associations, mortgage banks, development
accords him privileges and affords protection to banks, rural banks, stock savings and loan
him and his property by virtue of his domicile associations" (which have been formed and
may also exact reciprocal duties. "Enjoyment of organized under Philippine laws), making no
the privileges of residence within the state, and distinction between the former and the latter in
the attendant right to invoke the protection of its so far as the terms "banking institutions" and
laws, are inseparable" from the various "bank" are used in the Act [Sec. 2], declaring on
incidences of state citizenship. The the contrary that in "all matters not specifically
responsibilities of that citizenship arise out of covered by special provisions applicable only to
the relationship to the state which domicile foreign banks, or their branches and agencies
creates. That relationship is not dissolved by in the Philippines, said foreign banks or their
mere absence from the state. The attendant branches and agencies lawfully doing business
duties, like the rights and privileges incident to in the Philippines "shall be bound by all laws,
domicile, are not dependent on continuous rules, and regulations applicable to domestic
presence in the state. One such incident of banking corporations of the same class, except
domicile is amenability to suit within the state such laws, rules and regulations as provided for
even during sojourns without the state, where the creation, formation, organization, or
the state has provided and employed a dissolution of corporations or as fix the relation,
reasonable method for apprising such an liabilities, responsibilities, or duties of members,
absent party of the proceedings against him. 23 stockholders or officers of corporation. [Sec.
18].
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a This court itself has already had occasion to
corporation may have is single in its essence and a corporation hold [Claude Neon Lights, Fed. Inc. vs.
can have only one domicile which is the state of its creation. 25 Philippine Advertising Corp., 57 Phil. 607] that a
foreign corporation licitly doing business in the
Nonetheless, a corporation formed in one-state may, for certain Philippines, which is a defendant in a civil suit,
may not be considered a non-resident within
purposes, be regarded a resident in another state in which it has
offices and transacts business. This is the rule in our jurisdiction the scope of the legal provision authorizing
and apropos thereto, it may be necessery to quote what we stated attachment against a defendant not residing in
in State Investment House, Inc, vs. Citibank, N.A., 26 to wit: the Philippine Islands; [Sec. 424, in relation to
Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of
The issue is whether these Philippine branches 1940, Sec. 1(f), Rule 57, Rules of 1964] in other
or units may be considered "residents of the words, a preliminary attachment may not be
Philippine Islands" as that term is used in applied for and granted solely on the asserted
Section 20 of the Insolvency Law . . . or fact that the defendant is a foreign corporation
residents of the state under the laws of which authorized to do business in the Philippines —
they were respectively incorporated. The and is consequently and necessarily, "a party
answer cannot be found in the Insolvency Law who resides out of the Philippines."
itself, which contains no definition of the term, Parenthetically, if it may not be considered as a
resident, or any clear indication of its meaning. party not residing in the Philippines, or as a
There are however other statutes, albeit of party who resides out of the country, then,
subsequent enactment and effectivity, from logically, it must be considered a party who
which enlightening notions of the term may be does reside in the Philippines, who is a resident
derived. of the country. Be this as it may, this Court
pointed out that:
The National Internal Revenue Code declares
that the term "'resident foreign corporation' . . . Our laws and
applies to a foreign corporation engaged in jurisprudence indicate a
trade or business within the Philippines," as purpose to assimilate
distinguished from a "'non-resident foreign foreign corporations, duly
corporation' . . . (which is one) not engaged in licensed to do business
trade or bussiness within the Philippines." [Sec. here, to the status of
20, pars. (h) and (i)]. domestic corporations. (Cf.
Section 73, Act No. 1459,
The Offshore Banking Law, Presidential Decree and Marshall Wells Co. vs.
No. 1034, states "that branches, subsidiaries, Henry W. Elser & Co., 46
affiliation, extension offices or any other units of Phil. 70, 76; Yu Cong Eng
corporation or juridical person organized under vs. Trinidad, 47 Phil. 385,
the laws of any foreign country operating in the 411) We think it would be
Philippines shall be considered residents of the entirely out of line with this
Philippines. [Sec. 1(e)]. policy should we make a
discrimination against a
foreign corporation, like the
The General Banking Act, Republic Act No. petitioner, and subject its
337, places "branches and agencies in the property to the harsh writ of
Philippines of foreign banks . . . (which are) seizure by attachment when
Page 30 of 84
it has complied not only with filing of the complaint therein until the said foreign judgment is fully
every requirement of law satisfied.
made specially of foreign
corporations, but in addition
Costs against the private respondent. SO ORDERED.
with every requirement of
law made of domestic
corporations. . . . LOURDES A. VALMONTE and ALFREDO D. VALMONTE, vs.
THE HONORABLE COURT OF APPEALS, THIRD DIVISION and
Obviously, the assimilation of foreign ROSITA DIMALANTA ; G.R. No. 108538. January 22, 1996];
corporations authorized to do business in the MENDOZA, J.:
Philippines "to the status of domestic
corporations, subsumes their being found and Petitioner Lourdfes A. Valmonte is a foreign resident. The question
operating as corporations, hence, residing, in is whether in an action for partition filed against her and her
the country. husband, who is also her attorney, summons intended for her may
be served on her husband, who has a law office in the Philippines.
The same principle is recognized in American The Regional Trial Court of Manila, Branch 48, said no and refused
law: that the residence of a corporation, if it can to declare Lourdes A. Valmonte in default, but the Court of Appeals
be said to have a residence, is necessarily said yes. Hence this petition for review on certiorari.
where it exercises corporate functions . . .;" that
it is considered as dwelling "in the place where The facts of the case are as follows:
its business is done . . .," as being "located
where its franchises are exercised . . .," and as
being "present where it is engaged in the Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are
prosecution of the corporate enterprise;" that a husband and wife. They are both residents of 90222 Carkeek Drive
"foreign corporation licensed to do business in South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte,
a state is a resident of any country where it who is a member of the Philippine bar, however, practices his
maintains an office or agent for transaction of profession in the Philippines, commuting for this purpose between
its usual and customary business for venue his residence in the state of Washington and Manila, where he
purposes;" and that the "necessary element in holds office at S-304 Gedisco Centre, 1564 A. Mabini, Ermita,
its signification is locality of existence." [Words Manila.
and Phrases, Permanent Ed., vol. 37, pp. 394,
412, 493]. On March 9, 1992, private respondent Rosita Dimalanta, who is
the sister of petitioner Lourdes A. Valmonte, filed a complaint for
In as much as SHARP was admittedly doing business in Japan partition of real property and accounting of rentals against
through its four duly registered branches at the time the collection petitioners Lourdes A. Valmonte and Alfredo D. Valmonte before
suit against it was filed, then in the light of the processual the Regional Trial Court of Manila, Branch 48. The subject of the
presumption, SHARP may be deemed a resident of Japan, and, as action is a three-door apartment located in Paco, Manila.
such, was amenable to the jurisdiction of the courts therein and
may be deemed to have assented to the said courts' lawful In her Complaint, private respondent alleged:
methods of serving process. 27
The plaintiff is of legal age, a widow and is at present a resident of
Accordingly, the extraterritorial service of summons on it by the 14823 Conway Road, Chesterfield, Missouri, U.S.A., while the
Japanese Court was valid not only under the processual defendants are spouses, of legal age and at present residents of
presumption but also because of the presumption of regularity of 90222 Carkeek Drive, South Seattle, Washington, U.S.A., but, for
performance of official duty. purposes of this complaint may be served with summons at
Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita, Manila
We find NORTHWEST's claim for attorney's fees, litigation where defendant Alfredo D. Valmonte as defendant Lourdes
expenses, and exemplary damages to be without merit. We find no Arreola Valmontes spouse holds office and where he can be
evidence that would justify an award for attorney's fees and found.
litigation expenses under Article 2208 of the Civil Code of the
Philippines. Nor is an award for exemplary damages warranted. Apparently, the foregoing averments were made on the basis of a
Under Article 2234 of the Civil Code, before the court may consider letter previously sent by petitioner Lourdes A. Valmonte to private
the question of whether or not exemplary damages should be respondents counsel
awarded, the plaintiff must show that he is entitled to moral,
temperate, or compensatory damaged. There being no such proof
in which, in regard to the partition of the property in question, she
presented by NORTHWEST, no exemplary damages may be
referred private respondents counsel to her husband as the party
adjudged in its favor.
to whom all communications intended for her should be sent. The
letter reads:
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied
July 4, 1991
NORTHWEST's claims for attorneys fees, litigation expenses, and
exemplary damages but REVERSED insofar as in sustained the
trial court's dismissal of NORTHWEST's complaint in Civil Case Dear Atty. Balgos:
No. 83-17637 of Branch 54 of the Regional Trial Court of Manila,
and another in its stead is hereby rendered ORDERING private This is in response to your letter, dated 20 June 1991, which I
respondent C.F. SHARP L COMPANY, INC. to pay to received on 3 July 1991. Please address all communications to my
NORTHWEST the amounts adjudged in the foreign judgment lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and
subject of said case, with interest thereon at the legal rate from the fax numbers appear below.
Page 31 of 84
c/o Prime Marine obtained by her and to deny such authority when it would turn out
Gedisco Center, Unit 304 to be her disadvantage. If this be allowed, Our Rules of Court,
1564 A. Mabini, Ermita instead of being an instrument to promote justice would be made
Metro Manila use of to thwart or frustrate the same.
Telephone: 521-1736
Fax: 21-2095 xxx xxx xxx

Service of summons was then made upon petitioner Alfredo D. Turning to another point, it would not do for Us to overlook the fact
Valmonte, who at the time, was at his office in Manila. Petitioner that the disputed summons was served not upon just an ordinary
Alfredo D. Valmonte accepted the summons, insofar as he was lawyer of private respondent Lourdes A. Valmonte, but upon her
concerned, but refused to accept the summons for his wife, lawyer husband. But that is not all, the same lawyer/husband
Lourdes A. Valmonte, on the ground that he was not authorized to happens to be also her co-defendant in the instant case which
accept the process on her behalf. Accordingly the process server involves real property which, according to her lawyer/husband/ co-
left without leaving a copy of the summons and complaint for defendant, belongs to the conjugal partnership of the defendants
petitioner Lourdes A. Valmonte. (the spouses Valmonte). It is highly inconceivable and certainly it
would be contrary to human nature for the lawyer/husband/co-
Petitioner Alfredo D. Valmonte thereafter filed his Answer with defendant to keep to himself the fact that they (the spouses
Counterclaim. Petitioner Lourdes A. Valmonte, however, did not Valmonte) had been sued with regard to a property which he
file her Answer. For this reason private respondent moved to claims to be conjugal. Parenthetically, there is nothing in the
declare her in default. Petitioner Alfredo D. Valmonte entered a records of the case before Us regarding any manifestation by
special appearance in behalf of his wife and opposed the private private respondent Lourdes A. Valmonte about her lack of
respondents motion. knowledge about the case instituted against her and her
lawyer/husband/co-defendant by her sister Rosita.
In its Order dated July 3, 1992, the trial court, denied private
respondents motion to declare petitioner Lourdes A. Valmonte in PREMISES CONSIDERED, the instant petition for certiorari,
default. A motion for reconsideration was similarly denied on prohibition and mandamus is given due course. This Court hereby
September 23, 1992. Whereupon, private respondent filed a Resolves to nullify the orders of the court a quo dated July 3, 1992
petition for certiorari, prohibition and mandamus with the Court of and September 23, 1992 and further declares private respondent
Appeals. Lourdes Arreola Valmonte as having been properly served with
summons.
On December 29, 1992, the Court of Appeals rendered a decision
granting the petition and declaring Lourdes A. Valmonte in default. Petitioners assail the aforequoted decision, alleging that the Court
A copy of the appellate courts decision was received by petitioner of Appeals erred (1) in refusing to apply the provisions of Rule 14,
Alfredo D. Valmonte on January 15, 1993 at his Manila office and 17 of the Revised Rules of Court and applying instead Rule 14, 8
on January 21, 1993 in Seattle, Washington. Hence, this petition. when the fact is that petitioner Lourdes A. Valmonte is a
nonresident defendant; and (2) because even if Rule 14, 8 is the
The issue at bar is whether in light of the facts set forth above, applicable provision, there was no valid substituted service as
petitioner Lourdes A. Valmonte was validly served with summons. there was no strict compliance with the requirement by leaving a
In holding that she had been, the Court of Appeals stated:[1] copy of the summons and complaint with petitioner Alfredo D.
Valmonte. Private respondent, upon the other hand, asserts that
petitioners are invoking a technicality and that strict adherence to
[I]n her above-quoted reply, Mrs. Valmonte clearly and the rules would only result in a useless ceremony.
unequivocally directed the aforementioned counsel of Dimalanta to
address all communications (evidently referring to her controversy
We hold that there was no valid service of process on Lourdes A.
with her sister Mrs. Dimalanta over the Paco property, now the
subject of the instant case) to her lawyer who happens also to be Valmonte.
her husband. Such directive was made without any qualification
just as was her choice/designation of her husband Atty. Valmonte To provide perspective, it will be helpful to determine first the
as her lawyer likewise made without any qualification or nature of the action filed against petitioners Lourdes A. Valmonte
reservation. Any disclaimer therefore on the part of Atty. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an
as to his being his wifes attorney (at least with regard to the action in personam, in rem or quasi in rem. This is because the
dispute vis-a-vis [sic] the Paco property) would appear to be feeble rules on service of summons embodied in Rule 14 apply according
or trifling, if not incredible. to whether an action is one or the other of these actions.

This view is bolstered by Atty. Valmontes subsequent alleged In an action in personam, personal service of summons or, if this is
special appearance made on behalf of his wife. Whereas Mrs. not possible and he cannot be personally served, substituted
Valmonte had manifestly authorized her husband to serve as her service, as provided in Rule 14, 7-8[2] is essential for the
lawyer relative to her dispute with her sister over the Paco property acquisition by the court of jurisdiction over the person of a
and to receive all communications regarding the same and defendant who does not voluntarily submit himself to the authority
subsequently to appear on her behalf by way of a so-called special of the court.[3] If defendant cannot be served with summons
appearance, she would nonetheless now insist that the same because he is temporarily abroad, but otherwise he is a Philippine
husband would nonetheless had absolutely no authority to receive resident, service of summons may, by leave of court, be made by
summons on her behalf. In effect, she is asserting that publication.[4] Otherwise stated, a resident defendant in an action
representation by her lawyer (who is also her husband) as far as in personam, who cannot be personally served with summons,
the Paco property controversy is concerned, should only be made may be summoned either by means of substituted service in
by him when such representation would be favorable to her but not accordance with Rule 14, 8 or by publication as provided in 17 and
otherwise. It would obviously be inequitable for this Court to allow 18 of the same Rule.[5]
private respondent Lourdes A. Valmonte to hold that her husband
has the authority to represent her when an advantage is to be
Page 32 of 84
In all of these cases, it should be noted, defendant must be a the summons and order of the court should be sent by registered
resident of the Philippines, otherwise an action in personam cannot mail to the last known address of the defendant; or (3) in any other
be brought because jurisdiction over his person is essential to manner which the court may deem sufficient.
make a binding decision.
Since in the case at bar, the service of summons upon petitioner
On the other hand, if the action is in rem or quasi in rem, Lourdes A. Valmonte was not done by means of any of the first two
jurisdiction over the person of the defendant is not essential for modes, the question is whether the service on her attorney,
giving the court jurisdiction so long as the court acquires petitioner Alfredo D. Valmonte, can be justified under the third
jurisdiction over the res. If the defendant is a nonresident and he is mode, namely, in any . . . manner the court may deem sufficient.
not found in the country, summons may be served extraterritorially
in accordance with Rule 14, 17, which provides: We hold it cannot. This mode of service, like the first two, must be
made outside the Philippines, such as through the Philippine
17. Extraterritorial service. - When the defendant does not reside Embassy in the foreign country where the defendant resides.[8]
and is not found in the Philippines and the action affects the Moreover, there are several reasons why the service of summons
personal status of the plaintiff or relates to, or the subject of which on Atty. Alfredo D. Valmonte cannot be considered a valid service
is, property within the Philippines, in which the defendant has or of summons on petitioner Lourdes A. Valmonte. In the first place,
claims a lien or interest, actual or contingent, or in which the relief service of summons on petitioner Alfredo D. Valmonte was not
demanded consists, wholly or in part, in excluding the defendant made upon the order of the court as required by Rule 14, 17 and
from any interest therein, or the property of the defendant has certainly was not a mode deemed sufficient by the court which in
been attached within the Philippines, service may, by leave of fact refused to consider the service to be valid and on that basis
court, be effected out of the Philippines by personal service as declare petitioner Lourdes A. Valmonte in default for her failure to
under Section 7; or by publication in a newspaper of general file an answer.
circulation in such places and for such time as the court may order,
in which case a copy of the summons and order of the court shall In the second place, service in the attempted manner on petitioner
be sent by registered mail to the last known address of the was not made upon prior leave of the trial court as required also in
defendant, or in any other manner the court may deem sufficient. Rule 14, 17. As provided in 19, such leave must be applied for by
Any order granting such leave shall specify a reasonable time, motion in writing, supported by affidavit of the plaintiff or some
which shall not be less than sixty (60) days after notice, within person on his behalf and setting forth the grounds for the
which the defendant must answer. application.

In such cases, what gives the court jurisdiction in an action in rem Finally, and most importantly, because there was no order granting
or quasi in rem is that it has jurisdiction over the res, i.e. the such leave, petitioner Lourdes A. Valmonte was not given ample
personal status of the plaintiff who is domiciled in the Philippines or time to file her Answer which, according to the rules, shall be not
the property litigated or attached. Service of summons in the less than sixty (60) days after notice. It must be noted that the
manner provided in 17 is not for the purpose of vesting it with period to file an Answer in an action against a resident defendant
jurisdiction but for complying with the requirements of fair play or
differs from the period given in an action filed against a
due process, so that he will be informed of the pendency of the nonresident defendant who is not found in the Philippines. In the
action against him and the possibility that property in the
former, the period is fifteen (15) days from service of summons,
Philippines belonging to him or in which he has an interest may be while in the latter, it is at least sixty (60) days from notice.
subjected to a judgment in favor of the plaintiff and he can thereby
take steps to protect his interest if he is so minded.[6]
Strict compliance with these requirements alone can assure
observance of due process. That is why in one case,[9] although
Applying the foregoing rules to the case at bar, private the Court considered publication in the Philippines of the summons
respondents action, which is for partition and accounting under (against the contention that it should be made in the foreign state
Rule 69, is in the nature of an action quasi in rem. Such an action where defendant was residing) sufficient, nonetheless the service
is essentially for the purpose of affecting the defendants interest in was considered insufficient because no copy of the summons was
a specific property and not to render a judgment against him. As sent to the last known correct address in the Philippines.
explained in the leading case of Banco Espaol Filipino v. Palanca
:[7]
Private respondent cites the ruling in De Leon v. Hontanosas, 67
SCRA 458,462-463 (1975), in which it was held that service of
[An action quasi in rem is] an action which while not strictly summons upon the defendants husband was binding on her. But
speaking an action in rem partakes of that nature and is the ruling in that case is justified because summons were served
substantially such. . . . The action quasi in rem differs from the true upon defendants husband in their conjugal home in Cebu City and
action in rem in the circumstance that in the former an individual is the wife was only temporarily absent, having gone to Dumaguete
named as defendant and the purpose of the proceeding is to
City for a vacation. The action was for collection of a sum of
subject his interest therein to the obligation or lien burdening the money. In accordance with Rule 14, 8, substituted service could be
property. All proceedings having for their sole object the sale or
made on any person of sufficient discretion in the dwelling place of
other disposition of the property of the defendant, whether by the defendant, and certainly defendants husband, who was there,
attachment, foreclosure, or other form of remedy, are in a general was competent to receive the summons on her behalf. In any
way thus designated. The judgment entered in these proceedings event, it appears that defendant in that case submitted to the
is conclusive only between the parties. jurisdiction of the court by instructing her husband to move for the
dissolution of the writ of attachment issued in that case.
As petitioner Lourdes A. Valmonte is a nonresident who is not
found in the Philippines, service of summons on her must be in On the other hand, in the case of Gemperle v. Schenker,[10] it was
accordance with Rule 14, 17. Such service, to be effective outside held that service on the wife of a nonresident defendant was found
the Philippines, must be made either (1) by personal service; (2) by sufficient because the defendant had appointed his wife as his
publication in a newspaper of general circulation in such places attorney-in-fact. It was held that although defendant Paul Schenker
and for such time as the court may order, in which case a copy of was a Swiss citizen and resident of Switzerland, service of
Page 33 of 84
summons upon his wife Helen Schenker who was in the 4) at least $80,000.00 representing attorneys
Philippines was sufficient because she was her husbands fees, litigation expenses and cost,
representative and attorney-in-fact in a civil case, which he had with interest thereon from the date of
earlier filed against William Gemperle. In fact Gemperles action the judgment until fully paid.
was for damages arising from allegedly derogatory statements
contained in the complaint filed in the first case. As this Court said, On March 3, 1988, the defendant filed a Motion to
i]n other words, Mrs. Schenker had authority to sue, and had Dismiss. However, before the court could resolve the
actually sued, on behalf of her husband, so that she was, also, said motion, a fire which partially razed the Quezon
empowered to represent him in suits filed against him, particularly City Hall Building on June 11, 1988 totally destroyed
in a case, like the one at bar, which is a consequence of the action the office of this Court, together with all its records,
brought by her on his behalf.[11] Indeed, if instead of filing an equipment and properties. On July 26, 1988, the
independent action Gemperle filed a counterclaim in the action plaintiff, through counsel filed a Motion for
brought by Mr. Schenker against him, there would have been no Reconstitution of Case Records. The Court, after
doubt that the trial court could have acquired jurisdiction over Mr. allowing the defendant to react thereto, granted the
Schenker through his agent and attorney-in-fact, Mrs. Schenker. said Motion and admitted the annexes attached thereto
as the reconstituted records of this case per Order
dated September 6, 1988. Thereafter, the Motion to
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did Dismiss, the resolution of which had been deferred,
not appoint her husband as her attorney-in-fact. Although she was denied by the Court in its Order of October 4,
wrote private respondent s attorney that all communications 1988.
intended for her should be addressed to her husband who is also
her lawyer at the latters address in Manila, no power of attorney to On October 19, 1988, defendant filed his Answer. The
receive summons for her can be inferred therefrom. In fact the case was then set for pre-trial conference. At the
letter was written seven months before the filing of this case below, conference, the parties could not arrive at any
and it appears that it was written in connection with the settlement. However, they agreed on the following
negotiations between her and her sister, respondent Rosita stipulations of facts:
Dimalanta, concerning the partition of the property in question. As
is usual in negotiations of this kind, the exchange of 1) The defendant admits the existence
correspondence was carried on by counsel for the parties. But the of the judgment dated December 28,
authority given to petitioners husband in these negotiations 1984 as well as its amendment dated
certainly cannot be construed as also including an authority to April 13, 1987, but not necessarily
represent her in any litigation. the authenticity or validity thereof;
2) The plaintiff is not doing business and
For the foregoing reasons, we hold that there was no valid service is not licensed to do business in the
on petitioner Lourdes A. Valmonte in this case. Philippines;

WHEREFORE, the decision appealed from is REVERSED and the 3) The residence of defendant, Antonio Heras, is
orders dated July 3, 1992 and September 23, 1992 of the Regional New Manila, Quezon City.
Trial Court of Manila, Branch 48 are REINSTATED.
The only issue for this Court to determine is, whether or
SO ORDERED. not the judgment of the Hong Kong Court has been
repelled by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud or clear mistake of
ASIAVEST LIMITED, petitioner, vs. THE COURT OF APPEALS law or fact, such as to overcome the presumption
AND ANTONIO HERAS, respondents.; DAVIDE, JR., J.: [G.R. established in Section 50, Rule 39 of the Rules of Court
No. 128803. September 25, 1998] in favor of foreign judgments.

In issue is the enforceability in the Philippines of a foreign In view of the admission by the defendant of the
judgment. The antecedents are summarized in the 24 August 1990 existence of the aforementioned judgment (Pls. See
Decision[1] of Branch 107 of the Regional Trial Court of Quezon Stipulations of Facts in the Order dated January 5,
City in Civil Case No. Q-52452; thus: 1989 as amended by the Order of January 18, 1989),
as well as the legal presumption in favor of the plaintiff
as provided for in paragraph (b), Sec. 50, (Ibid.), the
The plaintiff Asiavest Limited filed a complaint on plaintiff presented only documentary evidence to show
December 3, 1987 against the defendant Antonio rendition, existence, and authentication of such
Heras praying that said defendant be ordered to pay to judgment by the proper officials concerned (Pls. See
the plaintiff the amounts awarded by the Hong Kong Exhibits A thru B, with their submarkings). In addition,
Court Judgment dated December 28, 1984 and the plaintiff presented testimonial and documentary
amended on April 13, 1987, to wit: evidence to show its entitlement to attorneys fees and
other expenses of litigation.
1) US$1,810,265.40 or its equivalent in Hong
Kong currency at the time of payment On the other hand, the defendant presented two
with legal interest from December 28, witnesses, namely, Fortunata dela Vega and Russel
1984 until fully paid; Warren Lousich.
2) interest on the sum of US$1,500.00 at The gist of Ms. dela Vegas testimony is to the effect
9.875% per annum from October 31, that no writ of summons or copy of a statement of claim
1984 to December 28, 1984; and of Asiavest Limited was ever served in the office of the
Navegante Shipping Agency Limited and/or for Mr.
3) HK$905.00 at fixed cost in the action; and
Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his
Page 34 of 84
residence in New Manila, Quezon City. Her knowledge e) In an action based on a guarantee,
is based on the fact that she was the personal there is no established legal
secretary of Mr. Heras during his JD Transit days up to requirement or obligation under
the latter part of 1972 when he shifted or diversified to Hong Kong laws that the creditor
shipping business in Hong Kong; that she was in- must first bring proceedings
charge of all his letters and correspondence, business against the principal debtor. The
commitments, undertakings, conferences and creditor can immediately go
appointments, until October 1984 when Mr. Heras left against the guarantor.
Hong Kong for good; that she was also the Officer-in-
Charge or Office Manager of Navegante Shipping On cross examination, Mr. Lousich stated that before
Agency LTD, a Hong Kong registered and based he was commissioned by the law firm of the
company acting as ships agent, up to and until the defendants counsel as an expert witness and to verify
company closed shop sometime in the first quarter of the records of the Hong Kong case, he had been acting
1985, when shipping business collapsed worldwide; as counsel for the defendant in a number of
that the said company held office at 34-35 Connaught commercial matters; that there was an application for
Road, Central Hong Kong and later transferred to service of summons upon the defendant outside the
Caxton House at Duddel Street, Hong Kong, until the jurisdiction of Hong Kong; that there was an order of
company closed shop in 1985; and that she was the Court authorizing service upon Heras outside of
certain of such facts because she held office at Caxton Hong Kong, particularly in Manila or any other place in
House up to the first quarter of 1985. the Philippines (p. 9, TSN, 2/14/90); that there must be
adequate proof of service of summons, otherwise the
Mr. Lousich was presented as an expert on the laws of Hong Kong Court will refuse to render judgment (p. 10,
Hong Kong, and as a representative of the law office of ibid); that the mere fact that the Hong Kong Court
the defendants counsel who made a verification of the rendered judgment, it can be presumed that there was
record of the case filed by the plaintiff in Hong Kong service of summons; that in this case, it is not just a
against the defendant, as well as the procedure in presumption because there was an affidavit stating that
serving Court processes in Hong Kong. service was effected in [sic] a particular man here in
Manila; that such affidavit was filed by one Jose R.
In his affidavit (Exh. 2) which constitutes his direct Fernandez of the firm Sycip Salazar on the 21st of
testimony, the said witness stated that: December 1984, and stated in essence that on Friday,
the 23rd of November 1984 he served the 4th defendant
The defendant was sued on the basis of his
at No. 6 First Street, Quezon City by leaving it at that
personal guarantee of the obligations of
address with Mr. Dionisio Lopez, the son-in-law of the
Compania Hermanos de Navegacion S.A.
4th defendant the copy of the writ and Mr. Lopez
There is no record that a writ of summons
informed me and I barely believed that he would bring
was served on the person of the defendant
the said writ to the attention of the 4th defendant (pp.
in Hong Kong, or that any such attempt at
11-12, ibid.); that upon filing of that affidavit, the Court
service was made. Likewise, there is no
was asked and granted judgment against the 4th
record that a copy of the judgment of the
defendant; and that if the summons or claim is not
High Court was furnished or served on the
contested, the claimant of the plaintiff is not required to
defendant; anyway, it is not a legal
present proof of his claim or complaint or present
requirement to do so under Hong Kong
evidence under oath of the claim in order to obtain
laws;
judgment; and that such judgment can be enforced in
a) The writ of summons or claim can the same manner as a judgment rendered after full
be served by the solicitor (lawyer) hearing.
of the claimant or plaintiff. In
Hong Kong there are no Court The trial court held that since the Hong Kong court judgment had
personnel who serve writs of been duly proved, it is a presumptive evidence of a right as
summons and/or most other between the parties; hence, the party impugning it had the burden
processes. to prove want of jurisdiction over his person. HERAS failed to
discharge that burden. He did not testify to state categorically and
b) If the writ of summons or claim (or
under oath that he never received summons. Even his own witness
complaint) is not contested, the
Lousich admitted that HERAS was served with summons in his
claimant or the plaintiff is not
Quezon City residence. As to De la Vegas testimony regarding
required to present proof of his
non-service of summons, the same was hearsay and had no
claim or complaint nor present
probative value.
evidence under oath of the claim
in order to obtain a Judgment.
As to HERAS contention that the Hong Kong court judgment
c) There is no legal requirement that violated the Constitution and the procedural laws of the Philippines
such a Judgment or decision because it contained no statements of the facts and the law on
rendered by the Court in Hong which it was based, the trial court ruled that since the issue related
Kong [to] make a recitation of the to procedural matters, the law of the forum, i.e., Hong Kong laws,
facts or the law upon which the should govern. As testified by the expert witness Lousich, such
claim is based. legalities were not required under Hong Kong laws. The trial court
also debunked HERAS contention that the principle of excussion
d) There is no necessity to furnish the
under Article 2058 of the Civil Code of the Philippines was violated.
defendant with a copy of the
It declared that matters of substance are subject to the law of the
Judgment or decision rendered
place where the transaction occurred; in this case, Hong Kong
against him.
laws must govern.

Page 35 of 84
The trial court concluded that the Hong Kong court judgment serve summons on HERAS in Hong Kong, the Hong Kong
should be recognized and given effect in this jurisdiction for failure Supreme Court did not acquire jurisdiction over HERAS.
of HERAS to overcome the legal presumption in favor of the Nonetheless, it did not totally foreclose the claim of ASIAVEST;
foreign judgment. It then decreed; thus: thus:

WHEREFORE, judgment is hereby rendered ordering While We are not fully convinced that [HERAS] has a
defendant to pay to the plaintiff the following sums or meritorious defense against [ASIAVESTs] claims or
their equivalents in Philippine currency at the time of that [HERAS] ought to be absolved of any liability,
payment: US$1,810,265.40 plus interest on the sum nevertheless, in view of the foregoing discussion, there
of US$1,500,000.00 at 9.875% per annum from is a need to deviate from the findings of the lower court
October 31, 1984 to December 28, 1984, and HK$905 in the interest of justice and fair play. This, however, is
as fixed cost, with legal interests on the aggregate without prejudice to whatever action [ASIAVEST] might
amount from December 28, 1984, and to pay deem proper in order to enforce its claims against
attorneys fees in the sum of P80,000.00. [HERAS].

ASIAVEST moved for the reconsideration of the decision. It sought Finally, the Court of Appeals also agreed with HERAS that it was
an award of judicial costs and an increase in attorneys fees in the necessary that evidence supporting the validity of the foreign
amount of US$19,346.45 with interest until full payment of the said judgment be submitted, and that our courts are not bound to give
obligations. On the other hand, HERAS no longer opposed the effect to foreign judgments which contravene our laws and the
motion and instead appealed the decision to the Court of Appeals, principle of sound morality and public policy.
which docketed the appeal as CA-G.R. CV No. 29513.
ASIAVEST forthwith filed the instant petition alleging that the Court
In its order[2] November 1990, the trial court granted ASIAVESTs of Appeals erred in ruling that
motion for reconsideration by increasing the award of attorneys
fees to US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
I.
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT, provided
that ASIAVEST would pay the corresponding filing fees for the
increase. ASIAVEST appealed the order requiring prior payment of IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT
filing fees. However, it later withdrew its appeal and paid the EVIDENCE SUPPORTING THE VALIDITY OF THE
additional filing fees. JUDGMENT;
II.
On 3 April 1997, the Court of Appeals rendered its decision[3]
reversing the decision of the trial court and dismissing ASIAVESTs THE SERVICE OF SUMMONS ON [HERAS] WAS
complaint without prejudice. It underscored the fact that a foreign DEFECTIVE UNDER PHILIPPINE LAW;
judgment does not of itself have any extraterritorial application. For
it to be given effect, the foreign tribunal should have acquired III.
jurisdiction over the person and the subject matter. If such tribunal SUMMONS SHOULD HAVE BEEN PERSONALLY
has not acquired jurisdiction, its judgment is void. SERVED ON HERAS IN HONG KONG;

The Court of Appeals agreed with the trial court that matters of IV.
remedy and procedure such as those relating to service of THE HONG KONG SUMMONS SHOULD HAVE BEEN
summons upon the defendant are governed by the lex fori, which SERVED WITH LEAVE OF PHILIPPINE COURTS;
was, in this case, the law of Hong Kong. Relative thereto, it gave
weight to Lousichs testimony that under the Hong Kong law, the V.
substituted service of summons upon HERAS effected in the
Philippines by the clerk of Sycip Salazar Hernandez & Gatmaitan THE FOREIGN JUDGMENT CONTRAVENES
firm would be valid provided that it was done in accordance with PHILIPPINE LAWS, THE PRINCIPLES OF SOUND
Philippine laws. It then stressed that where the action is in MORALITY, AND THE PUBLIC POLICY OF THE
personam and the defendant is in the Philippines, the summons PHILIPPINES.
should be personally served on the defendant pursuant to Section
7, Rule 14 of the Rules of Court.[4] Substituted service may only Being interrelated, we shall take up together the assigned errors.
be availed of where the defendant cannot be promptly served in
person, the fact of impossibility of personal service should be
explained in the proof of service. It also found as persuasive Under paragraph (b) of Section 50, Rule 39 of the Rules of
HERAS argument that instead of directly using the clerk of the Court,[5] which was the governing law at the time this case was
Sycip Salazar Hernandez & Gatmaitan law office, who was not decided by the trial court and respondent Court of Appeals, a
authorized by the judge of the court issuing the summons, foreign judgment against a person rendered by a court having
ASIAVEST should have asked for leave of the local courts to have jurisdiction to pronounce the judgment is presumptive evidence of
the foreign summons served by the sheriff or other court officer of a right as between the parties and their successors in interest by
the place where service was to be made, or for special reasons by the subsequent title. However, the judgment may be repelled by
any person authorized by the judge. evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
The Court of Appeals agreed with HERAS that notice sent outside
the state to a non-resident is unavailing to give jurisdiction in an Also, Section 3(n) of Rule 131 of the New Rules of Evidence
action against him personally for money recovery. Summons provides that in the absence of proof to the contrary, a court, or
should have been personally served on HERAS in Hong Kong, for, judge acting as such, whether in the Philippines or elsewhere, is
as claimed by ASIAVEST, HERAS was physically present in Hong presumed to have acted in the lawful exercise of jurisdiction.
Kong for nearly 14 years. Since there was not even an attempt to
Page 36 of 84
Hence, once the authenticity of the foreign judgment is proved, the Nevertheless, the testimony of an expert witness may be allowed
burden to repel it on grounds provided for in paragraph (b) of to prove a foreign law. An authority[12] on private international law
Section 50, Rule 39 of the Rules of Court is on the party thus noted:
challenging the foreign judgment -- HERAS in this case.
Although it is desirable that foreign law be proved in
At the pre-trial conference, HERAS admitted the existence of the accordance with the above rule, however, the Supreme
Hong Kong judgment. On the other hand, ASIAVEST presented Court held in the case of Willamette Iron and Steel
evidence to prove rendition, existence, and authentication of the Works v. Muzzal,[13] that Section 41, Rule 123
judgment by the proper officials. The judgment is thus presumed to (Section 25, Rule 132 of the Revised Rules of Court)
be valid and binding in the country from which it comes, until the does not exclude the presentation of other competent
contrary is shown.[6] Consequently, the first ground relied upon by evidence to prove the existence of a foreign law. In that
ASIAVEST has merit. The presumption of validity accorded foreign case, the Supreme Court considered the testimony
judgment would be rendered meaningless were the party seeking under oath of an attorney-at-law of San Francisco,
to enforce it be required to first establish its validity. California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force
The main argument raised against the Hong Kong judgment is that at the time the obligations were contracted, as
sufficient evidence to establish the existence of said
the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons law. Accordingly, in line with this view, the Supreme
Court in the Collector of Internal Revenue v. Fisher et
was properly and validly served on HERAS. It is settled that
matters of remedy and procedure such as those relating to the al.,[14] upheld the Tax Court in considering the
service of process upon the defendant are governed by the lex fori pertinent law of California as proved by the
or the law of the forum,[7] i.e., the law of Hong Kong in this case. respondents witness. In that case, the counsel for
HERAS insisted that according to his witness Mr. Lousich, who respondent testified that as an active member of the
was presented as an expert on Hong Kong laws, there was no California Bar since 1951, he is familiar with the
valid service of summons on him. revenue and taxation laws of the State of California.
When asked by the lower court to state the pertinent
California law as regards exemption of intangible
In his counter-affidavit,[8] which served as his direct testimony per personal properties, the witness cited Article 4, Sec.
agreement of the parties,[9] Lousich declared that the record of the 13851 (a) & (b) of the California Internal and Revenue
Hong Kong case failed to show that a writ of summons was served Code as published in Derrings California Code, a
upon HERAS in Hong Kong or that any such attempt was made. publication of Bancroft-Whitney Co., Inc. And as part of
Neither did the record show that a copy of the judgment of the his testimony, a full quotation of the cited section was
court was served on HERAS. He stated further that under Hong offered in evidence by respondents. Likewise, in
Kong laws (a) a writ of summons could be served by the solicitor of several naturalization cases, it was held by the Court
the claimant or plaintiff; and (b) where the said writ or claim was that evidence of the law of a foreign country on
not contested, the claimant or plaintiff was not required to present reciprocity regarding the acquisition of citizenship,
proof under oath in order to obtain judgment. although not meeting the prescribed rule of practice,
may be allowed and used as basis for favorable action,
On cross-examination by counsel for ASIAVEST, Lousich testified if, in the light of all the circumstances, the Court is
that the Hong Kong court authorized service of summons on satisfied of the authenticity of the written proof
HERAS outside of its jurisdiction, particularly in the Philippines. He offered.[15] Thus, in a number of decisions, mere
admitted also the existence of an affidavit of one Jose R. authentication of the Chinese Naturalization Law by the
Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm Chinese Consulate General of Manila was held to be
stating that he (Fernandez) served summons on HERAS on 13 competent proof of that law.[16]
November 1984 at No. 6, 1st St., Quezon City, by leaving a copy
with HERASs son-in-law Dionisio Lopez.[10] On redirect There is, however, nothing in the testimony of Mr. Lousich that
examination, Lousich declared that such service of summons touched on the specific law of Hong Kong in respect of service of
would be valid under Hong Kong laws provided that it was in summons either in actions in rem or in personam, and where the
accordance with Philippine laws.[11] defendant is either a resident or nonresident of Hong Kong. In view
of the absence of proof of the Hong Kong law on this particular
We note that there was no objection on the part of ASIAVEST on issue, the presumption of identity or similarity or the so-called
the qualification of Mr. Lousich as an expert on the Hong Kong law. processual presumption shall come into play. It will thus be
Under Sections 24 and 25, Rule 132 of the New Rules of presumed that the Hong Kong law on the matter is similar to the
Evidence, the record of public documents of a sovereign authority, Philippine law.[17]
tribunal, official body, or public officer may be proved by (1) an
official publication thereof or (2) a copy attested by the officer As stated in Valmonte vs. Court of Appeals,[18] it will be helpful to
having the legal custody thereof, which must be accompanied, if determine first whether the action is in personam, in rem, or quasi
the record is not kept in the Philippines, with a certificate that such in rem because the rules on service of summons under Rule 14 of
officer has the custody. The certificate may be issued by a the Rules of Court of the Philippines apply according to the nature
secretary of the embassy or legation, consul general, consul, vice of the action.
consul, or consular agent, or any officer in the foreign service of
the Philippines stationed in the foreign country in which the record
An action in personam is an action against a person on the basis
is kept, and authenticated by the seal of his office. The attestation
must state, in substance, that the copy is a correct copy of the of his personal liability. An action in rem is an action against the
thing itself instead of against the person.[19] An action quasi in
original, or a specific part thereof, as the case may be, and must
be under the official seal of the attesting officer. rem is one wherein an individual is named as defendant and the
purpose of the proceeding is to subject his interest therein to the
obligation or lien burdening the property.[20]

Page 37 of 84
In an action in personam, jurisdiction over the person of the defendants, so as to sustain a money judgment, must be based
defendant is necessary for the court to validly try and decide the upon personal service of summons within the state which renders
case. Jurisdiction over the person of a resident defendant who the judgment.[35]
does not voluntarily appear in court can be acquired by personal
service of summons as provided under Section 7, Rule 14 of the For its part, ASIAVEST, in its Opposition to the Motion to
Rules of Court. If he cannot be personally served with summons Dismiss[36] contended: The question of Hong Kong courts want of
within a reasonable time, substituted service may be made in jurisdiction is therefore a triable issue if it is to be pleaded by the
accordance with Section 8 of said Rule. If he is temporarily out of defendant to repel the foreign judgment. Facts showing
the country, any of the following modes of service may be resorted jurisdictional lack (e.g. that the Hong Kong suit was in personam,
to: (1) substituted service set forth in Section 8;[21] (2) personal that defendant was not a resident of Hong Kong when the suit was
service outside the country, with leave of court; (3) service by filed or that he did not voluntarily submit to the Hong Kong courts
publication, also with leave of court;[22] or (4) any other manner jurisdiction) should be alleged and proved by the defendant.[37]
the court may deem sufficient.[23]

In his Reply (to the Opposition to Motion to Dismiss),[38] HERAS


However, in an action in personam wherein the defendant is a non- argued that the lack of jurisdiction over his person was
resident who does not voluntarily submit himself to the authority of corroborated by ASIAVESTs allegation in the complaint that he
the court, personal service of summons within the state is essential
has his residence at No. 6, 1st St., New Manila, Quezon City,
to the acquisition of jurisdiction over her person.[24] This method Philippines. He then concluded that such judicial admission
of service is possible if such defendant is physically present in the
amounted to evidence that he was and is not a resident of Hong
country. If he is not found therein, the court cannot acquire Kong.
jurisdiction over his person and therefore cannot validly try and
decide the case against him.[25] An exception was laid down in
Gemperle v. Schenker[26] wherein a non-resident was served with Significantly, in the pre-trial conference, the parties came up with
summons through his wife, who was a resident of the Philippines stipulations of facts, among which was that the residence of
and who was his representative and attorney-in-fact in a prior civil defendant, Antonio Heras, is New Manila, Quezon City.[39]
case filed by him; moreover, the second case was a mere offshoot
of the first case. We note that the residence of HERAS insofar as the action for the
enforcement of the Hong Kong court judgment is concerned, was
On the other hand, in a proceeding in rem or quasi in rem, never in issue. He never challenged the service of summons on
jurisdiction over the person of the defendant is not a prerequisite to him through a security guard in his Quezon City residence and
confer jurisdiction on the court provided that the court acquires through a lawyer in his office in that city. In his Motion to Dismiss,
jurisdiction over the res. Nonetheless, summons must be served he did not question the jurisdiction of the Philippine court over his
upon the defendant not for the purpose of vesting the court with person on the ground of invalid service of summons. What was in
jurisdiction but merely for satisfying the due process issue was his residence as far as the Hong Kong suit was
requirements.[27] Thus, where the defendant is a non-resident concerned. We therefore conclude that the stipulated fact that
who is not found in the Philippines and (1) the action affects the HERAS is a resident of New Manila, Quezon City, Philippines
personal status of the plaintiff; (2) the action relates to, or the refers to his residence at the time jurisdiction over his person was
subject matter of which is property in the Philippines in which the being sought by the Hong Kong court. With that stipulation of fact,
defendant has or claims a lien or interest; (3) the action seeks the ASIAVEST cannot now claim that HERAS was a resident of Hong
exclusion of the defendant from any interest in the property located Kong at the time.
in the Philippines; or (4) the property of the defendant has been
attached in the Philippines -- service of summons may be effected Accordingly, since HERAS was not a resident of Hong Kong and
by (a) personal service out of the country, with leave of court; (b) the action against him was, indisputably, one in personam,
publication, also with leave of court; or (c) any other manner the summons should have been personally served on him in Hong
court may deem sufficient.[28] Kong. The extraterritorial service in the Philippines was therefore
invalid and did not confer on the Hong Kong court jurisdiction over
In the case at bar, the action filed in Hong Kong against HERAS his person. It follows that the Hong Kong court judgment cannot be
was in personam, since it was based on his personal guarantee of given force and effect here in the Philippines for having been
the obligation of the principal debtor. Before we can apply the rendered without jurisdiction.
foregoing rules, we must determine first whether HERAS was a
resident of Hong Kong. Even assuming that HERAS was formerly a resident of Hong
Kong, he was no longer so in November 1984 when the
Fortunata de la Vega, HERASs personal secretary in Hong Kong extraterritorial service of summons was attempted to be made on
since 1972 until 1985,[29] testified that HERAS was the President him. As declared by his secretary, which statement was not
and part owner of a shipping company in Hong Kong during all disputed by ASIAVEST, HERAS left Hong Kong in October 1984
those times that she served as his secretary. He had in his employ for good.[40] His absence in Hong Kong must have been the
a staff of twelve.[30] He had business commitments, undertakings, reason why summons was not served on him therein; thus,
conferences, and appointments until October 1984 when [he] left ASIAVEST was constrained to apply for leave to effect service in
Hong Kong for good.[31] HERASs other witness, Russel Warren the Philippines, and upon obtaining a favorable action on the
Lousich, testified that he had acted as counsel for HERAS for a matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan
number of commercial matters.[32] ASIAVEST then infers that law firm to serve the summons here in the Philippines.
HERAS was a resident of Hong Kong because he maintained a
business there. In Brown v. Brown, the defendant was previously a resident of the
Philippines. Several days after a criminal action for concubinage
It must be noted that in his Motion to Dismiss,[33] as well as in his was filed against him, he abandoned the Philippines. Later, a
Answer[34] to ASIAVESTs complaint for the enforcement of the proceeding quasi in rem was instituted against him. Summons in
Hong Kong court judgment, HERAS maintained that the Hong the latter case was served on the defendants attorney-in-fact at the
Kong court did not have jurisdiction over him because the latters address. The Court held that under the facts of the case, it
fundamental rule is that jurisdiction in personam over non-resident could not be said that the defendant was still a resident of the
Page 38 of 84
Philippines because he ha[d] escaped to his country and [was] transhipment to Hongkong. The request was
therefore an absentee in the Philippines. As such, he should have approved by the Bureau of Customs.8
been summoned in the same manner as one who does not reside [Records, Vol. 1, pp. 27-31.] Despite the
and is not found in the Philippines. approval, the customs personnel boarded the
vessel when it docked on January 7, 1989, on
Similarly, HERAS, who was also an absentee, should have been suspicion that it was the hijacked M/V Silver
served with summons in the same manner as a non-resident not Med owned by Med Line Philippines Co., and
found in Hong Kong. Section 17, Rule 14 of the Rules of Court that its cargo would be smuggled into the
providing for extraterritorial service will not apply because the suit country.9 [Records, Vol. 1, p. 32.] The district
against him was in personam. Neither can we apply Section 18, customs collector seized said vessel and its
which allows extraterritorial service on a resident defendant who is cargo pursuant to Section 2301, Tariff and
temporarily absent from the country, because even if HERAS be Customs Code. A notice of hearing of SFLU
Seizure Identification No. 3-89 was served on
considered as a resident of Hong Kong, the undisputed fact
remains that he left Hong Kong not only temporarily but for good. its consignee, Singkong Trading Co. of
Hongkong, and its shipper, Dusit International
Co., Ltd. of Thailand.
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered
DENYING the petition in this case and AFFIRMING the assailed
judgment of the Court of Appeals in CA-G.R. CV No. 29513. While seizure proceedings were ongoing, La
Union was hit by three typhoons, and the
vessel ran aground and was abandoned. On
No costs. June 8, 1989, its authorized representative,
Frank Cadacio, entered into salvage agreement
SO ORDERED. with private respondent to secure and repair the
vessel at the agreed consideration of $1 million
and "fifty percent (50%) [of] the cargo after all
BANCO DO BRASIL, petitioner, vs. THE COURT OF APPEALS, expenses, cost and taxes."10 [Records, Vol. 1,
HON. ARSENIO M. GONONG, and CESAR S. URBINO, SR., pp. 36-39.]
respondents.; [G.R. Nos. 121576-78. June 16, 2000]; DE LEON,
JR., J.: Finding that no fraud was committed, the
District Collector of Customs, Aurelio M. Quiray,
Before us is a petition for review on certiorari of the Decision1 lifted the warrant of seizure on July 1989.11
[Penned by Associate Justice Jainal D. Rasul and concurred in by [Decision dated July 17, 1989, in SFLU Seizure
Associate Justices Segundino G. Chua and Consuelo Ynares- Identification No. 3-89; Records, Vol. 1, pp. 54-
Santiago, now Associate Justice of the Supreme Court, in CA-G.R. 68.] However, in a Second Indorsement dated
S.P. Nos. 24669, 28387 & 29317, Rollo, pp. 33-47.] and the November 11, 1989, then Customs
Resolution2 [Id., pp. 49-53.] of the Court of Appeals3 [Former Commissioner Salvador M. Mison declined to
Special Eighth Division.] dated July 19, 1993 and August 15, 1995, issue a clearance for Quirays Decision; instead,
respectively, which reinstated the entire Decision4 [Penned by he forfeited the vessel and its cargo in
Judge Arsenio M. Gonong, Civil Case No. 89-51451, Records, Vol. accordance with Section 2530 of the Tariff and
2, pp. 517-528.] dated February 18, 1991 of the Regional Trial Customs Code.12 [2nd Indorsement dated
Court of Manila, Branch 8, holding, among others, petitioner Banco November 1989; Records, Vol. 1, pp. 70-71.]
do Brasil liable to private respondent Cesar Urbino, Sr. for Accordingly, acting District Collector of
damages amounting to $300,000.00.5 [The Appellate Court Customs John S. Sy issued a Decision
erroneously declared in its decision that the amount of decreeing the forfeiture and the sale of the
P300,000.00 was awarded by the trial court, Rollo, p. 36.] cargo in favor of the government.13 [Decision
dated November 17, 1989, Records, Vol. 1, pp.
74-86.]
At the outset, let us state that this case should have been
consolidated with the recently decided case of Vlason Enterprises
Corporation v. Court of Appeals and Duraproof Services, To enforce its preferred salvors lien, herein
represented by its General Manager, Cesar Urbino Sr.6 [G.R. Nos. Private Respondent Duraproof Services filed
121662-64, July 6, 1999, Third Division, penned by Associate with the Regional Trial Court of Manila a
Justice Artemio V. Panganiban and concurred in by Associate Petition for Certiorari, Prohibition and
Justices Jose C. Vitug, Fidel P. Purisima, and Minerva P. Mandamus14 [Docketed as Civil Case No. 89-
Gonzaga-Reyes.], for these two (2) cases involved the same 51451 and raffled to Branch 8; Records, Vol. 1,
material antecedents, though the main issue proffered in the pp. 1-26.] assailing the actions of
present petition vary with the Vlason case. Commissioner Mison and District Collector Sy.
Also impleaded as respondents were PPA
Representative Silverio Mangaoang and Med
The material antecedents, as quoted from the Vlason7 [Decision in
Line Philippines, Inc.
G.R. Nos. 121662-64, pp. 3-13.] case, are:

On January 10, 1989, private respondent


Poro Point Shipping Services, then acting as
amended its Petition15 [Ibid., pp. 122-145.] to
the local agent of Omega Sea Transport
include former District Collector Quiray; PPA
Company of Honduras & Panama, a
Port Manager Adolfo Ll. Amor, Jr.; x Vlason
Panamanian Company (hereafter referred to as
Enterprises as represented by its president,
Omega), requested permission for its vessel
Vicente Angliongto; Singkong Trading
M/V Star Ace, which had engine trouble, to
Company as represented by Atty. Eddie
unload its cargo and to store it at the Philippine
Tamondong; Banco Du Brasil; Dusit
Ports Authority (PPA) compound in San
International Co.; Thai-Nan Enterprises Ltd.,
Fernando, La Union while awaiting
Page 39 of 84
and Thai-United Trading Co., Ltd.16 [Amended with Supplemental Petition" against Singkong
Petition, id., pp. 122 & 128-129.] x x x Trading Company; and Omega and M/V Star
Ace,28 [Records, Vol. 2, pp. 414-415.] to which
Cadacio and Rada filed a Joint Answer.29
Summonses for the amended Petition were
served on Atty. Joseph Capuyan for Med Line [Ibid., pp. 425-288.]
Philippines: Anglionto (through his secretary,
Betty Bebero), Atty. Tamondong and Declared in default in an Order issued by the
Commissioner Mison.17 [Sheriffs Return, id., trial court on January 23, 1991, were the
pp. 160-164 & 171.] Upon motion of the private following: Singkong Trading Co., Commissioner
respondent, the trial court allowed summons by Mison, M/V Star Ace and Omega.30 [Id., p.
publication to be served upon defendants who 506.] Private respondent filed, and the trial
were not residents and had no direct court granted, an ex parte Motion to present
representative in the country.18 [Id., pp. 153- evidence against the defaulting respondents.31
156.] [Order dated December 10, 1990, id., p. 492.]
Only private respondent, Atty. Tamondong,
On January 29, 1990, private respondent Commissioner Mison, Omega and M/V Star
Ace appeared in the next pretrial hearing; thus,
moved to declare respondents in default, but
the trial court denied the motion in its February the trial court declared the other respondents in
default and allowed private respondent to
23, 1990 Order19 [Id., pp. 214-215.], because
Mangaoang and Amor had jointly filed a Motion present evidence against them.32 [Order dated
to Dismiss, while Mison and Med Line had January 23, 1991, Records, Vol. 2, p. 506. The
moved separately for an extension to file a records (pp. 493-495), however, show that only
similar motion.20 [Eventually, both separately Duraproof Service, Singkong Trading and M/V
filed their motions to dismiss.] Later it rendered Star Ace were served summons.] Cesar Urbino,
an Order dated July 2, 1990, giving due course general manager of private respondent,
to the motions to dismiss filed by Mangaoang testified and adduced evidence against the
and Amor on the ground of litis pendentia, and other respondents, x x x.33 [RTC Decision, p.
7; Rollo, p. 92; penned by Judge Arsenio M.
by the commissioner and district collector of
customs on the ground of lack of jurisdiction.21 Gonong.]
[Records, Vol. 1, pp. 325-326.] In another
Order, the trial court dismissed the action On December 29, 1990, private respondent and
against Med Line Philippines on the ground of Rada, representing Omega, entered into a
litis pendentia.22 [Order dated September 10, Memorandum of Agreement stipulating that
1990; Records, Vol. 2, p. 359.] Rada would write and notify Omega regarding
the demand for salvage fees of private
On two other occasions, private respondent respondent; and that if Rada did not receive
again moved to declare the following in default: any instruction from his principal, he would
[Vlason], Quiray, Sy and Mison on March 26, assign the vessel in favor of the salvor.34
1990;23 [Records, Vol. 1, pp. 237-238.] and [Memorandum of Agreement, id., pp. 511-512.]
Banco [do] Bra[s]il, Dusit International Co., Inc.,
Thai-Nan Enterprises Ltd. and Thai-United On February 18, 1991, the trial court
Trading Co., Ltd. on August 24, 1990.24 [Ibid., disposed as follows:
pp. 351-352.] There is no record, however, that
the trial court acted upon the motions. On "WHEREFORE, IN VIEW OF THE
September 18, 1990, [private respondent] filed FOREGOING, based on the
another Motion for leave to amend the allegations, prayer and evidence
petition,25 [Records, Vol. 2, pp. 370-371.]
adduced, both testimonial and
alleging that its counsel failed to include documentary, the Court is convinced,
"necessary and/or indispensable parties":
that, indeed, defendants/respondents
Omega represented by Cadacio; and M/V Star are liable to [private respondent] in
Ace represented by Capt. Nahon Rada, relief the amount as prayed for in the
captain. Aside from impleading these additional petition for which it renders judgment
respondents, private respondent also alleged in as follows:
the Second (actually, third) Amended Petition26
[Motion for Leave to Admit Second Amended
Petition and Supplemental Petition, ibid., p. 1. Respondent M/V Star Ace, represented by
370; Second Amended Petition with Capt. Nahum Rada, [r]elief [c]aptain of the
Supplemental Petition, ibid., pp. 372-398.] that vessel and Omega Sea Transport Company,
the owners of the vessel intended to transfer Inc., represented by Frank Cadacio[,] is ordered
and alienate their rights and interest over the to refrain from alienating or [transferring] the
vessel and its cargo, to the detriment of the vessel M/V Star Ace to any third parties;
private respondent.
2. Singkong Trading Company to pay the
The trial court granted leave to private following:
respondent to amend its Petition, but only to
exclude the customs commissioner and the a. Taxes due the government;
district collector.27 [Order dated September 28,
1990, Records, Vol. 2, p. 407.] Instead, private
respondent filed the "Second Amended Petition
Page 40 of 84
b. Salvage fees on the vessel in the amount of On April 10, 1991, petitioner Banco do Brasil filed, by special
$1,000,000.00 based on xxx Lloyds Standard appearance, an Urgent Motion to Vacate Judgement and to
Form of Salvage Agreement; Dismiss Case38 [Rollo, pp. 67-73.] on the ground that the
February 18, 1991 Decision of the trial court is void with respect to
c. Preservation, securing and guarding fees on it for having been rendered without validly acquiring jurisdiction
the vessel in the amount of $225,000.00; over the person of Banco do Brasil. Petitioner subsequently
amended its petition39 [Rollo, pp. 74-80.] to specifically aver that
its special appearance is solely for the purpose of questioning the
d. Maintenance fees in the amount of Courts exercise of personal jurisdiction.
P2,685,000.00;
On May 20, 1991, the trial court issued an Order40 [Rollo, pp. 81-
e. Salaries of the crew from August 16, 1989 to 82.] acting favorably on petitioners motion and set aside as against
December 1989 in the amount of $43,000.00 petitioner the decision dated February 18, 1991 for having been
and unpaid salaries from January 1990 up to rendered without jurisdiction over Banco do Brasils person. Private
the present; respondent sought reconsideration41 [Records, Vol. 3, pp. 103-
105.] of the Order dated May 20, 1991. However, the trial court in
f. Attorneys fees in the amount of P656,000.00; an Order42 [Rollo, p. 83.] dated June 21, 1991 denied said motion.

3. [Vlason] Enterprises to pay [private Meanwhile, a certiorari petition43 [Docketed as CA-G.R. SP No.
respondent] in the amount of P3,000,000.00 for 24669.] was filed by private respondent before public respondent
damages; Court of Appeals seeking to nullify the cease and desist Order
dated April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2)
more separate petitions for certiorari were subsequently filed by
4. Banco [Du] Brasil to pay [private respondent] private respondent. The second petition44 [Docketed as CA-G.R.
in the amount of $300,000.00 in damages;35 SP No. 28387.] sought to nullify the Order45 [Penned by Judge
[Italics supplied.] and finally, Bernardo P. Pardo, then Executive Judge, and now Associate
Justice of the Supreme Court.] dated June 26, 1992 setting aside
5. Costs of [s]uit." the Deputy Sheriffs return dated April 1, 1991 as well as the
certificate of sale issued by Deputy Sheriff Camañgon. The third
petition46 [Docketed as CA-G.R. SP No. 29317.] sought to nullify
Subsequently, upon the motion of Omega, the Order dated October 5, 1992 of the Court of Tax Appeals
Singkong Trading Co., and private respondent, directing the Commissioner of Customs to place Bureau of
the trial court approved a Compromise Customs and PNP officers and guards to secure the M/V Star Ace
Agreement36 [Records, Vol. 2, pp. 535-538.] and its cargoes, make inventory of the goods stored in the
among the movants, reducing by 20 percent the premises as indicated to belong to the private respondent.
amounts adjudged. For their part, respondents- Likewise challenged was the Order dated August 17, 1992
movants agreed not to appeal the Decision.37 authorizing the sale of M/V Star Ace and its cargoes.
[Order dated March 6, 1991, ibid., pp. 539-541.
Private respondent entered into two separate
compromise agreements with Singkong Trading These three (3) petitions were consolidated and on July 19, 1993,
Co. (id., pp. 535-536) and another with Omega the appellate court rendered its Decision47 [See Note 1, supra.]
(id., pp. 537-538). Both agreements were dated granting private respondents petitions, thereby nullifying and
March 4, 1991.] On March 8, 1991, private setting aside the disputed orders and effectively "giving way to the
respondent moved for the execution of entire [decision dated February 18, 1991 of the x x x Regional Trial
judgment, claiming that the trial court Decision Court of Manila, Branch 8, in Civil Case No. 89-51451 which
had already become final and executory. The remains valid, final and executory, if not yet wholly executed."48
Motion was granted and a Writ of Execution [Rollo, p. 46.]
was issued. To satisfy the Decision, Sheriffs
Jorge Victorino, Amado Sevilla and Dionisio Private respondent Urbino, Vlason Enterprises and petitioner
Camañgon were deputized on March 13, 1991 Banco do Brasil filed separate motions for reconsideration. For its
to levy and to sell on execution the defendants part, petitioner Banco do Brasil sought reconsideration, insofar as
vessel and personal property. its liability for damages, on the ground that there was no valid
service of summons as service was on the wrong party the
xxx ambassador of Brazil. Hence, it argued, the trial court did not
acquire jurisdiction over petitioner Banco do Brasil.49 [Rollo, pp.
107.] Nonetheless, the appellate court denied the motions for
On March 18, 1991, the Bureau of Customs reconsideration in its Resolution50 [See Note 2, supra.] dated
also filed an ex parte Motion to recall the August 15, 1995.
execution, and to quash the notice of levy and
the sale on execution. Despite this Motion, the
auction sale was conducted on March 21, 1991 Hence, the instant petition.
by Sheriff Camañgon, with private respondent
submitting the winning bid. The trial court Petitioner Banco do Brasil takes exception to the appellate courts
ordered the deputy sheriffs to cease and desist declaration that the suit below is in rem, not in personam,51 [Rollo,
from implementing the Writ of Execution and pp. 19-21.] thus, service of summons by publication was sufficient
from levying on the personal property of the for the court to acquire jurisdiction over the person of petitioner
defendants. Nevertheless, Sheriff Camañgon Banco do Brasil, and thereby liable to private respondent Cesar
issued the corresponding Certificate of Sale on Urbino for damages claimed, amounting to $300,000.00. Petitioner
March 27, 1991. further challenges the finding that the February 18, 1991 decision

Page 41 of 84
of the trial court was already final and thus, cannot be modified or [1939].] This cannot be done, however, if the defendant is not
assailed.52 [Rollo, p. 22-23.] physically present in the country, and thus, the court cannot
acquire jurisdiction over his person and therefore cannot validly try
and decide the case against him.58 [Asiavest Limited v. Court of
Petitioner avers that the action filed against it is an action for
damages, as such it is an action in personam which requires Appeals, supra. at 554.]
personal service of summons be made upon it for the court to
acquire jurisdiction over it. However, inasmuch as petitioner Banco In the instant case, private respondents suit against petitioner is
do Brasil is a non-resident foreign corporation, not engaged in premised on petitioners being one of the claimants of the subject
business in the Philippines, unless it has property located in the vessel M/V Star Ace.59 [Records, Vol. 1, pp. 128-129.] Thus, it can
Philippines which may be attached to convert the action into an be said that private respondent initially sought only to exclude
action in rem, the court cannot acquire jurisdiction over it in respect petitioner from claiming interest over the subject vessel M/V Star
of an action in personam. Ace. However, private respondent testified during the presentation
of evidence that, for being a nuisance defendant, petitioner caused
The petition bears merit, thus the same should be as it is hereby irreparable damage to private respondent in the amount of
granted. $300,000.00.60 [Records, Vol. 2, p. 567.] Therefore, while the
action is in rem, by claiming damages, the relief demanded went
beyond the res and sought a relief totally alien to the action.
First. When the defendant is a nonresident and he is not found in
the country, summons may be served extraterritorially in
accordance with Rule 14, Section 1753 [Section 17. Extraterritorial It must be stressed that any relief granted in rem or quasi in rem
service When the defendant does not reside and is not found in the actions must be confined to the res, and the court cannot lawfully
render a personal judgment against the defendant.61 [Villareal v.
Philippines and the action affects the personal status of the plaintiff
or relates to, or the subject of which, is property within the Court of Appeals, 295 SCRA 511, 525 [1998].] Clearly, the
publication of summons effected by private respondent is invalid
Philippines, in which the defendant has or claims a lien or interest,
actual or contingent, or in which relief demanded consists, wholly and ineffective for the trial court to acquire jurisdiction over the
or in part, in excluding the defendant from any interest therein, or person of petitioner, since by seeking to recover damages from
the property of the defendant has been attached in the Philippines, petitioner for the alleged commission of an injury to his person or
service may, by leave of court, be effected out of the Philippines by property62 [The Dial Corporation v. Soriano, supra. at 742 citing
personal service as under section 7; or by publication in a Hernandez v. Development Bank of the Phil., 71 SCRA 290, 292-
newspaper of general circulation in such places and for such time 293 [1976].] caused by petitioners being a nuisance defendant,
as the court may order, in which case a copy of the summons and private respondents action became in personam. Bearing in mind
order of the court shall be sent by registered mail to the last known the in personam nature of the action, personal or, if not possible,
substituted service of summons on petitioner, and not
address of the defendant, or in any other manner the court may
deem sufficient. Any order granting such leave shall specify a extraterritorial service, is necessary to confer jurisdiction over the
person of petitioner and validly hold it liable to private respondent
reasonable time, which shall not be less than sixty (60) days after
notice, within which the defendant must answer.] of the Rules of for damages. Thus, the trial court had no jurisdiction to award
Court. Under this provision, there are only four (4) instances when damages amounting to $300,000.00 in favor of private respondent
extraterritorial service of summons is proper, namely: "(1) when and as against herein petitioner.
the action affects the personal status of the plaintiffs; (2) when the
action relates to, or the subject of which is property, within the Second. We settled the issue of finality of the trial courts decision
Philippines, in which the defendant claims a lien or interest, actual dated February 18, 1991 in the Vlason case, wherein we stated
or contingent; (3) when the relief demanded in such action that, considering the admiralty case involved multiple defendants,
consists, wholly or in part, in excluding the defendant from any "each defendant had a different period within which to appeal,
interest in property located in the Philippines; and (4) when the depending on the date of receipt of decision."63 [Decision in G.R.
defendant non-residents property has been attached within the Nos. 121662-64, p. 27.] Only upon the lapse of the reglementary
Philippines."54 [Ibid., now Sec. 15 of the 1997 Rules of Civil period to appeal, with no appeal perfected within such period, does
Procedure.] In these instances, service of summons may be the decision become final and executory.64 [Ibid.]
effected by (a) personal service out of the country, with leave of
court; (b) publication, also with leave of court; or (c) any other In the case of petitioner, its Motion to Vacate Judgment and to
manner the court may deem sufficient.55 [Ibid..]
Dismiss Case was filed on April 10, 1991, only six (6) days after it
learned of the existence of the case upon being informed by the
Clear from the foregoing, extrajudicial service of summons apply Embassy of the Federative Republic of Brazil in the Philippines, on
only where the action is in rem, an action against the thing itself April 4, 1991, of the February 18, 1991 decision.65 [Rollo, pp. 67-
instead of against the person, or in an action quasi in rem, where 80.] Thus, in the absence of any evidence on the date of receipt of
an individual is named as defendant and the purpose of the decision, other than the alleged April 4, 1991 date when petitioner
proceeding is to subject his interest therein to the obligation or loan learned of the decision, the February 18, 1991 decision of the trial
burdening the property. This is so inasmuch as, in in rem and court cannot be said to have attained finality as regards the
quasi in rem actions, jurisdiction over the person of the defendant petitioner.
is not a prerequisite to confer jurisdiction on the court provided that
the court acquires jurisdiction over the res.56 [Asiavest Limited v. WHEREFORE, the subject petition is hereby GRANTED. The
Court of Appeals, 296 SCRA 539, 552-554 [1998]; Valmonte v.
Decision and the Resolution of the Court of Appeals dated July 19,
Court of Appeals, 252 SCRA 92, 99-102 [1996].] 1993 and August 15, 1995, respectively, in CA-G.R. SP Nos.
24669, 28387 and 29317 are hereby REVERSED and SET ASIDE
However, where the action is in personam, one brought against a insofar as they affect petitioner Banco do Brasil. The Order dated
person on the basis of his personal liability, jurisdiction over the May 20, 1991 of the Regional Trial Court of Manila, Branch 8 in
person of the defendant is necessary for the court to validly try and Civil Case No. 89-51451 is REINSTATED.
decide the case. When the defendant is a non-resident, personal
service of summons within the state is essential to the acquisition
SO ORDERED.
of jurisdiction over the person.57 [The Dial Corporation v. Soriano,
161 SCRA 737, 743 [1988] citing Boudard v. Tait, 67 Phil 170, 174
Page 42 of 84
MARGARITA ROMUALDEZ-LICAROS, petitioner, vs. On July 15, 1991, Process Server, Maximo B. Dela Rosa,
ABELARDO B. LICAROS, respondent.; [G.R. No. 150656. April submitted his Officers Return quoted hereunder:
29, 2003]; CARPIO, J.:
OFFICERS RETURN
The Case
THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of
This is a petition for review on certiorari[1] to annul the Decision[2] summons and complaint with annexes together with order dated
dated 9 August 2001 of the Court of Appeals in CA-G.R. SP No. June 28, 1991 issued by the Court in the above-entitled case upon
58487, as well as the Resolution dated 23 October 2001 denying defendant Margarita Romualdez-Licaros c/o DFA. (sent by Mail)
the motion for reconsideration. The Court of Appeals dismissed the thru Pat G. Martines receiving Clerk of Department of Foreign
petition to annul the following decisions[3] rendered by Branch 143 Affairs a person authorized to receive this kind of process who
of the Regional Trial Court of Makati: acknowledged the receipt thereof at ADB Bldg., Roxas Blvd.,
Pasay City, Metro Manila. (p. 40, Rollo)
(1) The Decision dated 27 December 1990[4] granting the
dissolution of the conjugal partnership of gains of the spouses As required by law, the case was referred to Trial Prosecutor
Abelardo B. Licaros and Margarita Romualdez-Licaros; Bruselas, Jr. to find out any possible collusion between the parties
in the case. Thereafter, with the negative report of collusion,
Abelardo was allowed to present his evidence ex-parte. On
(2) The Decision dated 8 November 1991[5] declaring the marriage
between the same spouses null and void. November 8, 1991, the Decision (Annex A, Petition) was handed
down in Civil Case No. 91-1757 declaring the marriage between
Abelardo and Margarita null and void.
The Facts
Almost nine (9) years later, on April 28, 2000, the petition at bench
The antecedent facts as found by the Court of Appeals are as was commenced when Margarita received a letter dated
follows: November 18, 1991 from a certain Atty. Angelo Q. Valencia
informing her that she no longer has the right to use the family
x x x Abelardo Licaros (Abelardo, for short) and Margarita name Licaros inasmuch as her marriage to Abelardo had already
Romualdez-Licaros (Margarita, hereafter) were lawfully married on been judicially dissolved by the Regional Trial Court of Makati on
December 15, 1968. Out of this marital union were born Maria November 8, 1991. Asseverating to have immediately made some
Concepcion and Abelardo, Jr. Ironically, marital differences, verifications and finding the information given to be true, petitioner
squabbles and irreconcilable conflicts transpired between the commenced the instant petition on the following grounds:
spouses, such that sometime in 1979, they agreed to separate
from bed and board. (A) THERE WAS EXTRINSIC FRAUD IN THE
PREPARATION AND FILING BY ABELARDO OF
In 1982, Margarita left for the United States and there, to settle THE PETITION FOR DISSOLUTION OF THE
down with her two (2) children. In the United States, on April 26, CONJUGAL PARTNERSHIP OF GAINS AND ITS
1989, Margarita applied for divorce before the Superior Court of ANNEX, THE AGREEMENT OF SEPARATION
California, County of San Mateo (Annex 1, Rejoinder, pp. 164- OF PROPERTIES.
165) where she manifested that she does not desire counseling at
that time (Quotation, p. 166, Rollo). On August 6, 1990, Margarita (B) THE TRIAL COURT LACKED JURISDICTION TO
was granted the decree of divorce (Annex 2, Answer, p. 108, HEAR AND DECIDE THE PETITION FOR
Rollo) together with a distribution of properties between her and DECLARATION OF NULLITY OF MARRIAGE.[6]
Abelardo (pp. 167-168, Rollo).
The Ruling of the Court of Appeals
Not long after, on August 17, 1990, Abelardo and Margarita
executed an Agreement of Separation of Properties (pp. 60-64,
Rollo). This was followed-up by a petition filed on August 21, 1990 The Court of Appeals debunked the claim of Margarita that there
was extrinsic fraud in the preparation and filing by Abelardo of the
before the Regional Trial Court of Makati for the dissolution of the
conjugal partnership of gains of the spouses and for the approval Petition for Dissolution of Conjugal Partnership of Gains and its
annex, the Agreement of Separation of Properties. The Court of
of the agreement of separation of their properties. This was
docketed as Special Proceeding No. 2551. On December 27, Appeals stated:
1990, a decision was issued granting the petition and approving
the separation of property agreement. x x x, the extrinsic fraud alluded to consists of Abelardo coercing
Margarita into signing the petition to dissolve their conjugal
For his part, on June 24, 1991, Abelardo commenced Civil Case partnership of gains together with the agreement of separation of
properties, by threatening to cut-off all financial and material
No. 91-1757, for the declaration of nullity of his marriage with
Margarita, based on psychological incapacity under the New support of their children then still studying in the United States; that
Family Code. As Margarita was then residing at 96 Mulberry Lane, petitioner had no hand directly or indirectly in the preparation of the
Atherton, California, U.S.A., Abelardo initially moved that summons petition and agreement of separation of properties; that petitioner
be served through the International Express Courier Service. The never met the counsel for the petitioner, nor the notary public who
court a quo denied the motion. Instead, it ordered that summons notarized the deed; and, petitioner never received any notice of the
be served by publication in a newspaper of general circulation pendency of the petition nor a copy of the decision.
once a week for three (3) consecutive weeks, at the same time
furnishing respondent a copy of the order, as well as the Antithetically, a meticulous perusal of the controversial petition
corresponding summons and a copy of the petition at the given (Annex B-1) and the agreement of separation of properties (pp.
address in the United States through the Department of Foreign 60-64, Rollo) readily shows that the same were signed by the
Affairs, all at the expense of Abelardo. Respondent was given sixty petitioner on the proper space after the prayer and on the portion
(60) days after publication to file a responsive pleading. for the verification of the petition. The same is true with the
Page 43 of 84
agreement of separation of properties. What is striking to note is I. Whether Margarita was validly served with summons in the case
that on August 6, 1990, Margarita appeared before Amado P. for declaration of nullity of her marriage with Abelardo;
Cortez, Consul of the Republic of the Philippines at the San
Francisco, California, United States Consulate Office, to affirm and
II. Whether there was extrinsic fraud in the preparation and filing by
acknowledge before said official that she executed the agreement Abelardo of the Petition for Dissolution of the Conjugal Partnership
of separation of properties of her own free will and deed, after of Gains and its annex, the Agreement of Separation of Properties.
being informed of the contents thereof. And yet, there is no
showing that Abelardo was with her at the Philippine Consulate
Office in confirming the separation of property agreement. The Courts Ruling
Moreover, on page 2 of the same agreement, it is specifically
stated that such property separation document shall be subject to The petition is bereft of merit.
approval later on by the proper court of competent jurisdiction. The
clear import of this is that the agreement must have to be
submitted before the proper court for approval, which explains and First Issue: Validity of the Service of Summons on Margarita
confirms petitioners signature on the petition filed in court.
Margarita insists that the trial court never acquired jurisdiction over
In main, We see no indication nor showing of coercion or fraud her person in the petition for declaration of nullity of marriage since
from these facts, which could very well be considered as extrinsic she was never validly served with summons. Neither did she
or collateral fraud to justify a petition under Rule 47. From all appear in court to submit voluntarily to its jurisdiction.
indications, the pretended coerced documents were rather freely
and voluntarily executed by the parties therein knowing fully well On the other hand, Abelardo argues that jurisdiction over the
the imports thereof. This conclusion finds more weight if We person of a non-resident defendant in an action in rem or quasi in
consider the fact that the separation of property was fully rem is not necessary. The trial and appellate courts made a clear
implemented and enforced, when apparently both parties factual finding that there was proper summons by publication
correspondingly received the properties respectively assigned to effected through the Department of Foreign Affairs as directed by
each of them under the said document.[7] the trial court. Thus, the trial court acquired jurisdiction to render
the decision declaring the marriage a nullity.
The Court of Appeals also rejected Margaritas claim that the trial
court lacked jurisdiction to hear and decide the Petition for Summons is a writ by which the defendant is notified of the action
Declaration of Nullity of Marriage for improper service of summons brought against him. Service of such writ is the means by which
on her. The case involves the marital status of the parties, which is the court acquires jurisdiction over his person.[9]
an action in rem or quasi in rem. The Court of Appeals ruled that in
such an action the purpose of service of summons is not to vest
the trial court with jurisdiction over the person of the defendant, but As a rule, when the defendant does not reside and is not found in
only to comply with due process. The Court of Appeals concluded the Philippines, Philippine courts cannot try any case against him
that any irregularity in the service of summons involves due because of the impossibility of acquiring jurisdiction over his
process which does not destroy the trial courts jurisdiction over the person unless he voluntarily appears in court. But when the case is
res which is the parties marital status. Neither does such one of actions in rem or quasi in rem enumerated in Section
irregularity invalidate the judgment rendered in the case. Thus, the 15,[10] Rule 14 of the Rules of Court, Philippine courts have
Court of Appeals dismissed the petition for annulment of judgment, jurisdiction to hear and decide the case. In such instances,
stating that: Philippine courts have jurisdiction over the res, and jurisdiction
over the person of the non-resident defendant is not essential.[11]

At bar, the case involves the personal (marital) status of the


plaintiff and the defendant. This status is the res over which the Actions in personam[12] and actions in rem or quasi in rem differ in
Philippine court has acquired jurisdiction. This is also the kind of that actions in personam are directed against specific persons and
action which the Supreme Court had ruled that service of seek personal judgments. On the other hand, actions in rem or
summons may be served extraterritorially under Section 15 quasi in rem are directed against the thing or property or status of
(formerly Section 17) of Rule 14 and where such service of a person and seek judgments with respect thereto as against the
summons is not for the purpose of vesting the trial court with whole world.[13]
jurisdiction over the person of the defendant but only for the
purpose of complying with the requirements of fair play and due At the time Abelardo filed the petition for nullity of the marriage in
process. A fortiori, the court a quo had properly acquired 1991, Margarita was residing in the United States. She left the
jurisdiction over the person of herein petitioner-defendant when Philippines in 1982 together with her two children. The trial court
summons was served by publication and a copy of the summons, considered Margarita a non-resident defendant who is not found in
the complaint with annexes, together with the Order of June 28, the Philippines. Since the petition affects the personal status of the
1991, was served to the defendant through the Department of plaintiff, the trial court authorized extraterritorial service of
Foreign Affairs by registered mail and duly received by said office summons under Section 15, Rule 14 of the Rules of Court. The
to top it all. Such mode was upon instruction and lawful order of term personal status includes family relations, particularly the
the court and could even be treated as any other manner the court relations between husband and wife.[14]
may deem sufficient.[8]
Under Section 15 of Rule 14, a defendant who is a non-resident
Hence, the instant petition. and is not found in the country may be served with summons by
extraterritorial service in four instances: (1) when the action
The Issues affects the personal status of the plaintiff; (2) when the action
relates to, or the subject of which is property within the Philippines,
in which the defendant has or claims a lien or interest, actual or
The issues raised by Margarita are restated as follows: contingent; (3) when the relief demanded consists, wholly or in
part, in excluding the defendant from any interest in property

Page 44 of 84
located in the Philippines; or (4) when the property of the The Court is bound by the factual findings of the trial and appellate
defendant has been attached within the Philippines. courts that the parties freely and voluntarily executed the
documents and that there is no showing of coercion or fraud. As a
rule, in an appeal by certiorari under Rule 45, the Court does not
In these instances, extraterritorial service of summons may be
effected under any of three modes: (1) by personal service out of pass upon questions of fact as the factual findings of the trial and
the country, with leave of court; (2) by publication and sending a appellate courts are binding on the Court. The Court is not a trier of
copy of the summons and order of the court by registered mail to facts. The Court will not examine the evidence introduced by the
the defendants last known address, also with leave of court; or (3) parties below to determine if the trial and appellate courts correctly
by any other means the judge may consider sufficient. assessed and evaluated the evidence on record.[17]

Applying the foregoing rule, the trial court required extraterritorial The due and regular execution of an instrument acknowledged
service of summons to be effected on Margarita in the following before an officer authorized to administer oaths cannot be
manner: overthrown by bare allegations of coercion but only by clear and
convincing proof.[18] A person acknowledging an instrument
before an officer authorized to administer oaths acknowledges that
x x x, service of Summons by way of publication in a newspaper of he freely and voluntarily executed the instrument, giving rise to a
general circulation once a week for three (3) consecutive weeks, at prima facie presumption of such fact.
the same time, furnishing respondent copy of this Order as well as
the corresponding Summons and copy of the petition at her given
address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru In the instant case, Margarita acknowledged the Agreement before
the Department of Foreign Affairs, all at the expense of Consul Cortez. The certificate of acknowledgment signed by
Consul Cortez states that Margarita personally appeared before
petitioner.[15] (Emphasis ours)
him and acknowledged before me that SHE executed the same of
her own free will and deed.[19] Thus, there is a prima facie
The trial courts prescribed mode of extraterritorial service does not presumption that Margarita freely and voluntarily executed the
fall under the first or second mode specified in Section 15 of Rule Agreement. Margarita has failed to rebut this prima facie
14, but under the third mode. This refers to any other means that presumption with clear and convincing proof of coercion on the
the judge may consider sufficient. part of Abelardo.

The Process Servers Return of 15 July 1991 shows that the A document acknowledged before a notary public is prima facie
summons addressed to Margarita together with the complaint and evidence of the due and regular execution of the document.[20] A
its annexes were sent by mail to the Department of Foreign Affairs notarized document has in its favor the presumption of regularity in
with acknowledgment of receipt. The Process Servers certificate of its execution, and to contradict the same, there must be evidence
service of summons is prima facie evidence of the facts as set out that is clear, convincing and more than merely preponderant.[21]
in the certificate.[16] Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court
stated in its Decision dated 8 November 1991 that compliance WHEREFORE, the Decision of the Court of Appeals in CA-G.R.
with the jurisdictional requirements hav(e) (sic) been duly SP No. 58487 dismissing the petition to annul judgment is
established. We hold that delivery to the Department of Foreign AFFIRMED.
Affairs was sufficient compliance with the rule. After all, this is
exactly what the trial court required and considered as sufficient to SO ORDERED.
effect service of summons under the third mode of extraterritorial
service pursuant to Section 15 of Rule 14.
FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO
Second Issue: Validity of the Judgment Dissolving the TROCINO, respondents.; ; AUSTRIA-MARTINEZ, J.:
Conjugal Partnership of Gains

Before the Court is a petition for review on certiorari under Rule 45


Margarita claims that Abelardo coerced her into signing the of the Rules of Court assailing the decision[1] of the Court of
Petition for Dissolution of the Conjugal Partnership of Gains Appeals dated September 30, 1996, in CA-G.R. SP No. 40067,
(Petition) and its annex, the Agreement of Separation of Properties nullifying the decision and orders of the Regional Trial Court of
(Agreement). Abelardo allegedly threatened to cut off all financial Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of
and material support to their children if Margarita did not sign the jurisdiction.
documents.

Civil Case No. CEB-11103 is an action for specific performance


The trial court did not find anything amiss in the Petition and and/or rescission filed by herein petitioners, spouses Fortunato
Agreement that Abelardo filed, and thus the trial court approved and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr.,
the same. The Court of Appeals noted that a meticulous perusal of which include herein respondents and their mother Caridad
the Petition and Agreement readily shows that Margarita signed Trocino.[2]
the same on the proper space after the prayer and on the portion
for the verification of the petition. The Court of Appeals observed
further that on 6 August 1990, Margarita appeared before Consul Filed on December 16, 1991, the complaint alleges: Some time in
Amado Cortez in the Philippine Consulate Office in San Francisco, 1975, the spouses Jesus and Caridad Trocino mortgaged two
California, to affirm that she executed the Agreement of her own parcels of land covered by TCT Nos. 10616 and 31856 to Dr.
free will. There was no showing that Abelardo was at that time with Clarence Yujuico. The mortgage was subsequently foreclosed and
her at the Philippine Consulate Office. Abelardo secured judicial the properties sold at public auction on July 11, 1988, and before
approval of the Agreement as specifically required in the the expiry of the redemption period, the spouses Trocino sold the
Agreement. property to petitioners on December 12, 1989, who in turn,
redeemed the same from Dr. Yujuico. The spouses Trocino,
however, refused to convey ownership of the properties to
petitioners, hence, the complaint.
Page 45 of 84
On January 10, 1992, the trial courts Process Server served a copy of the summons and the complaint. According to them, at
summons on respondents, in the manner described in his Return the time summons was served on them, Adolfo Trocino was
of Service, to wit: already in Ohio, U.S.A., and has been residing there for 25 years,
while Mariano Trocino was in Talibon, Bohol, and has been
Respectfully returned to the Branch Clerk of Court, Regional Trial residing there since 1986. They also refuted the receipt of the
Court of Cebu, Branch 10, the herein attached original summons summons by Caridad A. Trocino, and the representation made by
issued in the above-entitled case with the information that on Atty. Bugarin in their behalf. Respondents also contended that they
January 8, 1992 summons and copies of the complaint were have a meritorious defense.[7] Petitioners filed their
served to the defendants Jacob, Jesus Jr., Adolfo, Mariano, Comment/Answer to the petition.[8]
Consolacion, Alice, Racheal thru defendant Caridad Trocino at
their given address at Maria Cristina Extension (besides Sacred On September 30, 1996, the Court of Appeals issued the assailed
Heart School for Girls), Cebu City, evidence by her signature found Decision granting the petition and annulling the decision of the
at the lower portion of the original summons.[3] RTC-Cebu (Branch 10). The decretal portion of the decision reads:

WHEREFORE I, respectfully return the original summons duly WHEREFORE, the decision of the Regional Trial Court of Cebu
served to the court of origin. City, Branch 10, in Civil Case No. CEB-11103 as well as all Orders
issued to implement the same are hereby ANNULLED AND SET
Cebu City, Philippines, January 10, 1992. ASIDE. The Register of Deeds of Cebu City is hereby ENJOINED
from cancelling Transfer Certificates of Title Nos. 10616 and
31856. No pronouncement as to costs.
(signed)
SO ORDERED.[9]
DELFIN D. BARNIDO
Their motion for reconsideration having been denied by the Court
RTC Process Server of Appeals, petitioners filed the present petition, setting forth the
following assignment of errors:
On January 27, 1992, the defendants, through their counsel Atty.
Expedito P. Bugarin, filed their Answer. Defendant Caridad A. I. THE COURT OF APPEALS ERRED IN FINDING LACK
Trocino, respondents mother, verified said pleading.[4] OF PRIOR KNOWLEDGE ON THE PART OF RESPONDENTS
TROCINO, REGARDING THE PROCEEDINGS BEFORE THE
After trial on the merits, the RTC rendered its decision on March RTC OF CEBU CITY AND IN NOT DISMISSING THE PETITION
1993, with the following disposition: FOR VIOLATION OF SUPREME COURT CIRCULAR 04-94.

WHEREFORE, premises considered, judgment is hereby rendered II. THE COURT OF APPEALS ERRED IN DECLARING
in favor of the plaintiffs and against the defendants. THE NEED FOR PERSONAL AND/OR EXTRATERRITORIAL
SERVICE OF SUMMONS, DESPITE THE NATURE OF THE
CAUSE OF ACTION BEING ONE IN REM.
The latter are hereby ordered to jointly and severally execute a
Deed of Sale in favor of the plaintiffs and to deliver the owners
duplicate copies of TCT Nos. 10616 and 31856, covering the III. THE COURT OF APPEALS ERRED IN ANNULLING
properties sold, to the plaintiffs within ten (10) days from the finality THE JUDGMENT, CAUSING FURTHER USELESS LITIGATION
of the judgment, after which plaintiffs shall pay in turn to the AND UNNECESSARY EXPENSE ON PETITIONERS AND
defendants the balance of P2,000,000.00. Otherwise, the sale is RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE
rescinded and revoked and the defendants are directed to return to NOT SHOWN ANY VALID DEFENSE AS GROUND FOR
the plaintiffs the amount of P500,000.00, with interest of 12% per REVERSAL OF JUDGMENT OF THE RTC.
annum computed from December 6, 1989, until the full amount is
paid. IV. THE COURT OF APPEALS ERRED IN RULING THAT
ITS JUDGMENT IS APPLICABLE IN FAVOR OF CARIDAD
In addition thereto, defendants are to pay jointly and severally to TROCINO.[10]
the plaintiffs, the amount of P50,000.00 as moral damages;
P20,000.00 as exemplary damages; P40,000.00 by way of Summons is a writ by which the defendant is notified of the action
attorneys fees; and P10,000.00 as litigation expenses. brought against him. Service of such writ is the means by which
the court acquires jurisdiction over his person.[11] Any judgment
SO ORDERED.[5] without such service in the absence of a valid waiver is null and
void.[12]
Due to the defendants failure to deliver the owners duplicate of
TCT Nos. 10616 and 31856, the RTC issued an order on August The resolution of the present petition hinges on the issue of
29, 1995 declaring said titles null and void, and ordering the whether or not summons was effectively served on respondents. If
Register of Deeds of Cebu City to issue new titles in the name of in the affirmative, the trial court had validly acquired jurisdiction
herein petitioners.[6] over their persons and therefore its judgment is valid.

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano To resolve whether there was valid service of summons on
Trocino filed with the Court of Appeals, a petition for the annulment respondents, the nature of the action filed against them must first
of the judgment rendered by the RTC-Cebu (Branch 10) in Civil be determined. As the Court explained in Asiavest Limited vs.
Case No. CEB-11103. Private respondents alleged that the trial Court of Appeals, it will be helpful to determine first whether the
courts decision is null and void on the ground that it did not acquire action is in personam, in rem, or quasi in rem because the rules on
jurisdiction over their persons as they were not validly served with
Page 46 of 84
service of summons under Rule 14 of the Rules of Court of the Contrary to petitioners belief, the complaint they filed for specific
Philippines apply according to the nature of the action.[13] performance and/or rescission is not an action in rem. While it is a
real action because it affects title to or possession of the two
parcels of land covered by TCT Nos. 10616 and 31856, it does not
In actions in personam, summons on the defendant must be
served by handing a copy thereof to the defendant in person, or, if automatically follow that the action is already one in rem. In
he refuses to receive it, by tendering it to him. This is specifically Hernandez vs. Rural Bank of Lucena, Inc., the Court made the
provided in Section 7, Rule 14 of the Rules of Court,[14] which following distinction:
states:
In a personal action, the plaintiff seeks the recovery of personal
SEC. 7. Personal service of summons.-- The summons shall be property, the enforcement of a contract or the recovery of
served by handing a copy thereof to the defendant in person or, if damages. In a real action, the plaintiff seeks the recovery of real
he refuses to receive it, by tendering it to him. property, or, as indicated in section 2(a) of Rule 4, a real action is
an action affecting title to real property or for the recovery of
possession, or for partition or condemnation of, or foreclosure of a
If efforts to find defendant personally makes prompt service mortgage on, real property.
impossible, substituted service may be effected by leaving copies
of the summons at the defendant's dwelling house or residence
with some person of suitable age and discretion then residing An action in personam is an action against a person on the basis
therein, or by leaving the copies at the defendant's office or regular of his personal liability, while an action in rem is an action against
place of business with some competent person in charge the thing itself, instead of against the person. Hence, a real action
thereof.[15] In substituted service, it is mandated that the fact of may at the same time be an action in personam and not
necessarily an action in rem.[22]
impossibility of personal service should be explained in the proof of
service.[16]
The objective sought in petitioners complaint was to establish a
When the defendant in an action in personam is a non-resident claim against respondents for their alleged refusal to convey to
them the title to the two parcels of land that they inherited from
who does not voluntarily submit himself to the authority of the
court, personal service of summons within the State is essential to their father, Jesus Trocino, who was one of the sellers of the
properties to petitioners. Hence, to repeat, Civil Case No. CEB-
the acquisition of jurisdiction over his person. This cannot be done
if the defendant is not physically present in the country, and thus, 11103 is an action in personam because it is an action against
persons, namely, herein respondents, on the basis of their
the court cannot acquire jurisdiction over his person and therefore
cannot validly try and decide the case against him.[17] An personal liability. As such, personal service of summons upon
exception was accorded in Gemperle vs. Schenker wherein the defendants is essential in order for the court to acquire of
service of summons through the non-residents wife, who was a jurisdiction over their persons.[23]
resident of the Philippines, was held valid, as the latter was his
representative and attorney-in-fact in a prior civil case filed by the A distinction, however, must be made with regard to service of
non-resident, and the second case was merely an offshoot of the summons on respondents Adolfo Trocino and Mariano Trocino.
first case.[18] Adolfo Trocino, as records show, is already a resident of Ohio,
U.S.A. for 25 years. Being a non-resident, the court cannot acquire
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the jurisdiction over his person and validly try and decide the case
person of the defendant is not a prerequisite to confer jurisdiction against him.
on the court provided that the court acquires jurisdiction over the
res, although summons must be served upon the defendant in On the other hand, Mariano Trocino has been in Talibon, Bohol
order to satisfy the due process requirements.[19] Thus, where the since 1986. To validly acquire jurisdiction over his person,
defendant is a non-resident who is not found in the Philippines, summons must be served on him personally, or through
and (1) the action affects the personal status of the plaintiff; (2) the substituted service, upon showing of impossibility of personal
action relates to, or the subject matter of which is property in the service. Such impossibility, and why efforts exerted towards
Philippines in which the defendant has or claims a lien or interest; personal service failed, should be explained in the proof of service.
(3) the action seeks the exclusion of the defendant from any The pertinent facts and circumstances attendant to the service of
interest in the property located in the Philippines; or (4) the summons must be stated in the proof of service or Officers Return.
property of the defendant has been attached in the Philippines, Failure to do so would invalidate all subsequent proceedings on
summons may be served extraterritorially by (a) personal service jurisdictional grounds.[24]
out of the country, with leave of court; (b) publication, also with
leave of court; or (c) any other manner the court may deem In the present case, the process server served the summons and
sufficient.[20] copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo,
Mariano, Consolacion, Alice and Racheal,[25] through their
In the present case, petitioners cause of action in Civil Case No. mother, Caridad Trocino.[26] The return did not contain any
CEB-11103 is anchored on the claim that the spouses Jesus and particulars as to the impossibility of personal service on Mariano
Caridad Trocino reneged on their obligation to convey ownership Trocino within a reasonable time. Such improper service renders
of the two parcels of land subject of their sale. Thus, petitioners the same ineffective.
pray in their complaint that the spouses Trocino be ordered to
execute the appropriate deed of sale and that the titles be Due process of law requires personal service to support a personal
delivered to them (petitioners); or in the alternative, that the sale be
judgment, and, when the proceeding is strictly in personam
revoked and rescinded; and spouses Trocino ordered to return to brought to determine the personal rights and obligations of the
petitioners their down payment in the amount of P500,000.00 plus parties, personal service within the state or a voluntary appearance
interests. The action instituted by petitioners affect the parties in the case is essential to the acquisition of jurisdiction so as to
alone, not the whole world. Hence, it is an action in personam, i.e., constitute compliance with the constitutional requirement of due
any judgment therein is binding only upon the parties properly process.[27]
impleaded.[21]

Page 47 of 84
Moreover, inasmuch as the sheriffs return failed to state the facts WHEREFORE, the petition for review is DENIED. The decision of
and circumstances showing the impossibility of personal service of the Court of Appeals in CA-G.R. SP No. 40067 is AFFIRMED.
summons upon respondents within a reasonable time, petitioners
should have sought the issuance of an alias summons. Under
Costs against petitioners. SO ORDERED.
Section 5, Rule 14 of the Rules of Court, alias summons may be
issued when the original summons is returned without being
served on any or all of the defendants.[28] Petitioners, however, ST. AVIATION SERVICES CO., PTE., LTD., -versus- GRAND
did not do so, and they should now bear the consequences of their INTERNATIONAL AIRWAYS, INC.,; G.R. No. 140288; October
lack of diligence. 23, 2006; SANDOVAL-GUTIERREZ, J.:

The fact that Atty. Expedito Bugarin represented all the Challenged in the instant Petition for Review on Certiorari
respondents without any exception does not transform the are the Decision of the Court of Appeals dated July 30, 1999 and
ineffective service of summons into a valid one. It does not its Resolution dated September 29, 1999 in CA-G.R. SP No.
constitute a valid waiver or even a voluntary submission to the trial 51134 setting aside the Orders dated October 30, 1998 and
courts jurisdiction. There was not even the slightest proof showing December 16, 1998 of the Regional Trial Court (RTC), Branch 117,
that respondents authorized Atty. Bugarins appearance for and in Pasay City in Civil Case No. 98-1389.
their behalf. As found by the Court of Appeals:
St. Aviation Services Co., Pte., Ltd., petitioner, is a
While Caridad Trocino may have engaged the services of Atty. foreign corporation based in Singapore. It is engaged in the
Bugarin, it did not necessarily mean that Atty. Bugarin also had the manufacture, repair, and maintenance of airplanes and aircrafts.
authority to represent the defendant heirs. The records show that Grand International Airways, Inc., respondent, is a domestic
in all the pleadings which required verification, only Caridad corporation engaged in airline operations.
Trocino signed the same. There was never a single instance where
defendant heirs signed the pleading. The fact that a pleading is Sometime in January 1996, petitioner and respondent
signed by one defendant does not necessarily mean that it is executed an Agreement for the Maintenance and Modification of
binding on a co-defendant. Furthermore, Caridad Trocino Airbus A 300 B4-103 Aircraft Registration No. RP-C8882 (First
represented herself as the principal defendant in her Motion to Agreement). Under this stipulation, petitioner agreed to undertake
Withdraw Appeal. (Rollo, p. 80) maintenance and modification works on respondents aircraft. The
parties agreed on the mode and manner of payment by respondent
of the contract price, including interest in case of default. They also
Since the defendant heirs are co-defendants, the trial court should agreed that the construction, validity and performance thereof shall
have verified the extent of Atty. Bugarins authority when petitioners be governed by the laws of Singapore. They further agreed to
failed to appear as early as the pre-trial stage, where the parties submit any suit arising from their agreement to the non-exclusive
are required to appear. The absence of the defendant heirs should jurisdiction of the Singapore courts.
have prompted the trial court to inquire from the lawyer whether he
was also representing the other petitioners. As co-defendant and At about the same time, or on January 12, 1996, the
co-heirs over the disputed properties, the defendant heirs had parties verbally agreed that petitioner will repair and undertake
every right to be present during the trial. Only Caridad Trocino maintenance works on respondents other aircraft, Aircraft No. RP-
appeared and testified on her own behalf. All the defenses raised C8881; and that the works shall be based on a General Terms of
were her own, not the defendant heirs.[29] Agreement (GTA). The GTA terms are similar to those of their First
Agreement.
Consequently, the judgment sought to be executed against
respondents were rendered without jurisdiction as there was Petitioner undertook the contracted works and thereafter
neither a proper service of summons nor was there any waiver or promptly delivered the aircrafts to respondent. During the period
voluntary submission to the trial courts jurisdiction. Hence, the from March 1996 to October 1997, petitioner billed respondent in
same is void, with regard to private respondents except Caridad the total amount of US$303,731.67 or S$452,560.18. But despite
Trocino. petitioners repeated demands, respondent failed to pay, in
violation of the terms agreed upon.
It must be pointed out that while it was the spouses Jesus and
On December 12, 1997, petitioner filed with the High
Caridad Trocino who sold the properties to petitioners, their right to
Court of the Republic of Singapore an action for the sum of
proceed against Jesus Trocino when he died was passed on to his
S$452,560.18, including interest and costs, against respondent,
heirs, which includes respondents and Caridad Trocino. Such
docketed as Suit No. 2101. Upon petitioners motion, the court
transmission of right occurred by operation of law, more
issued a Writ of Summons to be served extraterritorially or outside
particularly by succession, which is a mode of acquisition by virtue
Singapore upon respondent. The court sought the assistance of
of which the property, rights and obligations to the extent of the
the sheriff of Pasay City to effect service of the summons upon
value of the inheritance of a person are transmitted.[30] When the
respondent. However, despite receipt of summons, respondent
process server personally served the summons on Caridad
failed to answer the claim.
Trocino, the trial court validly acquired jurisdiction over her person
alone. Hence, the trial courts decision is valid and binding with
On February 17, 1998, on motion of petitioner, the
regard to her, but only in proportion to Caridad Trocinos share. As
Singapore High Court rendered a judgment by default against
aptly stated by the Court of Appeals:
respondent.

This Courts decision is therefore applicable to all the defendant On August 4, 1998, petitioner filed with the RTC, Branch
heirs with the exception of defendant Caridad Trocino considering 117, Pasay City, a Petition for Enforcement of Judgment, docketed
that it was the latter who entered into the alleged sale without the as Civil Case No. 98-1389.
consent of her husband. She is therefore estopped from Respondent filed a Motion to Dismiss the Petition on two
questioning her own authority to enter into the questioned sale. grounds: (1) the Singapore High Court did not acquire jurisdiction
Moreover, Caridad Trocino was validly served with summons and over its person; and (2) the foreign judgment sought to be enforced
was accorded due process.[31]
Page 48 of 84
is void for having been rendered in violation of its right to due the judgment or final
process. order is conclusive
upon the title to the
On October 30, 1998, the RTC denied respondents thing; and
motion to dismiss, holding that neither one of the two grounds (of (b) In case of a
Grand) is among the grounds for a motion to dismiss under Rule judgment or final order
16 of the 1997 Rules of Civil Procedure. against a person, the
judgment or final order
Respondent filed a motion for reconsideration but was is presumptive
denied by the RTC in its Order dated December 16, 1998. evidence of a right as
between the parties and
On February 15, 1999, respondent filed with the Court of their successors in
Appeals a Petition for Certiorari assailing the RTC Order denying interest by a
its motion to dismiss. Respondent alleged that the extraterritorial subsequent title;
service of summons on its office in the Philippines is defective and In either case, the judgment or final
that the Singapore court did not acquire jurisdiction over its person. order may be repelled by evidence of a want of
Thus, its judgment sought to be enforced is void. Petitioner, in its jurisdiction, want of notice to the party,
comment, moved to dismiss the petition for being unmeritorious. collusion, fraud, or clear mistake of law or fact.

On July 30, 1999, the Court of Appeals issued its Under the above Rule, a foreign judgment or order
Decision granting the petition and setting aside the Orders dated against a person is merely presumptive evidence of a right as
October 30, 1998 and December 16, 1998 of the RTC without between the parties. It may be repelled, among others, by want of
prejudice to the right of private respondent to initiate another jurisdiction of the issuing authority or by want of notice to the party
proceeding before the proper court to enforce its claim. It found: against whom it is enforced. The party attacking a foreign
In the case at bar, the complaint does judgment has the burden of overcoming the presumption of its
not involve the personal status of plaintiff, nor validity.[3]
any property in which the defendant has a claim
or interest, or which the private respondent has Respondent, in assailing the validity of the judgment
attached but purely an action for collection of sought to be enforced, contends that the service of summons is
debt. It is a personal action as well as an action void and that the Singapore court did not acquire jurisdiction over
in personam, not an action in rem or quasi in it.
rem. As a personal action, the service of Generally, matters of remedy and procedure such as
summons should be personal or substituted, those relating to the service of process upon a defendant are
not extraterritorial, in order to confer jurisdiction governed by the lex fori or the internal law of the forum,[4] which in
on the court. this case is the law of Singapore. Here, petitioner moved for leave
of court to serve a copy of the Writ of Summons outside
Petitioner seasonably filed a motion for reconsideration Singapore. In an Order dated December 24, 1997, the Singapore
but it was denied on September 29, 1999. High Court granted leave to serve a copy of the Writ of Summons
on the Defendant by a method of service authorized by the law
Hence, the instant Petition for Review on Certiorari. of the Philippines for service of any originating process
issued by the Philippines at ground floor, APMC Building, 136
The issues to be resolved are: (1) whether the Singapore Amorsolo corner Gamboa Street, 1229 Makati City, or elsewhere
High Court has acquired jurisdiction over the person of respondent in the Philippines.[5] This service of summons outside Singapore
by the service of summons upon its office in the Philippines; and is in accordance with Order 11, r. 4(2) of the Rules of Court
(2) whether the judgment by default in Suit No. 2101 by the 1996[6] of Singapore, which provides.
Singapore High Court is enforceable in the Philippines.
(2) Where in accordance with these
Generally, in the absence of a special contract, no Rules, an originating process is to be served on
sovereign is bound to give effect within its dominion to a judgment a defendant in any country with respect to
rendered by a tribunal of another country; however, under the rules which there does not subsist a Civil Procedure
of comity, utility and convenience, nations have established a Convention providing for service in that country
usage among civilized states by which final judgments of foreign of process of the High Court, the originating
courts of competent jurisdiction are reciprocally respected and process may be served
rendered efficacious under certain conditions that may vary in
different countries.[1] Certainly, the Philippine legal system has a) through the government of that
long ago accepted into its jurisprudence and procedural rules the country, where that government is willing to
viability of an action for enforcement of foreign judgment, as well effect service;
as the requisites for such valid enforcement, as derived from
internationally accepted doctrines.[2] b) through a Singapore Consular
authority in that country, except where service
The conditions for the recognition and enforcement of a through such an authority is contrary to the law
foreign judgment in our legal system are contained in Section 48, of the country; or
Rule 39 of the 1997 Rules of Civil Procedure, as amended, thus: c) by a method of service
SEC. 48. Effect of foreign judgments. authorized by the law of that country for
The effect of a judgment or final order of a service of any originating process issued by
tribunal of a foreign country, having jurisdiction that country.
to render the judgment or final order is as
follows: In the Philippines, jurisdiction over a party is acquired by
(a) In case of a service of summons by the sheriff,[7] his deputy or other proper
judgment or final order court officer either personally by handing a copy thereof to the
upon a specific thing, defendant[8] or by substituted service.[9] In this case, the Writ of
Page 49 of 84
Summons issued by the Singapore High Court was served upon gave PIL the names of three of his subordinates in Betonval whom
respondent at its office located at Mercure Hotel (formerly Village he would like to join him in PIL.
Hotel), MIA Road, Pasay City. The Sheriffs Return shows that it
was received on May 2, 1998 by Joyce T. Austria, Secretary of the
Todaro attached nine letters, marked as Annexes "A" to "I," to his
General Manager of respondent company.[10] But respondent complaint. Annex "A" shows that on 15 July 1996, Todaro, under
completely ignored the summons, hence, it was declared in the letterhead of Ital Tech Distributors, Inc., sent a letter to Max
default. Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited.
Todaro wrote that "[m]y aim is to run again a ready-mix concrete
Considering that the Writ of Summons was served upon company in the Philippines and not to be a part-time consultant.
respondent in accordance with our Rules, jurisdiction was acquired Otherwise, I could have charged your company with a much higher
by the Singapore High Court over its person. Clearly, the judgment fee."
of default rendered by that court against respondent is valid.

WHEREFORE, we GRANT the petition. The challenged Annex "B" shows that on 4 September 1996, Lindsay, under the
Decision and Resolution of the Court of Appeals in CA-G.R. SP letterhead of Pioneer Concrete (Hong Kong) Limited, responded by
No. 51134 are SET ASIDE. fax to Todaro’s faxed letter to McDonald and proposed that Todaro
"join Pioneer on a retainer basis for 2 to 3 months on the
The RTC, Branch 117, Pasay City is hereby DIRECTED understanding that [Todaro] would become a permanent employee
to hear Civil Case No. 98-1389 with dispatch. SO ORDERED. if as we expect, our entry proceeds." The faxed letter to McDonald
referred to by Lindsay is not found in the rollo and was not
attached to Todaro’s complaint.
PIONEER INTERNATIONAL, LTD. vs. HON. TEOFILO GUADIZ,
JR., in his capacity as Presiding Judge of Regional Trial
Annex "C" shows that on the same date as that of Annex "B,"
Court, Branch 147, Makati City, and ANTONIO D. TODARO;
Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
G.R. No. 156848; October 11, 2007; CARPIO, J.:
another letter to Lindsay of Pioneer Concrete (Hong Kong) Limited.
Todaro asked for a formal letter addressed to him about the
The Case proposed retainer. Todaro requested that the letter contain a
statement on his remuneration package and on his permanent
This is a petition for review on certiorari of the Decision dated 27 employment "with PIONEER once it has established itself on a
September 2001 and of the Resolution dated 14 January 2003 of permanent basis in the Philippines."
the Court of Appeals (appellate court) in CA-G.R. SP No. 54062.
The Decision affirmed the Orders dated 4 January 1999 and 3 Annex "D" shows that Todaro, under the letterhead of Ital Tech
June 1999 of Branch 147 of the Regional Trial Court of Makati City Distributors, Inc., sent a letter to McDonald of PIL. Todaro
(trial court) in Civil Case No. 98-124. The trial court denied the confirmed the following to McDonald:
motion to dismiss filed by Pioneer International, Ltd. (PIL) in its
special appearance.
1. That I am accepting the proposal of PIONEER INT’L.
as a consultant for three (3) months, starting October 1,
The Facts 1996, with a retainer fee of U.S. $15,000.00 per month;

On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint 2. That after three (3) months consultancy, I should be
for sum of money and damages with preliminary attachment employed by PIONEER INT’L., on a permanent basis, as
against PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer its Managing Director or CEO in the Philippines.
Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald), Remuneration package will be mutually agreed upon by
and Philip J. Klepzig (Klepzig). PIL and its co-defendants were PIONEER and the undersigned;
served copies of the summons and of the complaint at PPHI and
PCPI’s office in Alabang, Muntinlupa, through Cecille L. De Leon
3. That Gino Martinel and the Sales Manager – Jun Ong,
(De Leon), who was Klepzig’s Executive Assistant.
will be hired as well, on a permanent basis, by PIONEER
as soon as the company is established. Salary, likewise,
Todaro alleged that PIL is a corporation duly organized under will be accepted by both PIONEER and the respective
Australian laws, while PCPI and PPHI are corporations duly parties.
organized under Philippine laws. PIL is engaged in the ready-mix
and concrete aggregates business and has established a presence
Annex "E" is a faxed letter dated 18 November 1996 of McDonald,
worldwide. PIL established PPHI as the holding company of the
under the letterhead of Pioneer Concrete Group HK, to Todaro of
stocks of its operating company in the Philippines, PCPI.
Ital Tech Distributors, Inc. The first three paragraphs of
McDonald is the Chief Executive Officer of PIL’s Hong Kong office
McDonald’s letter read:
while Klepzig is the President and Managing Director of PPHI and
PCPI. For his part, Todaro further alleged that he was the
managing director of Betonval Readyconcrete, Inc. (Betonval) from Further to our recent meeting in Hong Kong, I am now
June 1975 up to his resignation in February 1996. able to confirm my offer to engage you as a consultant to
Pioneer International Ltd. Should Pioneer proceed with
an investment in the Philippines, then Pioneer would
Before Todaro filed his complaint, there were several meetings and
offer you a position to manage the premixed concrete
exchanges of letters between Todaro and the officers of Pioneer
operations.
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK,
PPHI, and PIL. According to Todaro, PIL contacted him in May
1996 and asked if he could join it in establishing a pre-mixed Pioneer will probably be in a position to make a decision
concrete plant and in overseeing its operations in the Philippines. on proceeding with an investment by mid January ‘97.
Todaro confirmed his availability and expressed interest in joining
PIL. Todaro met with several of PIL’s representatives and even The basis for your consultancy would be:
Page 50 of 84
 Monthly fee USD 15,000 per month The employment conditions you specified in your letter to
billed on monthly basis and payable John McDonald dated 11th September are well beyond
15 days from billing date. our expectations.
 Additional pre-approved expenses to
be reimbursed. Mr. Todaro, I regret that we do not wish to pursue our
 Driver and secretarial support-basis association with you any further. Mr. Klepzig was
for reimbursement of this to be authorized to terminate this association and the letter he
agreed. sent to you dated 18th September has my support.
 Arrangement to commence from 1st
November ‘96, reflecting your Thank you for your involvement with Pioneer. I wish you
contributions so far and to continue all the best for the future. (Emphasis added)
until Pioneer makes a decision.
PIL filed, by special appearance, a motion to dismiss Todaro’s
Annex "F" shows Todaro’s faxed reply, under the letterhead of Ital complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
Tech Distributors, Inc., to McDonald of Pioneer Concrete Group separate motion to dismiss. PIL asserted that the trial court has no
HK dated 19 November 1996. Todaro confirmed McDonald’s jurisdiction over PIL because PIL is a foreign corporation not doing
package concerning the consultancy and reiterated his desire to be business in the Philippines. PIL also questioned the service of
the manager of Pioneer’s Philippine business venture. summons on it. Assuming arguendo that Klepzig is PIL’s agent in
the Philippines, it was not Klepzig but De Leon who received the
Annex "G" shows Todaro’s faxed reply, under the letterhead of Ital summons for PIL. PIL further stated that the National Labor
Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997. Relations Commission (NLRC), and not the trial court, has
Todaro informed McDonald that he was willing to extend jurisdiction over the subject matter of the action. It claimed that
assistance to the Pioneer representative from Queensland. The assuming that the trial court has jurisdiction over the subject matter
tenor of the letter revealed that Todaro had not yet occupied his of the action, the complaint should be dismissed on the ground of
expected position. forum non-conveniens. Finally, PIL maintained that the complaint
does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial
Annex "H" shows Klepzig’s letter, under the letterhead of PPHI, to court against PIL because PIL is a foreign corporation not doing
Todaro dated 18 September 1997. Klepzig’s message reads: business in the Philippines and there was improper service of
summons on PIL.
It has not proven possible for this company to meet with
your expectations regarding the conditions of your Todaro filed a Consolidated Opposition dated 26 August 1998 to
providing Pioneer with consultancy services. This, and refute PIL’s assertions. PIL filed, still by special appearance, a
your refusal to consider my terms of offer of permanent Reply on 2 October 1998.
employment, leave me no alternative but to withdraw
these offers of employment with this company.
The Ruling of the Trial Court

As you provided services under your previous agreement


with our Pioneer Hong Kong office during the month of On 4 January 1999, the trial court issued an order which ruled in
August, I will see that they pay you at the previous rates favor of Todaro. The trial court denied the motions to dismiss filed
until the end of August. They have authorized me on by PIL, PCPI, PPHI, and Klepzig.
behalf of Pioneer International Ltd. to formally advise you
that the agreement will cease from August 31st as per our The trial court stated that the merits of a motion to dismiss a
previous discussions. complaint for lack of cause of action are tested on the strength of
the allegation of facts in the complaint. The trial court found that
Annex "I" shows the letter dated 20 October 1997 of K.M. Folwell the allegations in the complaint sufficiently establish a cause of
(Folwell), PIL’s Executive General Manager of Australia and Asia, action. The trial court declared that Todaro’s cause of action is
to Todaro. Folwell confirmed the contents of Klepzig’s 18 based on an alleged breach of a contractual obligation and an
September 1997 letter. Folwell’s message reads: alleged violation of Articles 19 and 21 of the Civil Code. Therefore,
the cause of action does not lie within the jurisdiction of the NLRC
but with the trial court.
Thank you for your letter to Dr. Schubert dated 29th
September 1997 regarding the alleged breach of contract
with you. Dr. Schubert has asked me to investigate this The trial court also asserted its jurisdiction over PIL, holding that
matter. PIL did business in the Philippines when it entered into a contract
with Todaro. Although PIL questions the service of summons on
Klepzig, whom PIL claims is not its agent, the trial court ruled that
I have discussed and examined the material regarding PIL failed to adduce evidence to prove its contention. Finally, on
your association with Pioneer over the period from mid the issue of forum non-conveniens, the trial court found that it is
1996 through to September 1997. more convenient to hear and decide the case in the Philippines
because Todaro resides in the Philippines and the contract
Clearly your consultancy services to Pioneer Hong Kong allegedly breached involves employment in the Philippines.
are well documented and have been appropriately
rewarded. However, in regard to your request and PIL filed an urgent omnibus motion for the reconsideration of the
expectation to be given permanent employment with trial court’s 4 January 1999 order and for the deferment of filing its
Pioneer Philippines Holdings, Inc. I am informed that answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus
negotiations to reach agreement on appropriate terms motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
and conditions have not been successful. PPHI, and Klepzig filed a joint reply. The trial court issued an order
on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and
Page 51 of 84
Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days The Ruling of the Court
within which to file their respective answers.
The petition has partial merit. We affirm with modification the
PIL did not file an answer before the trial court and instead filed a rulings of the trial and appellate courts. Apart from the issue on
petition for certiorari before the appellate court. service of summons, the rulings of the trial and appellate courts on
the issues raised by PIL are correct.
The Ruling of the Appellate Court
Cause of Action
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate court’s Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a
decision reads: cause of action is the act or omission by which a party violates a
right of another.
WHEREFORE, premises considered, the present petition
for certiorari is hereby DENIED DUE COURSE and The general rule is that the allegations in a complaint are
accordingly DISMISSED. The assailed Orders dated sufficient to constitute a cause of action against the
January 4, 1999 and June 3, 1999 of the Regional Trial defendants if, admitting the facts alleged, the court can
Court of Makati City, Branch 147, in Civil Case No, 98- render a valid judgment upon the same in accordance
124 are hereby AFFIRMED in toto. with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in
favor of the plaintiff by whatever means and under
SO ORDERED.20
whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to
On 14 January 2003, the appellate court dismissed21 PIL’s motion violate such right; and (3) an act or omission on the part
for reconsideration for lack of merit. The appellate court stated that of such defendant violative of the right of the plaintiff or
PIL’s motion raised no new substantial or weighty arguments that constituting a breach of the obligation of the defendant to
could impel the appellate court from departing or overturning its the plaintiff for which the latter may maintain an action for
previous decision. PIL then filed a petition for review on certiorari recovery of damages.23
before this Court.
In the present case, the summary of Todaro’s allegations states
The Issues that PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
PIL raised the following issues before this Court: PIL’s Philippine office. Todaro’s allegations are thus sufficient to
establish a cause of action. We quote with approval the trial court’s
ruling on this matter:
A. [The trial court] did not and cannot acquire jurisdiction
over the person of [PIL] considering that:
On the issue of lack of cause of action – It is well-settled
that the merits of a motion to dismiss a complaint for lack
A.1. [PIL] is a foreign corporation "not doing of cause of action is tested on the strength of the
business" in the Philippines. allegations of fact contained in the complaint and no
other (De Jesus, et al. vs. Belarmino, et al., 95 Phil. 366
A.2. Moreover, the complaint does not contain [1954]). This Court finds that the allegations of the
appropriate allegations of ultimate facts complaint, specifically paragraphs 13-33 thereof,
showing that [PIL] is doing or transacting paragraphs 30-33 alleging as follows:
business in the Philippines.
"30. All of the acts set forth in the foregoing
A.3. Assuming arguendo that jurisdiction may have been done with the knowledge, consent
be acquired over the person of [PIL], [the trial and/or approval of the defendants who acted in
court] still failed to acquire jurisdiction since concert and/or in conspiracy with one another.
summons was improperly served on [PIL].
31. Under the circumstances, there is a valid
B. [Todaro] does not have a cause of action and the contract entered into between [Todaro] and the
complaint fails to state a cause of action. Jurisprudence Pioneer Group, whereby, among others, the
is settled in that in resolving a motion to dismiss, a court Pioneer Group would employ [Todaro], on a
can consider all the pleadings filed in the case, including permanent basis, to manage and operate the
annexes, motions and all evidence on record. ready-mix concrete operations, if the Pioneer
Group decides to invest in the Philippines.
C. [The trial court] did not and cannot acquire jurisdiction
over the subject matter of the complaint since the 32. The Pioneer Group has decided to invest in
allegations contained therein indubitably show that the Philippines. The refusal of the defendants to
[Todaro] bases his claims on an alleged breach of an comply with the Pioneer Group’s undertaking to
employment contract. Thus, exclusive jurisdiction is employ [Todaro] to manage their Philippine
vested with the [NLRC]. ready-mix operations, on a permanent basis, is
a direct breach of an obligation under a valid
and perfected contract.
D. Pursuant to the principle of forum non-conveniens,
[the trial court] committed grave abuse of discretion when
it took cognizance of the case. 33. Alternatively, assuming without conceding,
that there was no contractual obligation on the
Page 52 of 84
part of the Pioneer Group to employ [Todaro] on the government official designated by law to that
on a permanent basis, in their Philippine effect, or any of its officers or agents within the
operations, the Pioneer Group and the other Philippines.
defendants did not act with justice, give
[Todaro] his due and observe honesty and As to the first sub-issue, PIL insists that its sole act of "transacting"
good faith and/or they have willfully caused or "doing business" in the Philippines consisted of its investment in
injury to [Todaro] in a manner that is contrary to PPHI. Under Philippine law, PIL’s mere investment in PPHI does
morals, good customs, and public policy, as not constitute "doing business." However, we affirm the lower
mandated under Arts. 19 and 21 of the New courts’ ruling and declare that, based on the allegations in
Civil Code." Todaro’s complaint, PIL was doing business in the Philippines
when it negotiated Todaro’s employment with PPHI. Section 3(d)
sufficiently establish a cause of action for breach of of Republic Act No. 7042, Foreign Investments Act of 1991, states:
contract and/or violation of Articles 19 and 21 of the New
Civil Code. Whether or not these allegations are true is The phrase "doing business" shall include soliciting
immaterial for the court cannot inquire into the truth orders, service contracts, opening offices, whether
thereof, the test being whether, given the allegations of called "liaison" offices or branches; appointing
fact in the complaint, a valid judgment could be rendered
representatives or distributors domiciled in the
in accordance with the prayer in the complaint. Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred
It should be emphasized that the presence of a cause of action eighty [180] days or more; participating in the
rests on the sufficiency, and not on the veracity, of the allegations management, supervision or control of any domestic
in the complaint. The veracity of the allegations will have to be business, firm, entity or corporation in the Philippines;
examined during the trial on the merits. In resolving a motion to and any other act or acts that imply a continuity of
dismiss based on lack of cause of action, the trial court is limited to commercial dealings or arrangements and
the four corners of the complaint and its annexes. It is not yet contemplate to that extent the performance of acts or
necessary for the trial court to examine the truthfulness of the works, or the exercise of some of the functions
allegations in the complaint. Such examination is proper during the normally incident to, and in progressive prosecution
trial on the merits. of commercial gain or of the purpose and object of
the business organization: Provided, however, That the
Forum Non-Conveniens phrase "doing business" shall not be deemed to include
mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business,
The doctrine of forum non-conveniens requires an examination of and/or the exercise of rights as such investor; nor having
the truthfulness of the allegations in the complaint. Section 1, Rule a nominee director or officer to represent its interests in
16 of the 1997 Rules of Civil Procedure does not mention forum such corporation; nor appointing a representative or
non-conveniens as a ground for filing a motion to dismiss. The distributor domiciled in the Philippines which transacts
propriety of dismissing a case based on forum non-conveniens business in its own name and for its own account;
requires a factual determination; hence, it is more properly (Emphases added)
considered a matter of defense. While it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground,
the trial court should do so only after vital facts are established to PIL’s alleged acts in actively negotiating to employ Todaro to run
determine whether special circumstances require the court’s its pre-mixed concrete operations in the Philippines, which acts are
desistance. hypothetically admitted in PIL’s motion to dismiss, are not mere
acts of a passive investor in a domestic corporation. Such are
managerial and operational acts in directing and establishing
Jurisdiction over PIL commercial operations in the Philippines. The annexes that Todaro
attached to his complaint give us an idea on the extent of PIL’s
PIL questions the trial court’s exercise of jurisdiction over it on two involvement in the negotiations regarding Todaro’s employment. In
levels. First, that PIL is a foreign corporation not doing business in Annex "E," McDonald of Pioneer Concrete Group HK confirmed his
the Philippines and because of this, the service of summons on offer to engage Todaro as a consultant of PIL. In Annex "F,"
PIL did not follow the mandated procedure. Second, that Todaro’s Todaro accepted the consultancy. In Annex "H," Klepzig of PPHI
claims are based on an alleged breach of an employment contract stated that PIL authorized him to tell Todaro about the cessation of
so Todaro should have filed his complaint before the NLRC and his consultancy. Finally, in Annex "I," Folwell of PIL wrote to
not before the trial court. Todaro to confirm that "Pioneer" no longer wishes to be associated
with Todaro and that Klepzig is authorized to terminate this
association. Folwell further referred to a Dr. Schubert and to
Transacting Business in the Philippines and Pioneer Hong Kong. These confirmations and references tell us
Service of Summons that, in this instance, the various officers and companies under the
Pioneer brand name do not work independently of each other. It
The first level has two sub-issues: PIL’s transaction of business in cannot be denied that PIL had knowledge of and even authorized
the Philippines and the service of summons on PIL. Section 12, the non-implementation of Todaro’s alleged permanent
Rule 14 of the 1997 Rules of Civil Procedure provides the manner employment. In fact, in the letters to Todaro, the word "Pioneer"
by which summons may be served upon a foreign juridical entity was used to refer not just to PIL alone but also to all corporations
which has transacted business in the Philippines. Thus: negotiating with Todaro under the Pioneer name.

Service upon foreign private juridical entity. — When the As further proof of the interconnection of the various Pioneer
defendant is a foreign juridical entity which has corporations with regard to their negotiations with Todaro,
transacted business in the Philippines, service may be McDonald of Pioneer Concrete Group HK confirmed Todaro’s
made on its resident agent designated in accordance engagement as consultant of PIL (Annex "E") while Folwell of PIL
with law for that purpose, or, if there be no such agent, stated that Todaro rendered consultancy services to Pioneer HK
Page 53 of 84
(Annex "I"). In this sense, the various Pioneer corporations were (Annexes "H" and "I").32 The authority given by PIL to Klepzig to
not acting as separate corporations. The behavior of the various notify Todaro implies that Klepzig was likewise authorized to
Pioneer corporations shoots down their defense that the receive Todaro’s response to PIL’s notice. Todaro responded to
corporations have separate and distinct personalities, PIL’s notice by filing a complaint before the trial court.
managements, and operations. The various Pioneer corporations
were all working in concert to negotiate an employment contract However, summons was not served personally on Klepzig as
between Todaro and PPHI, a domestic corporation. agent of PIL. Instead, summons was served on De Leon, Klepzig’s
Executive Assistant. In this instance, De Leon was not PIL’s agent
Finally, the phrase "doing business in the Philippines" in the former but a mere employee of Klepzig. In effect, the sheriff33 resorted to
version of Section 12, Rule 14 now reads "has transacted business substituted service. For symmetry, we apply the rule on substituted
in the Philippines." The scope is thus broader in that it is enough service of summons on a natural person and we find that no
for the application of the Rule that the foreign private juridical entity reason was given to justify the service of PIL’s summons on De
"has transacted business in the Philippines." 26 Leon.

As to the second sub-issue, the purpose of summons is not only to Thus, we rule that PIL transacted business in the Philippines and
acquire jurisdiction over the person of the defendant, but also to Klepzig was its agent within the Philippines. However, there was
give notice to the defendant that an action has been commenced improper service of summons on PIL since summons was not
against it and to afford it an opportunity to be heard on the claim served personally on Klepzig.
made against it. The requirements of the rule on summons must
be strictly followed; otherwise, the trial court will not acquire NLRC Jurisdiction
jurisdiction over the defendant.

As to the second level, Todaro prays for payment of damages due


When summons is to be served on a natural person, service of him because of PIL’s non-implementation of Todaro’s alleged
summons should be made in person on the defendant. 27 employment agreement with PPHI. The appellate court stated its
Substituted service is resorted to only upon the concurrence of two
ruling on this matter, thus:
requisites: (1) when the defendant cannot be served personally
within a reasonable time and (2) when there is impossibility of
prompt service as shown by the statement in the proof of service in It could not be denied that there was no existing contract
the efforts made to find the defendant personally and that such yet to speak of between PIONEER INTL. and [Todaro].
efforts failed.28 Since there was an absence of an employment contract
between the two parties, this Court is of the opinion and
so holds that no employer-employee relationship actually
The statutory requirements of substituted service must be followed exists. Record reveals that all that was agreed upon by
strictly, faithfully, and fully, and any substituted service other than
[Todaro] and the Pioneer Concrete, acting in behalf of
by the statute is considered ineffective. Substituted service is in PIONEER INTL., was the confirmation of the offer to
derogation of the usual method of service. It is a method engage the services of the former as consultant of
extraordinary in character and may be used only as prescribed and PIONEER INTL. (Rollo, p. 132). The failure on the part of
in the circumstances authorized by the statute. 29 The need for strict PIONEER INTL. to abide by the said agreement, which
compliance with the requirements of the rule on summons is also was duly confirmed by PIONEER INTL., brought about a
exemplified in the exclusive enumeration of the agents of a breach of an obligation on a valid and perfected
domestic private juridical entity who are authorized to receive
agreement. There being no employer-employee
summons. relationship established between [PIL] and [Todaro], it
could be said that the instant case falls within the
At present, Section 11 of Rule 14 provides that when the jurisdiction of the regular courts of justice as the money
defendant is a domestic private juridical entity, service may be claim of [Todaro] did not arise out of or in connection with
made on the "president, managing partner, general manager, [an] employer-employee relationship.
corporate secretary, treasurer, or in-house counsel." The previous
version of Section 11 allowed for the service of summons on the Todaro’s employment in the Philippines would not be with PIL but
"president, manager, secretary, cashier, agent, or any of its
with PPHI as stated in the 20 October 1997 letter of Folwell.
directors." The present Section 11 qualified "manager" to "general Assuming the existence of the employment agreement, the
manager" and "secretary" to "corporate secretary." The present employer-employee relationship would be between PPHI and
Section 11 also removed "cashier, agent, or any of its directors" Todaro, not between PIL and Todaro. PIL’s liability for the non-
from the exclusive enumeration. implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes
When summons is served on a foreign juridical entity, there are of action as stated in his complaint are, in addition to breach of
three prescribed ways: (1) service on its resident agent designated contract, based on "violation of Articles 19 and 21 of the New Civil
in accordance with law for that purpose, (2) service on the Code" for the "clear and evident bad faith and malice" on the part
government official designated by law to receive summons if the of defendants. The NLRC’s jurisdiction is limited to those
corporation does not have a resident agent, and (3) service on any enumerated under Article 217 of the Labor Code.
of the corporation’s officers or agents within the Philippines.30
WHEREFORE, the petition is PARTIALLY GRANTED. The
In the present case, service of summons on PIL failed to follow any Decision dated 27 September 2001 and the Resolution dated 14
of the prescribed processes. PIL had no resident agent in the January 2003 of the appellate court are AFFIRMED with the
Philippines. Summons was not served on the Securities and MODIFICATION that there was improper service of summons on
Exchange Commission (SEC), the designated government Pioneer International, Ltd. The case is remanded to the trial court
agency,31 since PIL is not registered with the SEC. Summons for for proper service of summons and trial. No costs. SO ORDERED
PIL was served on De Leon, Klepzig’s Executive Assistant. Klepzig
is PIL’s "agent within the Philippines" because PIL authorized
Klepzig to notify Todaro of the cessation of his consultancy
Page 54 of 84
VICTORIA REGNER, Petitioner - versus - CYNTHIA R. Upon her arrival in the Philippines, on 1 June 2000,
LOGARTA, TERESA R. TORMIS and CEBU COUNTRY CLUB, Teresa was personally served the summons at Room 304,
Inc., G.R. No. 168747; October 19, 2007;CHICO-NAZARIO, J.: Regency Crest Condominium, Banilad, Cebu City. She filed her
Answer[4] with counterclaim with the RTC on 6 June 2000.

Subsequently, on 12 September 2002, Teresa filed a


This Petition for Review on Certiorari seeks to reverse motion to dismiss Civil Case No. CEB 23927 because of
the Decision[1] dated 6 May 2005 of the Court of Appeals in CA- petitioners failure to prosecute her action for an unreasonable
G.R. CV No. 71028 entitled, Victoria Regner v. Cynthia Logarta, length of time.
Teresa R. Tormis and Cebu Country Club, Inc., which affirmed the
Order dated 9 November 2000 of the Regional Trial Court (RTC) of
Cebu, granting herein respondents motion to dismiss Civil Case Petitioner opposed[5] the motion and filed her own
No. CEB 23927. The Order dated 9 November 2000 of the RTC motion to set the case for pre-trial, to which Teresa filed her
dismissed herein petitioners complaint for declaration of nullity of a rejoinder on the ground that their sister, Cynthia, an indispensable
deed of donation, for failure to serve summons on Cynthia Logarta, party, had not yet been served a summons. Thus, Teresa prayed
an indispensable party therein. for the dismissal of petitioners complaint, as the case would not
proceed without Cynthias presence.
Civil Case No. CEB. 23927 arose from the following
factual antecedents: On 9 November 2000, the RTC issued an Order[6]
granting respondent Teresas motion to dismiss, pertinent portions
of which read:
Luis Regner (Luis) had three daughters with his first wife,
Anicita C. Regner, namely, Cynthia Logarta (Cynthia) and Teresa
Tormis (Teresa), the respondents herein, and Melinda Regner- Considering that the donees in the
Borja (Melinda). Deed of Donation are Cynthia R. Logarta and
Teresa R. Tormis, they are therefore an (sic)
indispensable party (sic). In the case of
Herein petitioner Victoria Regner (Victoria) is the second Quisumbing vs. Court of Appeals, 189 SCRA
wife of Luis. 325, indispensable parties are those with such
an interest in the controversy that a final decree
During the lifetime of Luis, he acquired several would necessarily affect their rights so that the
properties, among which is a share at Cebu Country Club Inc., court could not proceed without their presence
evidenced by Proprietary Ownership Certificate No. 0272. On 15
May 1998, Luis executed a Deed[2] of Donation in favor of Wherefore, in view of the foregoing,
respondents Cynthia and Teresa covering Proprietary Ownership the instant case is hereby dismissed
Certificate No. 0272 of the Cebu Country Club, Inc. without prejudice.

Luis passed away on 11 February 1999. A motion for reconsideration was filed by petitioner, but
the same was denied in an Order dated 14 February 2001.
On 15 June 1999, Victoria filed a Complaint[3] for
Declaration of Nullity of the Deed of Donation with Prayer for Aggrieved, petitioner appealed to the Court of Appeals.
Issuance of a Writ of Preliminary Injunction and Temporary On 6 May 2005, the Court of Appeals rendered a Decision denying
Restraining Order against Cynthia and Teresa with the RTC, the appeal and affirming in toto the order of dismissal of the
docketed as Civil Case No. CEB. 23927. Victoria alleged in her complaint by the RTC and the denial of the motion for
complaint that: on 17 March 1997, Luis made a written declaration reconsideration thereof. The Court of Appeals ratiocinated that
wherein he stated that due to his illness and forgetfulness, he petitioners failure to move for an extraterritorial service of
would not sign any document without the knowledge of his lawyer, summons constitutes failure to prosecute for an unreasonable
Atty. Francis Zosa; on 15 May 1998, when Luis was already very ill length of time, thus:
and no longer of sound and disposing mind, Cynthia and Teresa ,
conspiring and confederating with each other, fraudulently made or [T]he plaintiff-appellant [Victoria Regner] should
caused to be fraudulently made a Deed of Donation whereby they have moved for the extraterritorial service of
made it appear that Luis donated to them Proprietary Ownership summons for both defendants-appellees
Certificate No. 0272; since Luis no longer had the ability to write or Teresa R. Tormis and Cynthia R. Logarta as
affix his signature, Melinda, acting under the influence of her they were not residing and were not found in
sisters, Cynthia and Teresa, fraudulently manipulated the hand of the Philippines when plaintiff-appellant [Victoria
Luis so that he could affix his thumbmark on the assailed Deed of Regner] filed this case below. Although
Donation; on 8 February 1998, or three days before the death of defendant-appellant Teresa Tormis was
Luis, and when he was already in comatose condition at the Cebu personally served with summons on June 1,
Doctors Hospital, Melinda, Teresa, and Cynthia caused the 2000 when she came to the Philippines but the
preparation of an affidavit to the effect that Luis affirmed the Deed same was only effected after a long wait or
of Donation he allegedly executed earlier by lifting his hand to affix after the lapse of almost one year from the date
his thumbmark on the said affidavit. the complaint was filed on June 15, 1999. To
allow this practice would be to make the
Sheriff Melchor A. Solon served the summonses on continuation of like proceedings before the
Cynthia and Teresa at the Borja Family Clinic in Tagbilaran City courts dependent on when the defendants
wherein Melinda worked as a doctor, but Melinda refused to would be personally served with summons by
receive the summonses for her sisters and informed the sheriff that the time they would come to the Philippines,
their lawyer, Atty. Francis Zosa, would be the one to receive the which would only unnecessarily delay the
same. proceedings and clog the court dockets as well.
The afore-cited rule was precisely crafted to
Page 55 of 84
meet situations similar to the present case to joinder of all indispensable parties under any and all conditions,
avoid unnecessary delays. their presence being a sine qua non for the exercise of judicial
power.[12] It is precisely when an indispensable party is not before
It has to be emphasized that it is the court [that] the action should be dismissed.[13] The absence of
incumbent upon the plaintiff [Victoria Regner] to an indispensable party renders all subsequent actions of the court
move with leave of court for the extraterritorial null and void for want of authority to act, not only as to the absent
service of summons. Taking into account the parties but even as to those present.[14]
considerable time that had elapsed from the
filing of the complaint on June 15, 1999 until As we ruled in Alberto v. Mananghala[15]:
defendant-appellee Teresa R. Tormis, through
counsel, filed a motion to dismiss on
September 12, 2000, or approximately fifteen In an action for recovery of property against a
(15) months, without any act on the part of person who purchased it from another who in
plaintiff-appellant [Victoria Regner] to move for turn acquired it from others by the same means
extraterritorial service of summons upon the or by donation or otherwise, the
person of defendant-appellee Cynthia Logarta predecessors of defendants are indispensable
renders plaintiff-appellants [Victoria Regner] parties if the transfers, if not voided, may bind
complaint dismissible for failure to prosecute plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In
her action for unreasonable length of time the latter case, this Court held:
under Section 3, Rule 17, Revised Rules of
Court, x x x.[7] In order to bring this suit duly to a
close, it is imperative to determine the only
question raised in connection with the pending
Hence, this appeal via petition[8] for review on certiorari appeal, to wit, whether all the persons who
filed by petitioner raising the following assignment of errors:
intervened in the matter of the transfers and
donation herein referred to, are or are not
THE COURT OF APPEALS ERRED IN necessary parties to this suit, since it is asked
HOLDING THAT THE DELAY IN SERVING in the complaint that the said transfers and
SUMMONS ON ONE OF THE DEFENDANTS donation be declared null and void an
CONSTITUTES A FAILURE TO PROSECUTE indispensable declaration for the purpose, in a
NOTWITHSTANDING THAT THE REST OF proper case, of concluding the plaintiff to be the
THE CO-DEFENDANTS WERE DULY sole owner of the house in dispute.
SERVED WITH SUMMONSES
If such a declaration of annulment can
THE COURT OF APPEALS ERRED IN NOT directly affect the persons who made and who
CONSIDERING THAT THE ANSWER FILED were concerned in the said transfers, nothing
BY ONE INDIVIDUAL DEFENDANT could be more proper and just than to hear
REDOUNDS TO THE BENEFIT OF THE them in the litigation, as parties interested in
OTHER DEFENDANT WHO HAS NOT BEEN maintaining the validity of those transactions,
SERVED WITH SUMMONS, THE NATURE OF and therefore, whatever be the nature of the
ACTION BEING ADMITTEDLY COMMON judgment rendered, Francisco Reyes, Dolores
AMONG ALL DEFENDANTS.[9] Carvajal, Alfredo Chicote, Vicente Miranda, and
Rafael Sierra, besides the said minors, must be
From the foregoing, this Court identifies the issues to be included in the case as defendants. (Garcia vs.
resolved in this petition as: (1) Whether a co-donee is an Reyes, 17 Phil., 130-131.)
indispensable party in an action to declare the nullity of the deed of
donation, and (2) whether delay in the service of summons upon It takes no great degree of legal sophistication to realize
one of the defendants constitutes failure to prosecute that would that Cynthia and Teresa are indispensable parties to Civil Case
warrant dismissal of the complaint. No. CEB 23927. Cynthia and Teresa allegedly derived their rights
to the subject property by way of donation from their father Luis.
A Court must acquire jurisdiction over the persons of The central thrust of the petitioners complaint in Civil Case No.
indispensable parties before it can validly pronounce judgments CEB 23927 was that Luis could not have donated Proprietary
personal to the parties. Courts acquire jurisdiction over a party Ownership Certificate No. 0272 to his daughters Cynthia and
plaintiff upon the filing of the complaint. On the other hand, Teresa, as Luis was already very ill and no longer of sound and
jurisdiction over the person of a party defendant is assured upon disposing mind at the time of donation on 15 May 1997.
the service of summons in the manner required by law or Accordingly, the prayer in petitioners complaint was for the trial
otherwise by his voluntary appearance. As a rule, if a defendant court to declare null and void the Deed of Donation and to restrain
has not been summoned, the court acquires no jurisdiction over his the Cebu Country Club, Inc. from transferring title and ownership of
person, and a personal judgment rendered against such defendant Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa.
is null and void.[10] A decision that is null and void for want of
jurisdiction on the part of the trial court is not a decision in the Thus, based on the Deed of Donation, Teresa and
contemplation of law and, hence, it can never become final and Cynthia are co-owners of Proprietary Membership Certificate No.
executory.[11] 0272 of Cebu Country Club, Inc. The country club membership
certificate is undivided and it is impossible to pinpoint which
Rule 3, Section 7 of the Rules of Court, defines specific portion of the property belongs to either Teresa or Cynthia.
indispensable parties as parties-in-interest without whom there can Indeed, both Teresa and Cynthia are indispensable parties in Civil
be no final determination of an action. As such, they must be Case No. CEB 23927.
joined either as plaintiffs or as defendants. The general rule with
reference to the making of parties in a civil action requires, of An indispensable party has been defined as follows:
course, the joinder of all necessary parties where possible, and the
Page 56 of 84
An indispensable party is a party who requiring the person asserting a right against
has such an interest in the controversy or the defendant to include with him, either as co-
subject matter that a final adjudication cannot plaintiffs or as co-defendants, all persons
be made, in his absence, without injuring or standing in the same position, so that the whole
affecting that interest, a party who has not only matter in dispute may be determined once and
an interest in the subject matter of the for all in one litigation.
controversy, but also has an interest of such
nature that a final decree cannot be made Applying the foregoing definitions and principles to the
without affecting his interest or leaving the present case, this Court finds that any decision in Civil Case No.
controversy in such a condition that its final CEB 23927 cannot bind Cynthia, and the Court cannot nullify the
determination may be wholly inconsistent with donation of the property she now co-owns with Teresa, even if
equity and good conscience. It has also been limited only to the portion belonging to Teresa, to whom summons
considered that an indispensable party is a
was properly served, since ownership of the property is still pro
person in whose absence there cannot be a indiviso. Obviously, Cynthia is an indispensable party in Civil Case
determination between the parties already
No. CEB 23927 without whom the lower court is barred from
before the court which is effective, complete, or making a final adjudication as to the validity of the entire donation.
equitable. Further, an indispensable party is Without the presence of indispensable parties to a suit or
one who must be included in an action before it proceeding, a judgment therein cannot attain finality.[19]
may properly go forward.

A person is not an indispensable Being an indispensable party in Civil Case No. CEB
party, however, if his interest in the controversy 23927, the trial court must also acquire jurisdiction over Cynthias
or subject matter is separable from the interest person through the proper service of summons.
of the other parties, so that it will not
necessarily be directly or injuriously affected by Based on the foregoing disquisitions, the issue of
a decree which does complete justice between whether the answer filed by Teresa should benefit Cynthia who
them. Also, a person is not an indispensable was not served summons need not be discussed.
party if his presence would merely permit
complete relief between him and those already
parties to the action, or if he has no interest in As to determine whether Cynthia was properly served a
the subject matter of the action. It is not a summons, it will be helpful to determine first the nature of the
sufficient reason to declare a person to be an action filed against Cynthia and Teresa by petitioner Victoria,
indispensable party that his presence will avoid whether it is an action in personam, in rem or quasi in rem. This is
multiple litigation.[16] because the rules on service of summons embodied in Rule 14
apply according to whether an action is one or the other of these
actions.
In Servicewide Specialists, Incorporated v. Court of
Appeals,[17] this Court held that no final determination of a case
could be made if an indispensable party is not legally present In a personal action, the plaintiff seeks the recovery of
therein: personal property, the enforcement of a contract or the recovery of
damages.[20] In contrast, in a real action, the plaintiff seeks the
recovery of real property; or, as indicated in Section 2(a), Rule 4 of
An indispensable party is one whose interest the then Rules of Court, a real action is an action affecting title to
will be affected by the courts action in the real property or for the recovery of possession, or for partition or
litigation, and without whom no final condemnation of, or foreclosure of mortgage on, real property. An
determination of the case can be had. The action in personam is an action against a person on the basis of
partys interest in the subject matter of the suit his personal liability, while an action in rem is an action against the
and in the relief sought are so inextricably thing itself, instead of against the person.[21]
intertwined with the other parties that his legal
presence as a party to the proceeding is an
absolute necessity. In his absence there cannot In an action in personam, personal service of summons
be a resolution of the dispute of the parties or, if this is not possible and he cannot be personally served,
before the court which is effective, complete, or substituted service, as provided in Section 7, Rule 14 of the Rules
equitable. of Court,[22] is essential for the acquisition by the court of
jurisdiction over the person of a defendant who does not voluntarily
submit himself to the authority of the court.[23] If defendant cannot
The rationale for treating all the co-owners of a property be served a summons because he is temporarily abroad, but is
as indispensable parties in a suit involving the co-owned property otherwise a Philippine resident, service of summons may, by leave
is explained in Arcelona v. Court of Appeals[18]: of court, be made by publication.[24] Otherwise stated, a resident
defendant in an action in personam, who cannot be personally
As held by the Supreme Court, were the courts served a summons, may be summoned either by means of
to permit an action in ejectment to be substituted service in accordance with Section 7, Rule 14 of the
maintained by a person having merely an Rules of Court, or by publication as provided in Sections 15 and 16
undivided interest in any given tract of land, a of the same Rule.
judgment in favor of the defendants would not
be conclusive as against the other co-owners In all of these cases, it should be noted, defendant must
not parties to the suit, and thus the defendant in be a resident of the Philippines; otherwise an action in personam
possession of the property might be harassed cannot be brought because jurisdiction over his person is essential
by as many succeeding actions of ejectment, to make a binding decision.
as there might be co-owners of the title
asserted against him. The purpose of this
provision was to prevent multiplicity of suits by
Page 57 of 84
On the other hand, if the action is in rem or quasi in rem, 2. Defendant Cynthia R. Logarta is a
jurisdiction over the person of the defendant is not essential for Filipino, of legal age, married to
giving the court jurisdiction so long as the court acquires Ramon Logarta, resident (sic) 463
jurisdiction over the res. If the defendant is a nonresident and he is West Vine No.201, Glendale,
not found in the country, summons may be served extraterritorially California, 912041, USA. She
in accordance with Section 15, Rule 14 of the Rules of Court, however usually visits in the
which provides: Philippines and can be served with
summons and other processes of this
Section 15. Extraterritorial service. - Honorable Court at Borja Family
When the defendant does not reside and is not Clinic, Tagbilaran, Bohol;
found in the Philippines, and the action affects
the personal status of the plaintiff or relates to, 3. Defendant Teresa R. Tormis is
or the subject of which is, property within the likewise a Filipino, of legal age,
Philippines, in which the defendant has or married to Antonio Tormis, and a
claims a lien or interest, actual or contingent, or resident of 2408 South Hacienda
in which the relief demanded consists, wholly or Heights, California, 19745, U.S.A.
in part, in excluding the defendant from any She however usually visits in the
interest therein, or the property of the defendant Philippines and can be served with
has been attached within the Philippines, summons and other processes of this
service may, by leave of court, be effected out Honorable Court at Borja Family
of the Philippines by personal service as under Clinic, Tagbilaran, Bohol.[27]
Section 6; or by publication in a newspaper of
general circulation in such places and for such Petitioner prayed for a declaration of nullity of the deed of
time as the court may order, in which case a donation, to restrain Cebu Country Club, Inc. from transferring title
copy of the summons and order of the court and ownership of Proprietary Ownership Certificate No. 0272 to
shall be sent by registered mail to the last Cynthia and Teresa, and for moral and exemplary damages. Civil
known address of the defendant, or in any other Case No. CEB 23927 is evidently an action against Cynthia and
manner the court may deem sufficient. Any Teresa on the basis of their personal liability for the alleged
order granting such leave shall specify a fraudulent transfer of the subject Country Club membership from
reasonable time, which shall not be less than Luis to their name. In this sense, petitioner questions the
sixty (60) days after notice, within which the participation and shares of Cynthia and Teresa in the transferred
defendant must answer. Country Club membership. Moreover, the membership certificate
from the Cebu Country Club, Inc. is a personal property. Thus, the
As stated above, there are only four instances wherein a action instituted by petitioner before the RTC is in personam.
defendant who is a non-resident and is not found in the country
may be served a summons by extraterritorial service, to wit: (1) Being an action in personam, the general rule requires
when the action affects the personal status of the plaintiff; (2) when the personal service of summons on Cynthia within the Philippines,
the action relates to, or the subject of which is property within the but this is not possible in the present case because Cynthia is a
Philippines, on which the defendant claims a lien or an interest, non-resident and is not found within the Philippines.
actual or contingent; (3) when the relief demanded in such action
consists, wholly or in part, in excluding the defendant from any
As Cynthia is a nonresident who is not found in the
interest in property located in the Philippines; and (4) when the
Philippines, service of summons on her must be in accordance
defendant non-residents property has been attached within the
with Section 15, Rule 14 of the Rules of Court. Such service, to be
Philippines. In these instances, service of summons may be
effective outside the Philippines, must be made either (1) by
effected by (a) personal service out of the country, with leave of
personal service; (2) by publication in a newspaper of general
court; (b) publication, also with leave of court; or (c) any other
circulation in such places and for such time as the court may order,
manner the court may deem sufficient.[25]
in which case a copy of the summons and order of the court should
be sent by registered mail to the last known address of the
In such cases, what gives the court jurisdiction in an defendant; or (3) in any other manner which the court may deem
action in rem or quasi in rem is that it has jurisdiction over the res, sufficient. The third mode, like the first two, must be made outside
i.e., the personal status of the plaintiff who is domiciled in the the Philippines, such as through the Philippine Embassy in the
Philippines or the property litigated or attached. Service of foreign country where Cynthia resides.
summons in the manner provided in Section 15, Rule 14 of the
Rules of Court is not for the purpose of vesting the court with
Since in the case at bar, the service of summons upon
jurisdiction, but for complying with the requirements of fair play or
Cynthia was not done by any of the authorized modes, the trial
due process, so that the defendant will be informed of the
court was correct in dismissing petitioners complaint.
pendency of the action against him; and the possibility that
property in the Philippines belonging to him, or in which he has an
interest, might be subjected to a judgment in favor of the plaintiff Section 3, Rule 17 of the 1997 Rules of Civil Procedure,
and he can thereby take steps to protect his interest if he is so states
minded.[26]
SEC. 3. Dismissal due to fault of
In petitioners Complaint in Civil Case No. CEB No. plaintiff. If, for no justifiable cause, the plaintiff
23427, she alleged that Cynthia is residing at 462 West Vine No. fails to appear on the date of the presentation
201, Glendale, California, 912041, U.S.A.; while Teresa is residing of his evidence in chief on the complaint, or to
at 2408 South Hacienda Boulevard, Hacienda Heights, California, prosecute his action for an unreasonable length
but they usually visit here in the Philippines and can be served of time, or to comply with these Rules or any
summonses and other processes at the Borja Family Clinic, Bohol. order of the court, the complaint may be
Pertinent portions of the Complaint read: dismissed upon motion of the defendant or
Page 58 of 84
upon the court's own motion, without prejudice [T]rial courts have x x x the duty to
to the right of the defendant to prosecute his dispose of controversies after trial on the merits
counterclaim in the same or in a separate whenever possible. It is deemed an abuse of
action. This dismissal shall have the effect of discretion for them, on their own motion, to
an adjudication upon the merits, unless enter a dismissal which is not warranted by the
otherwise declared by the court. circumstances of the case (Municipality of
Dingras v. Bonoan, 85 Phil. 458-59
As can be gleaned from the rule, there are three [1950]). While it is true that the dismissal of an
instances when the complaint may be dismissed due to the action on grounds specified under Section 3,
plaintiff's fault: (1) if he fails to appear during a scheduled trial, Rule 17 of the Revised Rules of Court is
especially on the date for the presentation of his evidence in chief; addressed to their discretion (Flores v. Phil.
(2) if he fails to prosecute his action for an unreasonable length of Alien Property Administrator, 107 Phil. 778
[1960]; Montelibano v. Benares, 103 Phil. 110
time; and (3) if he fails to comply with the rules or any order of the
court.[28] [1958]; Adorable v. Bonifacio, 105 Phil. 1269
[1959]; Inter-Island Gas Service, Inc. v. De la
Gerna, L-17631, October 19, 1966, 18 SCRA
Considering the circumstances of the case, it can be 390), such discretion must be exercised
concluded that the petitioner failed to prosecute the case for an soundly with a view to the circumstances
unreasonable length of time. There is failure to prosecute when surrounding each particular case (Vernus-
the plaintiff, being present, is not ready or is unwilling to proceed Sanciangco v. Sanciangco, L-12619, April 28,
with the scheduled trial or when postponements in the past were 1962, 4 SCRA 1209). If facts obtain that serve
due to the plaintiff's own making, intended to be dilatory or caused as mitigating circumstances for the delay, the
substantial prejudice on the part of the defendant.[29] same should be considered and dismissal
denied or set aside (Rudd v. Rogerson, 15 ALR
While a court can dismiss a case on the ground of failure 2d 672; Cervi v. Greenwood, 147 Colo. 190,
to prosecute, the true test for the exercise of such power is 362 P.2d 1050 [1961]), especially where the
whether, under the prevailing circumstances, the plaintiff is suit appears to be meritorious and the plaintiff
culpable for want of due diligence in failing to proceed with was not culpably negligent and no injury results
reasonable promptitude.[30] As to what constitutes an to defendant (27 C.J.S. 235-36; 15 ALR 3rd
unreasonable length of time, within the purview of the above- 680). (Abinales vs. Court of First Instance of
quoted provision, the Court has ruled that it depends upon the Zamboanga City, Br. I, 70 SCRA 590, 595).
circumstances of each particular case, and that the sound
discretion of the court in the determination of said question will not It is true that the allowance or denial
be disturbed, in the absence of patent abuse; and that the burden of petitions for postponement and the setting
of showing abuse of judicial discretion is upon the appellant since aside of orders previously issued, rest
every presumption is in favor of the correctness of the court's principally upon the sound discretion of the
action.[31] Likewise, the concept of promptness is a relative term judge to whom they are addressed, but always
and must not unnecessarily be an inflexible one. It connotes an predicated on the consideration that more than
action without hesitation and loss of time. As to what constitutes the mere convenience of the courts or of the
the term is addressed to the consideration of the trial court, bearing parties of the case, the ends of justice and
in mind that while actions must be disposed of with dispatch, the fairness would be served thereby (Camara Vda.
essential ingredient is the administration of justice and not mere de Zubiri v. Zubiri, et al., L-16745, December
speed.[32] 17, 1966). When no substantial rights are
affected and the intention to delay is not
manifest, the corresponding motion to transfer
It is well to quote the doctrine laid in Padua v. Ericta,[33] the hearing having been filed accordingly, it is
as accentuated in the subsequent case Marahay v. Melicor[34]: sound judicial discretion to allow them (Rexwell
Corp. v. Canlas, L-16746, December 30, 1961).
Courts should not brook undue delays x x x.
in the ventilation and determination of
causes. It should be their constant effort to This Court recalls that the complaint herein was filed on
assure that litigations are prosecuted and 15 June 1999. The summonses for Cynthia and Teresa were
resolved with dispatch. Postponements of trials served on their sister Melinda at the Borja Family Clinic in
and hearings should not be allowed except on Tagbilaran City, but the latter refused to receive the same. It was
meritorious grounds; and the grant or refusal only on 1 June 2000 that summons was served on Teresa at
thereof rests entirely in the sound discretion of Room 304, Regency Crest Condominium, Banilad, Cebu City,
the Judge. It goes without saying, however, when she was in the Philippines for a visit. However, the summons
that discretion must be reasonably and wisely for Cynthia was never served upon her.
exercised, in the light of the attendant
circumstances. Some reasonable deferment of
the proceedings may be allowed or tolerated to Although Section 1, Rule 14 of the Rules, imposes upon
the end that cases may be adjudged only after the clerk of court the duty to serve summons, this does not relieve
full and free presentation of evidence by all the the petitioner of her own duty as the plaintiff in a civil case to
parties, especially where the deferment would prosecute the case diligently. If the clerk had been negligent, it was
cause no substantial prejudice to any part. The petitioners duty to call the courts attention to that fact. It must be
desideratum of a speedy disposition of cases noted that it was not even petitioner who called the courts attention
should not, if at all possible, result in the that summons had not been served on Cynthia, but Teresa. This
precipitate loss of a partys right to present despite the fact that petitioner was aware, as early as 15 June
evidence and either in plaintiff's being non- 1999, when she filed her complaint, that the summonses could not
suited or the defendant's being pronounced be served on Teresa and Cynthia, as she admitted therein that
liable under an ex parte judgment. Teresa and Cynthia were residing abroad. Petitioner as plaintiff
Page 59 of 84
should have asked that Cynthia and Teresa be summoned by Bank (ADB), a multilateral development finance institution, agreed
publication at the earliest possible time. She cannot idly sit by and to extend to Marcopper Mining Corporation (Marcopper) a loan in
wait till this is done. She cannot afterwards wash her hands and the aggregate amount of US$40,000,000.00 to finance the latters
say that the delay was not her fault. She cannot simply "fold [her] mining project at Sta. Cruz, Marinduque. The principal loan of US$
hands" and say that it is the duty of the clerk of court to have the 15,000,000.00 was sourced from ADBs ordinary capital resources,
summonses served on Cynthia and Teresa for the prompt while the complementary loan of US$ 25,000,000.00 was funded
disposition of her case. If there were no means of summoning any by the Bank of Nova Scotia, a participating finance institution.
of the defendants, petitioner should have so informed the court
within a reasonable period of time, so that the case could be On even date, ADB and Placer Dome, Inc., (Placer Dome), a
disposed of one way or another and the administration of justice foreign corporation which owns 40% of Marcopper, executed a
would not suffer delay. The non-performance of that duty by Support and Standby Credit Agreement whereby the latter agreed
petitioner as plaintiff is an express ground for dismissing an action. to provide Marcopper with cash flow support for the payment of its
For, indeed, this duty imposed upon her was precisely to spur on
obligations to ADB.
the slothful.

To secure the loan, Marcopper executed in favor of ADB a Deed of


For failure to diligently pursue the complaint, petitioner Real Estate and Chattel Mortgage[6] dated November 11, 1992,
trifled with the right of the respondents to speedy trial. It also sorely
covering substantially all of its (Marcoppers) properties and assets
tried the patience of the court and wasted its precious time and in Marinduque. It was registered with the Register of Deeds on
attention. To allow petitioner to wait until such time that
November 12, 1992.
summonses were served on respondents would frustrate the
protection against unreasonable delay in the prosecution of cases
and violate the constitutional mandate of speedy dispensation of When Marcopper defaulted in the payment of its loan obligation,
justice which would in time erode the peoples confidence in the Placer Dome, in fulfillment of its undertaking under the Support
judiciary. We take a dim view of petitioners complacent attitude. Ex and Standby Credit Agreement, and presumably to preserve its
nihilo nihil fit.[35] international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcoppers
obligation to ADB in the amount of US$ 18,453,450.02.
Likewise, petitioners counsel inexplicably failed to Consequently, in an Assignment Agreement[7] dated March 20,
diligently pursue the service of summonses on respondents. These 1997, ADB assigned to petitioner all its rights, interests and
were acts of negligence, laxity and truancy which the court could obligations under the principal and complementary loan
have very easily avoided or timely remedied. Petitioner and her agreements, (Deed of Real Estate and Chattel Mortgage, and
counsel could not avail themselves of this Courts sympathy, Support and Standby Credit Agreement). On December 8, 1997,
considering their apparent complacency, if not delinquency, in the
Marcopper likewise executed a Deed of Assignment[8] in favor of
conduct of their litigation. petitioner. Under its provisions, Marcopper assigns, transfers,
cedes and conveys to petitioner, its assigns and/or successors-in-
Considering the foregoing, we sustain the dismissal by interest all of its (Marcoppers) properties, mining equipment and
the trial court of the petitioners complaint for failure to prosecute for facilities, to wit:
a period of more than one year (from the time of filing thereof on
15 June 1997 until Teresas filing of a motion to dismiss).
Land and Mining Rights

WHEREFORE, premises considered, the instant petition is Building and Other Structures
DENIED for lack of merit and the assailed Decision dated 6 May
2005 of the Court of Appeals in CA-G.R. CV No. 71028 is hereby
AFFIRMED. Costs against petitioner. SO ORDERED. Other Land Improvements

Machineries & Equipment, and Warehouse Inventory


CONTINENTAL MICRONESIA CASE

Mine/Mobile Equipment
[G.R. No. 138104. April 11, 2002]
Transportation Equipment and Furniture & Fixtures
MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P.
BAJAR, SHERIFF FERDINAND M. JANDUSAY, SOLIDBANK
CORPORATION, AND MARCOPPER MINING CORPORATION, Meanwhile, it appeared that on May 7, 1997, Solidbank
respondents.; SANDOVAL-GUTIERREZ, J.: Corporation (Solidbank) obtained a Partial Judgment[9] against
Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 96-
80083 entitled Solidbank Corporation vs. Marcopper Mining
In the present Petition for Review on Certiorari, petitioner MR Corporation, John E. Loney, Jose E. Reyes and Teodulo C. Gabor,
Holdings, Ltd. assails the a) Decision[1] dated January 8, 1999 of Jr., the decretal portion of which reads:
the Court of Appeals in CA-G.R. SP No. 49226 finding no grave
abuse of discretion on the part of Judge Leonardo P. Ansaldo of
the Regional Trial Court (RTC), Branch 94, Boac, Marinduque, in WHEREFORE, PREMISES CONSIDERED, partial judgment is
denying petitioners application for a writ of preliminary hereby rendered ordering defendant Marcopper Mining
injunction;[2] and b) Resolution[3] dated March 29, 1999 denying Corporation, as follows:
petitioners motion for reconsideration.
1. To pay plaintiff Solidbank the sum of
The facts of the case are as follows: Fifty Two Million Nine Hundred Seventy
Thousand Pesos Seven Hundred Fifty Six
and 89/100 only (PHP 52,970,756.89), plus
Under a Principal Loan Agreement[4] and Complementary Loan interest and charges until fully paid;
Agreement,[5] both dated November 4, 1992, Asian Development
Page 60 of 84
2. To pay an amount equivalent to Ten where the Deeds of Assignment were executed, without petitioner
Percent (10%) of above-stated amount as continuing to do business in the country.
attorneys fees; and
xxx xxx
3. To pay the costs of suit.
While petitioner may just be an assignee to the Deeds of
"SO ORDERED. Assignment, it may still fall within the meaning of doing
business in light of the Supreme Court ruling in the case of
Upon Solidbanks motion, the RTC of Manila issued a writ of Far East International Import and Export Corporation vs.
Nankai Kogyo Co., 6 SCRA 725, that:
execution pending appeal directing Carlos P. Bajar, respondent
sheriff, to require Marcopper to pay the sums of money to satisfy
the Partial Judgment.[10] Thereafter, respondent Bajar issued two Where a single act or transaction however is not merely
notices of levy on Marcoppers personal and real properties, and incidental or casual but indicates the foreign corporations
over all its stocks of scrap iron and unserviceable mining intention to do other business in the Philippines, said single
equipment.[11] Together with sheriff Ferdinand M. Jandusay (also act or transaction constitutes doing or engaging in or
a respondent) of the RTC, Branch 94, Boac, Marinduque, transacting business in the Philippines.
respondent Bajar issued two notices setting the public auction sale
of the levied properties on August 27, 1998 at the Marcopper mine
Furthermore, the court went further by declaring that even a
site.[12] single act may constitute doing business if it is intended to be
the beginning of a series of transactions. (Far East
Having learned of the scheduled auction sale, petitioner served an International Import and Export Corporation vs. Nankai Kogyo
Affidavit of Third-Party Claim[13] upon respondent sheriffs on Co. supra).
August 26, 1998, asserting its ownership over all Marcoppers
mining properties, equipment and facilities by virtue of the Deed of On the issue of whether petitioner is the bona fide owner of all the
Assignment. mining facilities and equipment of Marcopper, petitioner relies
heavily on the Assignment Agreement allegedly executed on
Upon the denial of its Affidavit of ThirdParty Claim by the RTC of March 20, 1997 wherein all the rights and interest of Asian
Manila,[14] petitioner commenced with the RTC of Boac, Development Bank (ADB) in a purported Loan Agreement were
Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint ceded and transferred in favor of the petitioner as assignee, in
for reivindication of properties, etc., with prayer for preliminary addition to a subsequent Deed of Assignment dated December 28,
injunction and temporary restraining order against respondents 1997 conveying absolutely all the properties, mining equipment
Solidbank, Marcopper, and sheriffs Bajar and Jandusay.[15] The and facilities of Marcopper in favor of petitioner.
case was docketed as Civil Case No. 98-13.
The Deeds of Assignment executed in favor of petitioner cannot be
In an Order[16]dated October 6, 1998, Judge Ansaldo denied binding on the judgment creditor, private respondent Solidbank,
petitioners application for a writ of preliminary injunction on the under the general legal principle that contracts can only bind the
ground that a) petitioner has no legal capacity to sue, it being a parties who had entered into it, and it cannot favor or prejudice a
foreign corporation doing business in the Philippines without third person (Quano vs. Court of Appeals, 211 SCRA 40).
license; b) an injunction will amount to staying the execution of a Moreover, by express stipulation, the said deeds shall be
final judgment by a court of co-equal and concurrent jurisdiction; governed, interpreted and construed in accordance with laws of
and c) the validity of the Assignment Agreement and the Deed of New York.
Assignment has been put into serious question by the timing of
their execution and registration. The Deeds of Assignment executed by Marcopper, through its
President, Atty. Teodulo C. Gabor, Jr., were clearly made in
Unsatisfied, petitioner elevated the matter to the Court of Appeals bad faith and in fraud of creditors, particularly private
on a Petition for Certiorari, Prohibition and Mandamus, docketed respondent Solidbank. The first Assignment Agreement
therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court purportedly executed on March 20, 1997 was entered into after
of Appeals rendered a Decision holding that Judge Ansaldo did not Solidbank had filed on September 19, 1996 a case against
commit grave abuse of discretion in denying petitioners prayer for Marcopper for collection of sum of money before Branch 26 of
a writ of preliminary injunction, ratiocinating as follows: the Regional Trial Court docketed as Civil Case No. 96-80083.
The second Deed of Assignment purportedly executed on
Petitioner contends that it has the legal capacity to sue and seek December 28, 1997 was entered into by President Gabor after
redress from Philippine courts as it is a non-resident foreign Solidbank had filed its Motion for Partial Summary Judgment,
after the rendition by Branch 26 of the Regional Trial Court of
corporation not doing business in the Philippines and suing on
isolated transactions. Manila of a Partial Summary Judgment and after the said trial
court had issued a writ of execution, and which judgment was
later affirmed by the Court of Appeals. While the assignments
xxx xxx (which were not registered with the Registry of Property as
required by Article 1625 of the new Civil Code) may be valid
We agree with the finding of the respondent court that petitioner is between the parties thereof, it produces no effect as against third
not suing on an isolated transaction as it claims to be, as it is very parties. The purported execution of the Deeds of Assignment in
obvious from the deed of assignment and its relationships with favor of petitioner was in violation of Article 1387 of the New Civil
Marcopper and Placer Dome, Inc. that its unmistakable intention is Code x x x. (Emphasis Supplied)
to continue the operations of Marcopper and shield its
properties/assets from the reach of legitimate creditors, even those Hence, the present Petition for Review on Certiorari by MR
holding valid and executory court judgments against it. There is no Holdings, Ltd. moored on the following grounds:
other way for petitioner to recover its huge financial investments
which it poured into Marcoppers rehabilitation and the local situs
Page 61 of 84
A. THE HONORABLE COURT OF APPEALS THAT PETITIONER IS WITHOUT LEGAL CAPACITY
COMMITS A REVERSIBLE ERROR IN TO SUE AND SEEK REDRESS FROM PHILIPPINE
COMPLETELY DISREGARDING AS A MATERIAL COURTS, IT BEING THE CASE THAT SECTION 133
FACT OF THE CASE THE EXISTENCE OF THE OF THE CORPORATION CODE IS WITHOUT
PRIOR, REGISTERED 1992 DEED OF REAL APPLICATION TO PETITIONER, AND IT BEING THE
ESTATE AND CHATTEL MORTGAGE CREATING A CASE THAT THE SAID COURT MERELY RELIED
LIEN OVER THE LEVIED PROPERTIES, SUBJECT ON SURMISES AND CONJECTURES IN OPINING
OF THE ASSIGNMENT AGREEMENT DATED THAT PETITIONER INTENDS TO DO BUSINESS IN
MARCH 20, 1997, THUS, MATERIALLY THE PHILIPPINES.
CONTRIBUTING TO THE SAID COURTS
MISPERCEPTION AND MISAPPRECIATION OF THE G. THE HONORABLE COURT OF APPEALS
MERITS OF PETITIONERS CASE. COMMITS A REVERSIBLE ERROR IN HOLDING
THAT RESPONDENT MARCOPPER, PLACER
B. THE HONORABLE COURT OF APPEALS DOME, INC., AND PETITIONER ARE ONE AND THE
COMMITS A REVERSIBLE ERROR IN MAKING A SAME ENTITY, THE SAME BEING WITHOUT
FACTUAL FINDING THAT THE SAID ASSIGNMENT FACTUAL OR LEGAL BASIS.
AGREEMENT IS NOT REGISTERED, THE SAME
BEING CONTRARY TO THE FACTS ON RECORD, H. THE HONORABLE COURT OF APPEALS
THUS, MATERIALLY CONTRIBUTING TO THE SAID
COMMITS A REVERSIBLE ERROR IN HOLDING
COURTS MISPERCEPTION AND PETITIONER GUILTY OF FORUM SHOPPING, IT
MISAPPRECIATION OF THE MERITS OF BEING CLEAR THAT NEITHER LITIS PENDENTIA
PETITIONERS CASE. NOR RES JUDICATA MAY BAR THE INSTANT
REIVINDICATORY ACTION, AND IT BEING CLEAR
C. THE HONORABLE COURT OF APPEALS THAT AS THIRD-PARTY CLAIMANT, THE LAW
COMMITS A REVERSIBLE ERROR IN MAKING A AFFORDS PETITIONER THE RIGHT TO FILE SUCH
FACTUAL FINDING ON THE EXISTENCE OF AN REIVINDICATORY ACTION.
ATTACHMENT ON THE PROPERTIES SUBJECT OF
INSTANT CASE, THE SAME BEING CONTRARY TO I. THE HONORABLE COURT OF APPEALS
THE FACTS ON RECORD, THUS, MATERIALLY COMMITS A REVERSIBLE ERROR IN RENDERING
CONTRIBUTING TO THE SAID COURTS A DECISION WHICH IN EFFECT SERVES AS
MISPERCEPTION AND MISAPPRECIATION OF THE JUDGMENT ON THE MERITS OF THE CASE.
MERITS OF PETITIONERS CASE.

J. THE SHERIFFS LEVY AND SALE, THE


D. THE HONORABLE COURT OF APPEALS SHERIFFS CERTIFICATE OF SALE DATED
COMMITS A REVERSIBLE ERROR IN HOLDING OCTOBER 12, 1998, THE RTC-MANILA ORDER
THAT THE SAID ASSIGNMENT AGREEMENT AND
DATED FEBRUARY 12, 1999, AND THE RTC-BOAC
THE DEED OF ASSIGNMENT ARE NOT BINDING ORDER DATED NOVEMBER 25, 1998 ARE NULL
ON RESPONDENT SOLIDBANK WHO IS NOT A
AND VOID.
PARTY THERETO, THE SAME BEING CONTRARY
TO LAW AND ESTABLISHED JURISPRUDENCE ON
PRIOR REGISTERED MORTGAGE LIENS AND ON K. THE HONORABLE COURT OF APPEALS
PREFERENCE OF CREDITS. COMMITS A REVERSIBLE ERROR IN AFFIRMING
THE DENIAL BY THE RTC-BOAC OF PETITIONERS
APPLICATION FOR PRELIMINARY INJUNCTION,
E. THE HONORABLE COURT OF APPEALS THE SAME BEING IN TOTAL DISREGARD OF
COMMITS A REVERSIBLE ERROR IN FINDING PETITIONERS RIGHT AS ASSIGNEE OF A PRIOR,
THAT THE AFOREMENTIONED ASSIGNMENT REGISTERED MORTGAGE LIEN, AND IN
AGREEMENT AND DEED OF ASSIGNMENT ARE DISREGARD OF THE LAW AND JURISPRUDENCE
SHAM, SIMULATED, OF DUBIOUS CHARACTER, ON PREFERENCE OF CREDIT."
AND WERE MADE IN BAD FAITH AND IN FRAUD
OF CREDITORS, PARTICULARLY RESPONDENT
SOLIDBANK, THE SAME BEING IN COMPLETE In its petition, petitioner alleges that it is not doing business in the
DISREGARD OF, VIZ: (1) THE LAW AND Philippines and characterizes its participation in the assignment
ESTABLISHED JURISPRUDENCE ON PRIOR, contracts (whereby Marcoppers assets where transferred to it) as
REGISTERED MORTGAGE LIENS AND ON mere isolated acts that cannot foreclose its right to sue in local
PREFERENCE OF CREDITS, BY REASON OF courts. Petitioner likewise maintains that the two assignment
WHICH THERE EXISTS NO CAUSAL CONNECTION contracts, although executed during the pendency of Civil Case
BETWEEN THE SAID CONTRACTS AND THE No. 96-80083 in the RTC of Manila, are not fraudulent
PROCEEDINGS IN CIVIL CASE NO. 96-80083; (2) conveyances as they were supported by valuable considerations.
THAT THE ASIAN DEVELOPMENT BANK WILL Moreover, they were executed in connection with prior transactions
NOT OR COULD NOT HAVE AGREED TO A SHAM; that took place as early as 1992 which involved ADB, a reputable
SIMULATED, DUBIOUS AND FRAUDULENT financial institution. Petitioner further claims that when it paid
TRANSACTION; AND (3) THAT RESPONDENT Marcoppers obligation to ADB, it stepped into the latters shoes and
SOLIDBANKS BIGGEST STOCKHOLDER, THE acquired its (ADBS) rights, titles, and interests under the Deed of
BANK OF NOVA SCOTIA, WAS A MAJOR Real Estate and Chattel Mortgage. Lastly, petitioner asserts its
BENEFICIARY OF THE ASSIGNMENT AGREEMENT existence as a corporation, separate and distinct from Placer
IN QUESTION. Dome and Marcopper.

F. THE HONORABLE COURT OF APPEALS In its comment, Solidbank avers that: a) petitioner is doing
COMMITS A REVERSIBLE ERROR IN HOLDING business in the Philippines and this is evidenced by the huge
Page 62 of 84
investment it poured into the assignment contracts; b) granting that Mangaliman,[24] this Court laid down the test to determine whether
petitioner is not doing business in the Philippines, the nature of its a foreign company is doing business, thus:
transaction reveals an intention to do business or to begin a series
of transaction in the country; c) petitioner, Marcopper and Placer
x x x The true test, however, seems to be whether the foreign
Dome are one and the same entity, petitioner being then a wholly- corporation is continuing the body or substance of the
owned subsidiary of Placer Dome, which, in turn, owns 40% of business or enterprise for which it was organized or whether
Marcopper; d) the timing under which the assignments contracts it has substantially retired from it and turned it over to
were executed shows that petitioners purpose was to defeat any another. (Traction Cos. vs. Collectors of Int. Revenue [C.C.A.,
judgment favorable to it (Solidbank); and e) petitioner violated the Ohio], 223 F. 984,987.) x x x.
rule on forum shopping since the object of Civil Case No. 98-13 (at
RTC, Boac, Marinduque) is similar to the other cases filed by
Marcopper in order to forestall the sale of the levied properties. The traditional case law definition has metamorphosed into a
statutory definition, having been adopted with some qualifications
in various pieces of legislation in our jurisdiction. For instance,
Marcopper, in a separate comment, states that it is merely a Republic Act No. 7042, otherwise known as the Foreign
nominal party to the present case and that its principal concerns Investment Act of 1991, defines doing business as follows:
are being ventilated in another case.

d) The phrase doing business shall include


The petition is impressed with merit. soliciting orders, service contracts, opening offices,
whether called liaison offices or branches; appointing
Crucial to the outcome of this case is our resolution of the following representatives or distributors domiciled in the
issues: 1) Does petitioner have the legal capacity to sue? 2) Was Philippines or who in any calendar year stay in the
the Deed of Assignment between Marcopper and petitioner country for a period or periods totalling one hundred
executed in fraud of creditors? 3) Are petitioner MR Holdings, Ltd., eight(y) (180) days or more; participating in the
Placer Dome, and Marcopper one and the same entity? and 4) Is management, supervision or control of any domestic
petitioner guilty of forum shopping? business, firm, entity, or corporation in the Philippines;
and any other act or acts that imply a continuity of
commercial dealings or arrangements, and
We shall resolve the issues in seriatim.
contemplate to that extent the performance of acts
or works; or the exercise of some of the functions
I normally incident to, and in progressive
prosecution of, commercial gain or of the purpose
The Court of Appeals ruled that petitioner has no legal capacity to and object of the business organization; Provided,
sue in the Philippine courts because it is a foreign corporation however, That the phrase doing business shall not be
doing business here without license. A review of this ruling does deemed to include mere investment as a shareholder
not pose much complexity as the principles governing a foreign by a foreign entity in domestic corporations duly
corporations right to sue in local courts have long been settled by registered to do business, and/or the exercise of rights
our Corporation Law.[17] These principles may be condensed in as such investor, nor having a nominee director or
three statements, to wit: a) if a foreign corporation does business officer to represent its interests in such corporation,
in the Philippines without a license, it cannot sue before the nor appointing a representative or distributor domiciled
Philippine courts;[18] b) if a foreign corporation is not doing in the Philippines which transacts business in its own
business in the Philippines, it needs no license to sue before name and for its own account. (Emphasis supplied)[25]
Philippine courts on an isolated transaction[19]or on a cause of
action entirely independent of any business transaction;[20] and c) Likewise, Section 1 of Republic Act No. 5455,[26] provides that:
if a foreign corporation does business in the Philippines with the
required license, it can sue before Philippine courts on any
transaction. Apparently, it is not the absence of the prescribed SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase
doing business shall include soliciting orders, purchases, service
license but the doing (of) business in the Philippines without such
license which debars the foreign corporation from access to our contracts, opening offices, whether called liaison offices or
branches; appointing representatives or distributors who are
courts.[21]
domiciled in the Philippines or who in any calendar year stay in the
Philippines for a period or periods totaling one hundred eighty days
The task at hand requires us to weigh the facts vis--vis the or more; participating in the management, supervision or control of
established principles. The question whether or not a foreign any domestic business firm, entity or corporation in the Philippines;
corporation is doing business is dependent principally upon the and any other act or acts that imply a continuity of commercial
facts and circumstances of each particular case, considered in the dealings or arrangements, and contemplate to that extent the
light of the purposes and language of the pertinent statute or performance of acts or works, or the exercise of some of the
statutes involved and of the general principles governing the functions normally incident to, and in progressive
jurisdictional authority of the state over such corporations.[22] prosecution of, commercial gain or of the purpose and object
of the business organization.
Batas Pambansa Blg. 68, otherwise known as The Corporation
Code of the Philippines, is silent as to what constitutes doing or There are other statutes[27] defining the term doing business in
transacting business in the Philippines. Fortunately, jurisprudence the same tenor as those above-quoted, and as may be observed,
has supplied the deficiency and has held that the term implies a one common denominator among them all is the concept of
continuity of commercial dealings and arrangements, and continuity.
contemplates, to that extent, the performance of acts or works or
the exercise of some of the functions normally incident to, and in
In the case at bar, the Court of Appeals categorized as doing
progressive prosecution of, the purpose and object for which the
corporation was organized.[23] In Mentholatum Co. Inc., vs. business petitioners participation under the Assignment Agreement
and the Deed of Assignment. This is simply untenable. The
expression doing business should not be given such a strict and
Page 63 of 84
literal construction as to make it apply to any corporate dealing Marcoppers creditor was just a necessary legal consequence of
whatever.[28] At this early stage and with petitioners acts or the transactions that transpired. Also, we must hasten to add that
transactions limited to the assignment contracts, it cannot be said the Support and Standby Credit Agreement was executed four (4)
that it had performed acts intended to continue the business for years prior to Marcoppers insovency, hence, the alleged
which it was organized. It may not be amiss to point out that the intention of petitioner to continue Marcoppers business could have
purpose or business for which petitioner was organized is not no basis for at that time, Marcoppers fate cannot yet be
discernible in the records. No effort was exerted by the Court determined.
of Appeals to establish the nexus between petitioners
business and the acts supposed to constitute doing business. In the final analysis, we are convinced that petitioner was engaged
Thus, whether the assignment contracts were incidental to only in isolated acts or transactions. Single or isolated acts,
petitioners business or were continuation thereof is beyond contracts, or transactions of foreign corporations are not regarded
determination. We cannot apply the case cited by the Court of as a doing or carrying on of business. Typical examples of these
Appeals, Far East Intl Import and Export Corp. vs. Nankai Kogyo
are the making of a single contract, sale, sale with the taking of a
Co., Ltd.,[29] which held that a single act may still constitute doing note and mortgage in the state to secure payment therefor,
business if it is not merely incidental or casual, but is of such
purchase, or note, or the mere commission of a tort.[33] In these
character as distinctly to indicate a purpose on the part of the instances, there is no purpose to do any other business within the
foreign corporation to do other business in the state. In said case, country.
there was an express admission from an official of the foreign
corporation that he was sent to the Philippines to look into the
operation of mines, thereby revealing the foreign corporations II
desire to continue engaging in business here. But in the case at
bar, there is no evidence of similar desire or intent. Unarguably, Solidbank contends that from the chronology and timing of events,
petitioner may, as the Court of Appeals suggested, decide to it is evident that there existed a pre-set pattern of response on the
operate Marcoppers mining business, but, of course, at this stage, part of Marcopper to defeat whatever court ruling that may be
that is a mere speculation. Or it may decide to sell the credit rendered in favor of Solidbank.
secured by the mining properties to an offshore investor, in which
case the acts will still be isolated transactions. To see through the
present facts an intention on the part of petitioner to start a We are not convinced.
series of business transaction is to rest on assumptions or
probabilities falling short of actual proof. Courts should never While it may appear, at initial glance, that the assignment contracts
base its judgments on a state of facts so inadequately are in the nature of fraudulent conveyances, however, a closer
developed that it cannot be determined where inference ends look at the events that transpired prior to the execution of those
and conjecture begins. contracts gives rise to a different conclusion. The obvious flaw in
the Court of Appeals Decision lies in its constricted view of the
Indeed, the Court of Appeals holding that petitioner was facts obtaining in the case. In its factual narration, the Court of
determined to be doing business in the Philippines is based mainly Appeals definitely left out some events. We shall see later the
on conjectures and speculation. In concluding that the significance of those events.
unmistakable intention of petitioner is to continue Marcoppers
business, the Court of Appeals hangs on the wobbly premise that Article 1387 of the Civil Code of the Philippines provides:
there is no other way for petitioner to recover its huge financial
investments which it poured into Marcoppers rehabilitation without
it (petitioner) continuing Marcoppers business in the country.[30] Art. 1387. All contracts by virtue of which the debtor alienates
This is a mere presumption. Absent overt acts of petitioner from property by gratuitous title are presumed to have been entered into
which we may directly infer its intention to continue Marcoppers in fraud of creditors, when the donor did not reserve sufficient
business, we cannot give our concurrence. Significantly, a view property to pay all debts contracted before the donation.
subscribed upon by many authorities is that the mere ownership by
a foreign corporation of a property in a certain state, Alienations by onerous title are also presumed fraudulent
unaccompanied by its active use in furtherance of the when made by persons against whom some judgment has
business for which it was formed, is insufficient in itself to been rendered in any instance or some writ of attachment has
constitute doing business.[31] In Chittim vs. Belle Fourche been issued. The decision or attachment need not refer to the
Bentonite Products Co.,[32] it was held that even if a foreign property alienated, and need not have been obtained by the
corporation purchased and took conveyances of a mining party seeking rescission.
claim, did some assessment work thereon, and endeavored to
sell it, its acts will not constitute the doing of business so as
In addition to these presumptions, the design to defraud creditors
to subject the corporation to the statutory requirements for
may be proved in any other manner recognized by law and of
the transacting of business. On the same vein, petitioner, a
evidence.
foreign corporation, which becomes the assignee of mining
properties, facilities and equipment cannot be automatically
considered as doing business, nor presumed to have the intention This article presumes the existence of fraud made by a debtor.
of engaging in mining business. Thus, in the absence of satisfactory evidence to the contrary, an
alienation of a property will be held fraudulent if it is made after a
judgment has been rendered against the debtor making the
One important point. Long before petitioner assumed Marcoppers
alienation.[34] This presumption of fraud is not conclusive and may
debt to ADB and became their assignee under the two assignment
be rebutted by satisfactory and convincing evidence. All that is
contracts, there already existed a Support and Standby Credit
necessary is to establish affirmatively that the conveyance is
Agreement between ADB and Placer Dome whereby the latter
made in good faith and for a sufficient and valuable
bound itself to provide cash flow support for Marcoppers payment
consideration.[35]
of its obligations to ADB. Plainly, petitioners payment of US$
18,453, 450.12 to ADB was more of a fulfillment of an obligation
under the Support and Standby Credit Agreement rather than an The Assignment Agreement and the Deed of Assignment were
investment. That petitioner had to step into the shoes of ADB as executed for valuable considerations. Patent from the Assignment
Page 64 of 84
Agreement is the fact that petitioner assumed the payment of US$ (a) The parent corporation owns all or most of the capital
18,453,450.12 to ADB in satisfaction of Marcoppers remaining stock of the subsidiary.
debt as of March 20, 1997.[36] Solidbank cannot deny this fact
considering that a substantial portion of the said payment, in the
(b) The parent and subsidiary corporations have common
sum of US$ 13,886,791.06, was remitted in favor of the Bank of directors or officers.
Nova Scotia, its major stockholder.[37]

(c) The parent corporation finances the subsidiary.


The facts of the case so far show that the assignment contracts
were executed in good faith. The execution of the Assignment
Agreement on Macrh 20, 1997 and the Deed of Assignment on (d) The parent corporation subscribes to all the capital stock
December 8,1997 is not the alpha of this case. While the execution of the subsidiary or otherwise causes its incorporation.
of these assignment contracts almost coincided with the rendition
on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 (e) The subsidiary has grossly inadequate capital.
by the Manila RTC, however, there was no intention on the part of
petitioner to defeat Solidbanks claim. It bears reiterating that as
early as November 4, 1992, Placer Dome had already bound itself (f) The parent corporation pays the salaries and other
under a Support and Standby Credit Agreement to provide expenses or losses of the subsidiary.
Marcopper with cash flow support for the payment to ADB of its
obligations. When Marcopper ceased operations on account of (g) The subsidiary has substantially no business except with
disastrous mine tailings spill into the Boac River and ADB pressed the parent corporation or no assets except those conveyed to or by
for payment of the loan, Placer Dome agreed to have its the parent corporation.
subsidiary, herein petitioner, paid ADB the amount of US
$18,453,450.12. Thereupon, ADB and Marcopper executed,
respectively, in favor of petitioner an Assignment Agreement and a (h) In the papers of the parent corporation or in the
Deed of Assignment. Obviously, the assignment contracts were statements of its officers, the subsidiary is described as a
connected with transactions that happened long before the department or division of the parent corporation, or its business or
rendition in 1997 of the Partial Judgment in Civil Case No. 96- financial responsibility is referred to as the parent corporations
80083 by the Manila RTC. Those contracts cannot be viewed in own.
isolation. If we may add, it is highly inconceivable that ADB, a
reputable international financial organization, will connive with (i) The parent corporation uses the property of the
Marcopper to feign or simulate a contract in 1992 just to defraud subsidiary as its own.
Solidbank for its claim four years thereafter. And it is equally
incredible for petitioner to be paying the huge sum of US $ 18, 453,
(j) The directors or executives of the subsidiary do not act
450.12 to ADB only for the purpose of defrauding Solidbank of the
independently in the interest of the subsidiary, but take their orders
sum of P52,970.756.89.
from the parent corporation.

It is said that the test as to whether or not a conveyance is


(k) The formal legal requirements of the subsidiary are not
fraudulent is -- does it prejudice the rights of creditors?[38] We
observed.
cannot see how Solidbanks right was prejudiced by the
assignment contracts considering that substantially all of
Marcoppers properties were already covered by the registered In this catena of circumstances, what is only extant in the
Deed of Real Estate and Chattel Mortgage executed by Marcopper records is the matter of stock ownership. There are no other
in favor of ADB as early as November 11, 1992. As such, factors indicative that petitioner is a mere instrumentality of
Solidbank cannot assert a better right than ADB, the latter being a Marcopper or Placer Dome. The mere fact that Placer Dome
preferred creditor. It is basic that mortgaged properties answer agreed, under the terms of the Support and Standby Credit
primarily for the mortgaged credit, not for the judgment credit of the Agreement to provide Marcopper with cash flow support in paying
mortgagors unsecured creditor. Considering that petitioner its obligations to ADB, does not mean that its personality has
assumed Marcoppers debt to ADB, it follows that Solidbanks right merged with that of Marcopper. This singular undertaking,
as judgment creditor over the subject properties must give way to performed by Placer Dome with its own stockholders in Canada
that of the former. and elsewhere, is not a sufficient ground to merge its corporate
personality with Marcopper which has its own set of shareholders,
dominated mostly by Filipino citizens. The same view applies to
III
petitioners payment of Marcoppers remaining debt to ADB.

The record is lacking in circumstances that would suggest that


With the foregoing considerations and the absence of fraud in the
petitioner corporation, Placer Dome and Marcopper are one and
transaction of the three foreign corporations, we find it improper to
the same entity. While admittedly, petitioner is a wholly-owned
pierce the veil of corporate fiction that equitable doctrine developed
subsidiary of Placer Dome, which in turn, which, in turn, was then a
to address situations where the corporate personality of a
minority stockholder of Marcopper, however, the mere fact that a
corporation is abused or used for wrongful purposes.
corporation owns all of the stocks of another corporation,
taken alone is not sufficient to justify their being treated as
one entity. If used to perform legitimate functions, a subsidiarys IV
separate existence shall be respected, and the liability of the
parent corporation as well as the subsidiary will be confined to On the issue of forum shopping, there could have been a violation
those arising in their respective business.[39] of the rules thereon if petitioner and Marcopper were indeed one
and the same entity. But since petitioner has a separate
The recent case of Philippine National Bank vs. Ritratto Group personality, it has the right to pursue its third-party claim by filing
Inc.,[40] outlines the circumstances which are useful in the the independent reivindicatory action with the RTC of Boac,
determination of whether a subsidiary is but a mere instrumentality Marinduque, pursuant to Rule 39, Section 16 of the 1997 Rules of
of the parent-corporation, to wit: Civil Procedures. This remedy has been recognized in a long line
Page 65 of 84
of cases decided by this Court.[41] In Rodriguez vs. Court of be sold for another man's debts.[45] To allow the execution of
Appeals,[42] we held: petitioners properties would surely work injustice to it and render
the judgment on the reivindicatory action, should it be favorable,
ineffectual. In Arabay, Inc., vs. Salvador,[46] this Court held that an
. . . It has long been settled in this jurisdiction that the claim of
ownership of a third party over properties levied for execution of a injunction is a proper remedy to prevent a sheriff from selling the
judgment presents no issue for determination by the court issuing property of one person for the purpose of paying the debts of
the writ of execution. another; and that while the general rule is that no court has
authority to interfere by injunction with the judgments or decrees of
another court of equal or concurrent or coordinate jurisdiction,
. . .Thus, when a property levied upon by the sheriff pursuant to a however, it is not so when a third-party claimant is involved. We
writ of execution is claimed by third person in a sworn statement of quote the instructive words of Justice Querube C. Makalintal in
ownership thereof, as prescribed by the rules, an entirely Abiera vs. Court of Appeals,[47] thus:
different matter calling for a new adjudication arises. And
dealing as it does with the all important question of title, it is
reasonable to require the filing of proper pleadings and the holding The rationale of the decision in the Herald Publishing Company
of a trial on the matter in view of the requirements of due process. case[48] is peculiarly applicable to the one before Us, and
removes it from the general doctrine enunciated in the decisions
cited by the respondents and quoted earlier herein.
. . . In other words, construing Section 17 of Rule 39 of the Revised
Rules of Court (now Section 16 of the 1997 Rules of Civil
Procedure), the rights of third-party claimants over certain 1. Under Section 17 of Rule 39 a third person who claims property
properties levied upon by the sheriff to satisfy the judgment may levied upon on execution may vindicate such claim by action.
Obviously a judgment rendered in his favor, that is, declaring him
not be taken up in the case where such claims are presented but in
a separate and independent action instituted by the claimants. to be the owner of the property, would not constitute interference
with the powers or processes of the court which rendered the
(Emphasis supplied)
judgment to enforce which the execution was levied. If that be so
and it is so because the property, being that of a stranger, is
This reivindicatory action has for its object the recovery of not subject to levy then an interlocutory order such as
ownership or possession of the property seized by the sheriff, injunction, upon a claim and prima facie showing of
despite the third party claim, as well as damages resulting ownership by the claimant, cannot be considered as such
therefrom, and it may be brought against the sheriff and such other interference either.
parties as may be alleged to have connived with him in the
supposedly wrongful execution proceedings, such as the judgment
creditor himself. Such action is an entirely separate and distinct WHEREFORE, the petition is GRANTED. The assailed Decision
action from that in which execution has been issued. Thus, dated January 8, 1999 and the Resolution dated March 29, 1999 of
there being no identity of parties and cause of action between Civil the Court of Appeals in CA G.R. No. 49226 are set aside. Upon
Case No. 98-13 (RTC, Boac) and those cases filed by Marcopper, filing of a bond of P1,000,000.00, respondent sheriffs are
including Civil Case No. 96-80083 (RTC, Manila) as to give rise to restrained from further implementing the writ of execution issued in
Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until
res judicata or litis pendentia, Solidbanks allegation of forum-
shopping cannot prosper.[43] further orders from this Court. The RTC, Branch 94, Boac,
Marinduque, is directed to dispose of Civil Case No. 98-13 with
dispatch. SO ORDERED.
All considered, we find petitioner to be entitled to the issuance of a
writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules
of Civil Procedure provides: [G.R. No. 113074. January 22, 1997]

SEC. 3 Grounds for issuance of preliminary injunction. A ALFRED HAHN, petitioner, vs. COURT OF APPEALS and
preliminary injunction may be granted when it is established: BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT
(BMW), respondents.; MENDOZA, J.:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission This is a petition for review of the decision[1] of the Court of
or continuance of the act or acts complained of, or in requiring the Appeals dismissing a complaint for specific performance which
performance of an act or acts, either for a limited period or petitioner had filed against private respondent on the ground that
perpetually; the Regional Trial Court of Quezon City did not acquire jurisdiction
over private respondent, a nonresident foreign corporation, and of
the appellate court's order denying petitioner's motion for
(b) That the commission, continuance or non-performance of the
reconsideration.
acts or acts complained of during the litigation would probably work
injustice to the applicant; or
The following are the facts:
(c) That a party, court, agency or a person is doing, threatening, or
is attempting to do, or is procuring or suffering to be done, some Petitioner Alfred Hahn is a Filipino citizen doing business under the
act or acts probably in violation of the rights of the applicant name and style "Hahn-Manila." On the other hand, private
respecting the subject of the action or proceeding, and tending to respondent Bayerische Motoren Werke Aktiengesellschaft (BMW)
render the judgment ineffectual. is a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at
Munich, Germany.
Petitioners right to stop the further execution of the properties
covered by the assignment contracts is clear under the facts so far
established. An execution can be issued only against a party and On March 7, 1967, petitioner executed in favor of private
not against one who did not have his day in court.[44] The duty of respondent a "Deed of Assignment with Special Power of
the sheriff is to levy the property of the judgment debtor not that of Attorney," which reads in full as follows:
a third person. For, as the saying goes, one mans goods shall not
Page 66 of 84
WHEREAS, the ASSIGNOR is the present owner and holder of the repairs and servicing because of the durability of BMW parts and
BMW trademark and device in the Philippines which ASSIGNOR the efficiency of petitioner's service.
uses and has been using on the products manufactured by
ASSIGNEE, and for which ASSIGNOR is the authorized exclusive
Because of Hahn's insistence on the former business relation,
Dealer of the ASSIGNEE in the Philippines, the same being BMW withdrew on March 26, 1993 its offer of a "standard importer
evidenced by certificate of registration issued by the Director of contract" and terminated the exclusive dealer relationship effective
Patents on 12 December 1963 and is referred to as Trademark No. June 30, 1993.[4] At a conference of BMW Regional Importers
10625; held on April 26, 1993 in Singapore, Hahn was surprised to find
Alvarez among those invited from the Asian region. On April 29,
WHEREAS, the ASSIGNOR has agreed to transfer and 1993, BMW proposed that Hahn and CMC jointly import and
consequently record said transfer of the said BMW trademark and distribute BMW cars and parts.
device in favor of the ASSIGNEE herein with the Philippines Patent
Office; Hahn found the proposal unacceptable. On May 14, 1993, he filed
a complaint for specific performance and damages against BMW
NOW THEREFORE, in view of the foregoing and in consideration to compel it to continue the exclusive dealership. Later he filed an
of the stipulations hereunder stated, the ASSIGNOR hereby amended complaint to include an application for temporary
affirms the said assignment and transfer in favor of the ASSIGNEE restraining order and for writs of preliminary, mandatory and
under the following terms and conditions: prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
1. The ASSIGNEE shall take appropriate steps against any user
other than ASSIGNOR or infringer of the BMW trademark in the 2. Defendant [BMW] is a foreign corporation doing business in the
Philippines, for such purpose, the ASSIGNOR shall inform the Philippines with principal offices at Munich, Germany. It may be
ASSIGNEE immediately of any such use or infringement of the served with summons and other court processes through the
said trademark which comes to his knowledge and upon such Secretary of the Department of Trade and Industry of the
information the ASSIGNOR shall automatically act as Attorney-In- Philippines. . . .
Fact of the ASSIGNEE for such case, with full power, authority and
responsibility to prosecute unilaterally or in concert with
....
ASSIGNEE, any such infringer of the subject mark and for
purposes hereof the ASSIGNOR is hereby named and constituted
as ASSIGNEE's Attorney-In-Fact, but any such suit without 5. On March 7, 1967, Plaintiff executed in favor of defendant BMW
ASSIGNEE's consent will exclusively be the responsibility and for a Deed of Assignment with Special Power of Attorney covering the
the account of the ASSIGNOR, trademark and in consideration thereof, under its first whereas
clause, Plaintiff was duly acknowledged as the "exclusive Dealer of
the Assignee in the Philippines" . . . .
2. That the ASSIGNOR and the ASSIGNEE shall continue
business relations as has been usual in the past without a formal
contract, and for that purpose, the dealership of ASSIGNOR shall ....
cover the ASSIGNEE's complete production program with the only
limitation that, for the present, in view of ASSIGNEE's limited 8. From the time the trademark "BMW & DEVICE" was first used
production, the latter shall not be able to supply automobiles to by the Plaintiff in the Philippines up to the present, Plaintiff, through
ASSIGNOR. its firm name "HAHN MANILA" and without any monetary
contribution from defendant BMW, established BMW's goodwill
Per the agreement, the parties "continue[d] business relations as and market presence in the Philippines. Pursuant thereto, Plaintiff
has been usual in the past without a formal contract." But on has invested a lot of money and resources in order to single-
February 16, 1993, in a meeting with a BMW representative and handedly compete against other motorcycle and car companies ....
the president of Columbia Motors Corporation (CMC), Jose Moreover, Plaintiff has built buildings and other infrastructures
Alvarez, petitioner was informed that BMW was arranging to grant such as service centers and showrooms to maintain and promote
the exclusive dealership of BMW cars and products to CMC, which the car and products of defendant BMW.
had expressed interest in acquiring the same. On February 24,
1993, petitioner received confirmation of the information from BMW ....
which, in a letter, expressed dissatisfaction with various aspects of
petitioner's business, mentioning among other things, decline in
sales, deteriorating services, and inadequate showroom and 10. In a letter dated February 24, 1993, defendant BMW advised
warehouse facilities, and petitioner's alleged failure to comply with Plaintiff that it was willing to maintain with Plaintiff a relationship
the standards for an exclusive BMW dealer.[2] Nonetheless, BMW but only "on the basis of a standard BMW importer contract as
expressed willingness to continue business relations with the adjusted to reflect the particular situation in the Philippines" subject
petitioner on the basis of a "standard BMW importer" contract, to certain conditions, otherwise, defendant BMW would terminate
otherwise, it said, if this was not acceptable to petitioner, BMW Plaintiff's exclusive dealership and any relationship for cause
would have no alternative but to terminate petitioner's exclusive effective June 30, 1993. . . .
dealership effective June 30, 1993.
....
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment.[3] Hahn 15. The actuations of defendant BMW are in breach of the
insisted that as long as the assignment of its trademark and device assignment agreement between itself and plaintiff since the
subsisted, he remained BMW's exclusive dealer in the Philippines consideration for the assignment of the BMW trademark is the
because the assignment was made in consideration of the continuance of the exclusive dealership agreement. It thus, follows
exclusive dealership. In the same letter petitioner explained that that the exclusive dealership should continue for so long as
the decline in sales was due to lower prices offered for BMW cars defendant BMW enjoys the use and ownership of the trademark
in the United States and the fact that few customers returned for assigned to it by Plaintiff.
Page 67 of 84
The case was docketed as Civil Case No. Q-93-15933 and raffled The Court of Appeals enjoined the trial court from hearing
to Branch 104 of the Quezon City Regional Trial Court, which on petitioner's complaint. On December 20, 1993, it rendered
June 14, 1993 issued a temporary restraining order. Summons and judgment finding the trial court guilty of grave abuse of discretion in
copies of the complaint and amended complaint were thereafter deferring resolution of the motion to dismiss. It stated:
served on the private respondent through the Department of Trade
and Industry, pursuant to Rule 14, 14 of the Rules of Court. The Going by the pleadings already filed with the respondent court
order, summons and copies of the complaint and amended before it came out with its questioned order of July 26, 1993, we
complaint were later sent by the DTI to BMW via registered mail on rule and so hold that petitioner's (BMW) motion to dismiss could be
June 15, 1993[5] and received by the latter on June 24, 1993. resolved then and there, and that the respondent judge's
deferment of his action thereon until after trial on the merit
On June 17, 1993, without proof of service on BMW, the hearing constitutes, to our mind, grave abuse of discretion.
on the application for the writ of preliminary injunction proceeded
ex parte, with petitioner Hahn testifying. On June 30, 1993, the trial ....
court issued an order granting the writ of preliminary injunction
upon the filing of a bond of P100,000.00. On July 13, 1993,
following the posting of the required bond, a writ of preliminary . . . [T]here is not much appreciable disagreement as regards the
injunction was issued. factual matters relating, to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal
conclusions they respectively draw from such facts, (sic) with Hahn
On July 1, 1993, BMW moved to dismiss the case, contending that maintaining that on the basis thereof, BMW is doing business in
the trial court did not acquire jurisdiction over it through the service the Philippines while the latter asserts that it is not.
of summons on the Department of Trade and Industry, because it
(BMW) was a foreign corporation and it was not doing business in
the Philippines. It contended that the execution of the Deed of Then, after stating that any ruling which the trial court might make
Assignment was an isolated transaction; that Hahn was not its on the motion to dismiss would anyway be elevated to it on appeal,
agent because the latter undertook to assemble and sell BMW the Court of Appeals itself resolved the motion. It ruled that BMW
cars and products without the participation of BMW and sold other was not doing business in the country and, therefore, jurisdiction
products; and that Hahn was an indentor or middleman transacting over it could not be acquired through service of summons on the
business in his own name and for his own account. DTI pursuant to Rule 14, Section 14. The court upheld private
respondent's contention that Hahn acted in his own name and for
his own account and independently of BMW, based on Alfred
Petitioner Alfred Hahn opposed the motion. He argued that BMW Hahn's allegations that he had invested his own money and
was doing business in the Philippines through him as its agent, as resources in establishing BMW's goodwill in the Philippines and on
shown by the fact that BMW invoices and order forms were used to BMW's claim that Hahn sold products other than those of BMW. It
document his transactions; that he gave warranties as exclusive held that petitioner was a mere indentor or broker and not an agent
BMW dealer; that BMW officials periodically inspected standards of through whom private respondent BMW transacted business in the
service rendered by him; and that he was described in service Philippines. Consequently, the Court of Appeals dismissed
booklets and international publications of BMW as a "BMW
petitioner's complaint against BMW.
Importer" or "BMW Trading Company" in the Philippines.

Hence, this appeal. Petitioner contends that the Court of Appeals


The trial court[6] deferred resolution of the Motion to dismiss until erred (1) in finding that the trial court gravely abused its discretion
after trial on the merits for the reason that the grounds advanced
in deferring action on the motion to dismiss and (2) in finding that
by BMW in its motion did not seem to be indubitable. private respondent BMW is not doing business in the Philippines
and, for this reason, dismissing petitioner's case.
Without seeking reconsideration of the aforementioned order,
BMW filed a petition for certiorari with the Court of Appeals alleging
Petitioner's appeal is well taken. Rule 14, 14 provides:
that:

14. Service upon foreign corporations. If the defendant is a foreign


I. THE RESPONDENT JUDGE ACTED WITH UNDUE corporation, or a nonresident joint stock company or association,
HASTE OR OTHERWISE INJUDICIOUSLY IN doing business in the Philippines, service may be made on its
PROCEEDINGS LEADING TOWARD THE ISSUANCE resident agent designated in accordance with law for that purpose,
OF THE WRIT OF PRELIMINARY INJUNCTION, AND
or, if there be no such agent, on the government official designated
IN PRESCRIBING THE TERMS FOR THE ISSUANCE by law to that effect, or on any of its officers or agents within the
THEREOF.
Philippines. (Emphasis added)

II. THE RESPONDENT JUDGE PATENTLY ERRED IN


What acts are considered "doing business in the Philippines" are
DEFERRING RESOLUTION OF THE MOTION TO enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A.
DISMISS ON THE GROUND OF LACK OF
No. 7042) as follows:[7]
JURISDICTION, AND THEREBY FAILING TO
IMMEDIATELY DISMISS THE CASE A QUO.
d) the phrase "doing business" shall include soliciting orders,
service contracts, opening offices, whether called "liaison"
BMW asked for the immediate issuance of a temporary restraining
offices or branches, appointing representatives or
order and, after hearing, for a writ of preliminary injunction, to distributors domiciled in the Philippines or who in any
enjoin the trial court from proceeding further in Civil Case No. Q- calendar year stay in the country for a period or periods
93-15933. Private respondent pointed out that, unless the trial totalling one hundred eighty (180) days or more; participating
court's order was set aside, it would be forced to submit to the in the management, supervision or control of any domestic
jurisdiction of the court by filing its answer or to accept judgment in business, firm, entity or corporation in the Philippines; and
default, when the very question was whether the court had any other act or acts that imply a continuity of
jurisdiction over it. commercial dealings or arrangements and contemplate
Page 68 of 84
to that extent the performance of acts or works, or the transmitted them to BMW. Upon receipt of the orders, BMW fixed
exercise of some of the functions normally incident to, the down payment and pricing charges, notified Hahn of the
and in progressive prosecution of, commercial gain or scheduled production month for the orders, and reconfirmed the
of the purpose and object of the business organization: orders by signing and returning to Hahn the acceptance sheets.
Provided, however, That the phrase "doing business" shall Payment was made by the buyer directly to BMW. Title to cars
not be deemed to include mere investment as a purchased passed directly to the buyer and Hahn never paid for
shareholder by a foreign entity in domestic corporations duly the purchase price of BMW cars sold in the Philippines. Hahn was
registered to do business, and/or the exercise of rights as credited with a commission equal to 14% of the purchase price
such investor; nor having, a nominee director or officer to upon the invoicing of a vehicle order by BMW. Upon confirmation
represent its interests in such corporation; nor appointing a in writing that the vehicles had been registered in the Philippines
representative or distributor domiciled in the Philippines and serviced by him, Hahn received an additional 3% of the full
which transacts business in its own name and for its purchase price. Hahn performed after-sale services, including,
own account. (Emphasis supplied) warranty services, for which he received reimbursement from
BMW. All orders were on invoices and forms of BMW.[8]
Thus, the phrase includes "appointing representatives or
distributors in the Philippines" but not when the representative or These allegations were substantially admitted by BMW which, in its
distributor "transacts business in its name and for its own account." petition for certiorari before the Court of Appeals, stated:[9]
In addition, Section 1(f)(1) of the Rules and Regulations
implementing (IRR) the Omnibus Investment Code of 1987 (E.O.
9.4. As soon as the vehicles are fully manufactured and full
No. 226) provided: payment of the purchase prices are made, the vehicles are
shipped to the Philippines. (The payments may be made by the
(f) "Doing business" shall be any act or combination of acts, purchasers or third-persons or even by Hahn.) The bills of lading
enumerated in Article 44 of the Code. In particular, "doing are made up in the name of the purchasers, but Hahn-Manila is
business" includes: therein indicated as the person to be notified.

(1).... A foreign firm which does business through middlemen 9.5. It is Hahn who picks up the vehicles from the Philippine ports,
acting in their own names, such as indentors, commercial brokers for purposes of conducting pre-delivery inspections. Thereafter, he
or commission merchants, shall not be deemed doing business in delivers the vehicles to the purchasers.
the Philippines. But such indentors, commercial brokers or
commission merchants shall be the ones deemed to be doing 9.6. As soon as BMW invoices the vehicle ordered, Hahn is
business in the Philippines. credited with a commission of fourteen percent (14%) of the full
purchase price thereof, and as soon as he confirms in writing, that
The question is whether petitioner Alfred Hahn is the agent or the vehicles have been registered in the Philippines and have been
distributor in the Philippines of private respondent BMW. If he is, serviced by him, he will receive an additional three percent (3%) of
BMW may be considered doing business in the Philippines and the the full purchase prices as commission.
trial court acquired jurisdiction over it (BMW) by virtue of the
service of summons on the Department of Trade and Industry. Contrary to the appellate court's conclusion, this arrangement
Otherwise, if Hahn is not the agent of BMW but an independent shows an agency. An agent receives a commission upon the
dealer, albeit of BMW cars and products, BMW, a foreign successful conclusion of a sale. On the other hand, a broker earns
corporation, is not considered doing business in the Philippines
his pay merely by bringing the buyer and the seller together, even
within the meaning of the Foreign Investments Act of 1991 and the if no sale is eventually made.
IRR, and the trial court did not acquire jurisdiction over it (BMW).

As to the service centers and showrooms which he said he had put


The Court of Appeals held that petitioner Alfred Hahn acted in his
up at his own expense, Hahn said that he had to follow BMW
own name and for his own account and not as agent or distributor specifications as exclusive dealer of BMW in the Philippines.
in the Philippines of BMW on the ground that "he alone had
According to Hahn, BMW periodically inspected the service
contacts with individuals or entities interested in acquiring BMW centers to see to it that BMW standards were maintained. Indeed,
vehicles. Independence characterizes Hahn's undertakings, for
it would seem from BMW's letter to Hahn that it was for Hahn's
which reason he is to be considered, under governing statutes, as alleged failure to maintain BMW standards that BMW was
doing business." (p. 13) In support of this conclusion, the appellate terminating Hahn's dealership.
court cited the following allegations in Hahn's amended complaint:

The fact that Hahn invested his own money to put up these service
8. From the time the trademark "BMW & DEVICE" was first used centers and showrooms does not necessarily prove that he is not
by the Plaintiff in the Philippines up to the present, Plaintiff, through an agent of BMW. For as already noted, there are facts in the
its firm name "HAHN MANILA" and without any monetary record which suggest that BMW exercised control over Hahn's
contributions from defendant BMW; established BMW's goodwill activities as a dealer and made regular inspections of Hahn's
and market presence in the Philippines. Pursuant thereto, Plaintiff premises to enforce compliance with BMW standards and
invested a lot of money and resources in order to single-handedly specifications.[10] For example, in its letter to Hahn dated
compete against other motorcycle and car companies.... Moreover,
February 23, 1996, BMW stated:
Plaintiff has built buildings and other infrastructures such as
service centers and showrooms to maintain and promote the car
and products of defendant BMW. In the last years we have pointed out to you in several
discussions and letters that we have to tackle the Philippine
market more professionally and that we are through your
As the above quoted allegations of the amended complaint show, present activities not adequately prepared to cope with the
however, there is nothing to support the appellate court's finding
forthcoming challenges.[11]
that Hahn solicited orders alone and for his own account and
without "interference from, let alone direction of, BMW." (p. 13) To
the contrary, Hahn claimed he took orders for BMW cars and
Page 69 of 84
In effect, BMW was holding Hahn accountable to it under the 1967 This is not to say, however, that the petitioner's right to question
Agreement. the jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only
involvement in the Philippines was through a passive investment in
This case fits into the mould of Communications Materials, Inc. v.
Court of Appeals,[12] in which the foreign corporation entered into Sigfil, which it even later disposed of, and that TEAM Pacific is not
a "Representative Agreement" and a "Licensing Agreement" with a its agent, then it cannot really be said to be doing business in the
domestic corporation, by virtue of which the latter was appointed Philippines. It is a defense, however, that requires the
"exclusive representative" in the Philippines for a stipulated contravention of the allegations of the complaint, as well as a full
commission. Pursuant to these contracts, the domestic corporation ventilation, in effect, of the main merits of the case, which should
sold products exported by the foreign corporation and put up a not thus be within the province of a mere motion to dismiss. So,
service center for the products sold locally. This Court held that also, the issue posed by the petitioner as to whether a foreign
these acts constituted doing business in the Philippines. The corporation which has done business in the country, but which has
ceased to do business at the time of the filing, of a complaint, can
arrangement showed that the foreign corporation's purpose was to
penetrate the Philippine market and establish its presence in the still be made to answer for a cause of action which accrued while it
was doing, business, is another matter that would yet have to await
Philippines.
the reception and admission of evidence. Since these points have
seasonably been raised by the petitioner, there should be no real
In addition, BMW held out private respondent Hahn as its exclusive cause for what may understandably be its apprehension, i.e., that
distributor in the Philippines, even as it announced in the Asian by its participation during the trial on the merits, it may, absent an
region that Hahn was the "official BMW agent" in the invocation of separate or independent reliefs of its own, be
Philippines.[13] considered to have voluntarily submitted itself to the court's
jurisdiction.[19]
The Court of Appeals also found that petitioner Alfred Hahn dealt
in other products, and not exclusively in BMW products, and, on Far from committing an abuse of discretion, the trial court properly
this basis, ruled that Hahn was not an agent of BMW. (p. 14) This deferred resolution of the motion to dismiss and thus avoided
finding is based entirely on allegations of BMW in its motion to prematurely deciding a question which requires a factual basis,
dismiss filed in the trial court and in its petition for certiorari before with the same result if it had denied the motion and conditionally
the Court of Appeals.[14] But this allegation was denied by assumed jurisdiction. It is the Court of Appeals which, by ruling that
Hahn[15] and therefore the Court of Appeals should not have cited BMW is not doing business on the basis merely of uncertain
it as if it were the fact. allegations in the pleadings, disposed of the whole case with
finality and thereby deprived petitioner of his right to be heard on
Indeed this is not the only factual issue raised, which should have his cause of action. Nor was there justification for nullifying the writ
indicated to the Court of Appeals the necessity of affirming the trial of preliminary injunction issued by the trial court. Although the
court's order deferring resolution of BMW's motion to dismiss. injunction was issued ex parte, the fact is that BMW was
Petitioner alleged that whether or not he is considered an agent of subsequently heard on its defense by filing a motion to dismiss.
BMW, the fact is that BMW did business in the Philippines because
it sold cars directly to Philippine buyers. [16] This was denied by WHEREFORE, the decision of the Court of Appeals is REVERSED
BMW, which claimed that Hahn was not its agent and that, while it and the case is REMANDED to the trial court for further
was true that it had sold cars to Philippine buyers, this was done proceedings.
without solicitation on its part.[17]
SO ORDERED.
It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties'
pleadings. There are genuine issues of facts which can only be [G.R. No. 159586. July 26, 2004]
determined on the basis of evidence duly presented. BMW cannot
short circuit the process on the plea that to compel it to go to trial EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and
would be to deny its right not to submit to the jurisdiction of the trial DELFIN J. WENCESLAO, petitioners, vs. INGENIEUBURO
court which precisely it denies. Rule 16, 3 authorizes courts to BIRKHAHN + NOLTE, Ingeniurgesellschaft mbh and HEERS &
defer the resolution of a motion to dismiss until after the trial if the BROCKSTEDT GMBH & CO., respondents.; YNARES-
ground on which the motion is based does not appear to be SANTIAGO, J.:
indubitable. Here the record of the case bristles with factual issues
and it is not at all clear whether some allegations correspond to the
proof. Assailed in this Petition for Review under Rule 45 of the Rules of
Court is the Decision[1] of the Court of Appeals dated May 15,
2003, which sustained the Order of the Regional Trial Court of
Anyway, private respondent need not apprehend that by Angeles City, Branch 61, dated June 28, 2001, and its subsequent
responding to the summons it would be waiving its objection to the Resolution dated August 3, 2003 denying petitioners motion for
trial court's jurisdiction. It is now settled that. for purposes of having reconsideration.
summons served on a foreign corporation in accordance with Rule
14, 14, it is sufficient that it be alleged in the complaint that the
foreign corporation is doing business in the Philippines. The court European Resources and Technologies Inc. (hereinafter ERTI), a
need not go beyond the allegations of the complaint in order to corporation organized and existing under the laws of the Republic
determine whether it has jurisdiction.[18] A determination that the of the Philippines, is joined by Delfin J. Wenceslao as petitioner in
foreign corporation is doing business is only tentative and is made this case. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh
only for the purpose of enabling the local court to acquire and Heers & Brockstedt Gmbh & Co. are German corporations
jurisdiction over the foreign corporation through service of who are respondents in this case and shall be collectively referred
summons pursuant to Rule 14, 14. Such determination does not to as the German Consortium.
foreclose a contrary finding should evidence later show that it is
not transacting business in the country. As this Court has The German Consortium tendered and submitted its bid to the
explained: Clark Development Corporation (CDC) to construct, operate and
Page 70 of 84
manage the Integrated Waste Management Center at the Clark there is no more factual or legal basis for the joint venture to
Special Economic Zone (CSEZ). CDC accepted the German continue; and (d) with the termination of the MOU, the MOA is also
Consortiums bid and awarded the contract to it. On October 6, deemed terminated or extinguished.
1999, CDC and the German Consortium executed the Contract for
Services[2] which embodies the terms and conditions of their Attached to the letter was a copy of the letter of the CDC,[13]
agreement. stating that the German Consortiums assignment of an eighty-five
percent (85%) majority interest to another party violated its
The Contract for Services provides that the German Consortium representation to undertake both the financial and technical
shall be empowered to enter into a contract or agreement for the aspects of the project. The dilution of the Consortiums interest in
use of the integrated waste management center by corporations, ERTI is a substantial modification of the Consortiums
local government units, entities, and persons not only within the representations which were used as bases for the award of the
CSEZ but also outside. For waste collected within the CSEZ, the project to it.
German Consortium may impose a tipping fee per ton of waste
collected from locators and residents of the CSEZ, which fees shall On February 20, 2001, petitioner ERTI, through counsel, sent a
be subject to the schedule agreed upon by the parties and letter to CDC requesting for the reconsideration of its disapproval
specified in the Contract for Services. For its operations outside of of the agreement between ERTI and the German Consortium.
the CSEZ, the German Consortium shall pay CDC US$1.50 per
ton of non-hazardous solid waste collected.[3] The CDC shall
guarantee that nineteen thousand eighteen hundred (19,800) tons Before CDC could act upon petitioner ERTIs letter, the German
per year of solid waste volume shall be collected from inside and Consortium filed a complaint for injunction against herein
outside the CSEZ.[4] The contract has a term of twenty-five (25) petitioners before the Regional Trial Court of Angeles City, Branch
years,[5] during which time the German Consortium shall operate 61, docketed as Civil Case No. 10049. The German Consortium
the waste management center on a day-to-day basis.[6] claimed that petitioner ERTIs continued misrepresentation as to
their right to accept solid wastes from third parties for processing at
the waste management center will cause irreparable damage to
Article VIII, Section 7 of the Contract for Services provides that the the Consortium and its exclusive right to operate the waste
German Consortium shall undertake to organize a local management center at the CSEZ. Moreover, petitioner ERTIs acts
corporation as its representative for this project. On April 18, 2000, destroy the Consortiums credibility and undermine customer
the German Consortium entered into a Joint Venture with D.M. confidence in it. Hence, the German Consortium prayed that a writ
Wenceslao and Associates, Inc. (DMWAI) and Ma. Elena B. of temporary restraining order be issued against petitioner ERTI
Villarama (doing business as LBV and Associates), embodied in a and, after hearing, a writ of preliminary injunction be likewise
Memorandum of Understanding[7] (MOU) signed by the parties. issued ordering petitioner ERTI to cease and desist from
Under the MOU, the parties agreed to jointly form a local
misrepresenting to third parties or the public that it has any right or
corporation to which the German Consortium shall assign its rights interest in the waste management center at CSEZ.[14]
under the Contract for Services. Pursuant to this agreement,
petitioner European Resources and Technologies, Inc. was
incorporated. The parties likewise agreed to prepare and finalize a Petitioners filed their Opposition to the application for preliminary
Shareholders Agreement within one (1) month from the execution injunction on February 7, 2001. The following day, February 8,
of the MOU, which shall provide that the German Consortium shall 2001, petitioners sent respondents, through Mr. Holger Holst, a
own fifteen percent (15%) of the equity in the joint venture letter demanding that the parties proceed to arbitration in
corporation, DMWAI shall own seventy percent (70%) and LBV&A accordance with Section 17 of the MOA. At the hearings on the
shall own fifteen percent (15%). In the event that the parties fail to application for injunction, petitioners objected to the presentation of
execute the Shareholders Agreement, the MOU shall be evidence on the ground that the trial court had no jurisdiction over
considered null and void.[8] the case since the German Consortium was composed of foreign
corporations doing business in the country without a license.
Moreover, the MOA between the parties provides that the dispute
On August 1, 2000, without the Shareholders Agreement having should be referred to arbitration.
been executed, the German Consortium and petitioner ERTI
entered into a Memorandum of Agreement (MOA)[9] whereby the
German Consortium ceded its rights and obligations under the The trial court overruled the objection and proceeded with the
Contract for Services in favor of ERTI and assigned unto ERTI, hearing. On June 28, 2001, the trial court issued an Order granting
among others, its license from CDC to engage in the business of the writ of preliminary injunction.[15] Petitioners filed a motion for
providing environmental services needed in the CSEZ in reconsideration, which was denied in a Resolution dated
connection with the waste management within the CSEZ and other November 21, 2001.
areas.[10] Likewise, the parties agreed that should there be a
disagreement between or among them relative to the interpretation On January 17, 2002, petitioners filed a petition for certiorari and
or implementation of the MOA and the collateral documents prohibition under Rule 65 of the Rules of Court before the Court of
including but not limited to the Contract for Services between the Appeals, assailing the trial courts Orders dated June 28, 2001 and
German Consortium and CDC, the dispute shall be referred to a November 21, 2001.
panel of arbitrators.[11]
Meanwhile, on February 11, 2002, the temporary restraining order
On December 11, 2000, ERTI received a letter from BN issued was lifted in view of respondents failure to file sufficient
Consultants Philippines, Inc., signed by Mr. Holger Holst for and on bond.[16] On September 6, 2002, all proceedings in Civil Case No.
behalf of the German Consortium,[12] stating that the German 10049 were suspended until the petition for certiorari pending
Consortiums contract with DMWAI, LBV&A and ERTI has been before the Court of Appeals shall have been resolved.[17]
terminated or extinguished on the following grounds: (a) the CDC
did not give its approval to the Consortiums request for the
approval of the assignment or transfer by the German Consortium On May 15, 2003, the Court of Appeals dismissed the petition for
in favor of ERTI of its rights and interests under the Contract for certiorari. Petitioners Motion for Reconsideration was denied in a
Services; (b) the parties failed to prepare and finalize the Resolution dated August 25, 2003.
Shareholders Agreement pursuant to the provision of the MOU; (c)
Page 71 of 84
Hence, this petition arguing that the Court of Appeals committed Securities and Exchange Commission (SEC) and appoint an agent
reversible error in: for service of process. Without such license, it cannot institute a
suit in the Philippines.[21]
(a) Ruling that petitioners are estopped from assailing
the capacity of the respondents to institute the suit However, there are exceptions to this rule. In a number of
for injunction cases,[22] we have declared a party estopped from challenging or
questioning the capacity of an unlicensed foreign corporation from
initiating a suit in our courts. In the case of Communication
(b) Ruling that respondents are entitled to an
injunctive writ. Materials and Design, Inc. v. Court of Appeals,[23] a foreign
corporation instituted an action before our courts seeking to enjoin
a local corporation, with whom it had a Representative Agreement,
(c) Not holding that the dispute is covered by the from using its corporate name, letter heads, envelopes, sign
arbitration clause in the memorandum of boards and business dealings as well as the foreign corporations
agreement. trademark. The case arose when the foreign corporation
discovered that the local corporation has violated certain
(d) Issuing the writ of preliminary injunction that is contractual commitments as stipulated in their agreement. In said
tantamount to a decision of the case on the case, we held that a foreign corporation doing business in the
merits.[18] Philippines without license may sue in Philippine Courts a
Philippine citizen or entity that had contracted with and benefited
from it.
The petition is partly meritorious.
Hence, the party is estopped from questioning the capacity of a
There is no general rule or governing principle laid down as to foreign corporation to institute an action in our courts where it had
what constitutes doing or engaging in or transacting business in obtained benefits from its dealings with such foreign corporation
the Philippines. Thus, it has often been held that a single act or and thereafter committed a breach of or sought to renege on its
transaction may be considered as doing business when a obligations. The rule relating to estoppel is deeply rooted in the
corporation performs acts for which it was created or exercises axiom of commodum ex injuria sua non habere debetno person
some of the functions for which it was organized.[19] We have held ought to derive any advantage from his own wrong.
that the act of participating in a bidding process constitutes doing
business because it shows the foreign corporations intention to
engage in business in the Philippines. In this regard, it is the In the case at bar, petitioners have clearly not received any benefit
performance by a foreign corporation of the acts for which it was from its transactions with the German Consortium. In fact, there is
created, regardless of volume of business, that determines no question that petitioners were the ones who have expended a
whether a foreign corporation needs a license or not.[20] considerable amount of money and effort preparatory to the
implementation of the MOA. Neither do petitioners seek to back
out from their obligations under both the MOU and the MOA by
Consequently, the German Consortium is doing business in the challenging respondents capacity to sue. The reverse could not be
Philippines without the appropriate license as required by our laws. any more accurate. Petitioners are insisting on the full validity and
By participating in the bidding conducted by the CDC for the implementation of their agreements with the German Consortium.
operation of the waste management center, the German
Consortium exhibited its intent to transact business in the
Philippines. Although the Contract for Services provided for the To rule that the German Consortium has the capacity to institute
establishment of a local corporation to serve as respondents an action against petitioners even when the latter have not
representative, it is clear from the other provisions of the Contract committed any breach of its obligation would be tantamount to an
for Services as well as the letter by the CDC containing the unlicensed foreign corporation gaining access to our courts for
disapproval that it will be the German Consortium which shall protection and redress. We cannot allow this without violating the
manage and conduct the operations of the waste management very rationale for the law prohibiting a foreign corporation not
center for at least twenty-five years. Moreover, the German licensed to do business in the Philippines from suing or
Consortium was allowed to transact with other entities outside the maintaining an action in Philippine courts. The object of requiring a
CSEZ for solid waste collection. Thus, it is clear that the local license is not to prevent the foreign corporation from performing
corporation to be established will merely act as a conduit or single acts, but to prevent it from acquiring domicile for the
extension of the German Consortium. purpose of business without taking the steps necessary to render it
amenable to suits in the local courts.[24] In other words, the
foreign corporation is merely prevented from being in a position
As a general rule, unlicensed foreign non-resident corporations where it takes the good without accepting the bad.
cannot file suits in the Philippines. Section 133 of the Corporation
Code specifically provides:
On the issue of whether the respondents were entitled to the
injunctive writ, the petitioners claim that respondents right is not in
SECTION 133. No foreign corporation transacting business in esse but is rather a future right which is contingent upon a judicial
the Philippines without a license, or its successors or assigns, shall declaration that the MOA has been validly rescinded. The Court of
be permitted to maintain or intervene in any action, suit or Appeals, in its decision, held that the MOA should be deemed
proceeding in any court or administrative agency of the Philippines, subject to a suspensive condition, that is, that CDCs prior written
but such corporation may be sued or proceeded against before consent must be obtained for the validity of the assignment.
Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws.
This issue must be resolved in a separate proceeding. It must be
noted that the hearing conducted in the trial court was merely a
A corporation has legal status only within the state or territory in preliminary hearing relating to the issuance of the injunctive writ. In
which it was organized. For this reason, a corporation organized in order to fully appreciate the facts of this case and the surrounding
another country has no personality to file suits in the Philippines. In circumstances relating to the agreements and contract involved,
order to subject a foreign corporation doing business in the country further proof should be presented for consideration of the court.
to the jurisdiction of our courts, it must acquire a license from the
Page 72 of 84
Likewise, corollary matters, such as whether either of the parties is the main case and seek a judgment without a full-blown trial as in
liable for damages and to what extent, cannot be resolved with the instant case.
absolute certainty, thus rendering any decision we might make
incomplete as to fully dispose of this case.
The Court of Appeals ruled that since petitioners did not raise this
issue during the hearing on the application for preliminary
More importantly, it is evident that CDC must be made a proper injunction before the trial court, the same cannot be raised for the
party in any case which seeks to resolve the effectivity or first time on appeal and even in special civil actions for certiorari as
ineffectivity of its disapproval of the assignment made between in this case.
petitioners and respondent German Consortium. Where, as in the
instant case, CDC is not impleaded as a party, any decision of the At the outset, it must be noted that with the finding that the German
court which will inevitably affect or involve CDC cannot be deemed Consortium is without any personality to file the petition with the
binding on it. trial court, the propriety of the injunction writ issued is already moot
and academic. Even assuming for the sake of argument that
For the same reason, petitioners assertion that the instant case respondents have the capacity to file the petition, we find merit in
should be referred to arbitration pursuant to the provision of the the issue raised by petitioners against the injunction writ issued.
MOA is untenable.
Before an injunctive writ can be issued, it is essential that the
We have ruled in several cases that arbitration agreements are following requisites are present: (1) there must be a right in esse or
valid, binding, enforceable and not contrary to public policy such the existence of a right to be protected; and (2) the act against
that when there obtains a written provision for arbitration which is which injunction to be directed is a violation of such right.[29] The
not complied with, the trial court should suspend the proceedings onus probandi is on movant to show that there exists a right to be
and order the parties to proceed to arbitration in accordance with protected, which is directly threatened by the act sought to be
the terms of their agreement.[25] In the case at bar, the MOA enjoined. Further, there must be a showing that the invasion of the
between petitioner ERTI and respondent German Consortium right is material and substantial and that there is an urgent and
provided: paramount necessity for the writ to prevent a serious damage.[30]

17. Should there be a disagreement between or among the Thus, it is clear that for the issuance of the writ of preliminary
Parties relative to the interpretation or implementation of this injunction to be proper, it must be shown that the invasion of the
Agreement and the collateral documents including but not limited right sought to be protected is material and substantial, that the
to the Contract for Services between GERMAN CONSORTIUM right of complainant is clear and unmistakable and that there is an
and CDC and the Parties cannot resolve the same by themselves, urgent and paramount necessity for the writ to prevent serious
the same shall be endorsed to a panel of arbitrators which shall be damage.[31] At the time of its application for an injunctive writ,
convened in accordance with the process ordained under the respondents right to operate and manage the waste management
Arbitration Law of the Republic of the Philippines.[26] center, to the exclusion of or without any participation by petitioner
ERTI, cannot be said to be clear and unmistakable. The MOA
Indeed, to brush aside a contractual agreement calling for executed between respondents and petitioner ERTI has not yet
arbitration in case of disagreement between parties would be a been judicially declared as rescinded when the complaint was
step backward.[27] But there are exceptions to this rule. Even if lodged in court.[32] Hence, a cloud of doubt exists over respondent
there is an arbitration clause, there are instances when referral to German Consortiums exclusive right relating to the waste
management center.
arbitration does not appear to be the most prudent action. The
object of arbitration is to allow the expeditious determination of a
dispute. Clearly, the issue before us could not be speedily and WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP
efficiently resolved in its entirety if we allow simultaneous No. 68923 dated May 15, 2003 is REVERSED and SET ASIDE.
arbitration proceedings and trial, or suspension of trial pending The Orders of the trial court dated June 28, 2001 and November
arbitration.[28] 21, 2001 are ANNULLED and SET ASIDE and Civil Case No.
10049 is DISMISSED for lack of legal capacity of respondents to
As discussed earlier, the dispute between respondent German institute the action. Costs against respondents. SO ORDERED.
Consortium and petitioners involves the disapproval by the CDC of
the assignment by the German Consortium of its rights under the [G.R. No. 154618. April 14, 2004]
Contract for Services to petitioner ERTI. Admittedly, the arbitration
clause is contained in the MOA to which only the German
Consortium and petitioner ERTI were parties. Even if the case is AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD.,
brought before an arbitration panel, the decision will not be binding petitioner, vs. INTEGRATED SILICON TECHNOLOGY
upon CDC who is a non-party to the arbitration agreement. What is PHILIPPINES CORPORATION, TEOH KIANG HONG, TEOH
more, the arbitration panel will not be able to completely dispose of KIANG SENG, ANTHONY CHOO, JOANNE KATE M. DELA
all the issues of this case without including CDC in its proceedings. CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T. NACILLA,
Accordingly, the interest of justice would only be served if the trial respondents.; YNARES-SANTIAGO, J.:
court hears and adjudicates the case in a single and complete
proceeding. This petition for review assails the Decision dated August 12, 2002
of the Court of Appeals in CA-G.R. SP No. 66574, which dismissed
Lastly, petitioners question the propriety of the issuance of writ of Civil Case No. 3123-2001-C and annulled and set aside the Order
preliminary injunction claiming that such is already tantamount to dated September 4, 2001 issued by the Regional Trial Court of
granting the main prayer of respondents complaint without the Calamba, Laguna, Branch 92.
benefit of a trial. Petitioners point out that the purpose of a
preliminary injunction is to prevent threatened or continuous Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a
irremediable injury to some of the parties before their claims can foreign corporation, which, by its own admission, is not licensed to
be thoroughly studied and decided. It cannot be used to railroad do business in the Philippines.[1] Respondent Integrated Silicon
Technology Philippines Corporation (Integrated Silicon) is a private
Page 73 of 84
domestic corporation, 100% foreign owned, which is engaged in In the meantime, upon motion filed by respondents, Judge Antonio
the business of manufacturing and assembling electronics S. Pozas of Branch 92 voluntarily inhibited himself in Civil Case
components.[2] Respondents Teoh Kiang Hong, Teoh Kiang Seng No. 3123-2001-C. The case was re-raffled and assigned to Branch
and Anthony Choo, Malaysian nationals, are current members of 35, the same branch where Civil Case No. 3110-2001-C is
Integrated Silicons board of directors, while Joanne Kate M. dela pending.
Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former
members.[3] On August 12, 2002, the Court of Appeals granted respondents
petition for certiorari, set aside the assailed Order of the trial court
The juridical relation among the various parties in this case can be dated September 4, 2001, and ordered the dismissal of Civil Case
traced to a 5-year Value Added Assembly Services Agreement No. 3123-2001-C.
(VAASA), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Hence, the instant petition raising the following errors:
Components Operation (HP-Singapore).[4] Under the terms of the
VAASA, Integrated Silicon was to locally manufacture and
assemble fiber optics for export to HP-Singapore. HP-Singapore, I.
for its part, was to consign raw materials to Integrated Silicon;
transport machinery to the plant of Integrated Silicon; and pay THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
Integrated Silicon the purchase price of the finished products.[5] IN NOT DISMISSING RESPONDENTS PETITION FOR
The VAASA had a five-year term, beginning on April 2, 1996, with CERTIORARI FOR RESPONDENTS FAILURE TO FILE A
a provision for annual renewal by mutual written consent.[6] On MOTION FOR RECONSIDERATION BEFORE RESORTING TO
September 19, 1999, with the consent of Integrated Silicon,[7] HP- THE REMEDY OF CERTIORARI.
Singapore assigned all its rights and obligations in the VAASA to
Agilent.[8]
II.
On May 25, 2001, Integrated Silicon filed a complaint for Specific
Performance and Damages against Agilent and its officers Tan THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor, IN ANNULLING AND SETTING ASIDE THE TRIAL COURTS
docketed as Civil Case No. 3110-01-C. It alleged that Agilent ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
breached the parties oral agreement to extend the VAASA. DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE
Integrated Silicon thus prayed that defendant be ordered to GROUND OF LITIS PENDENTIA, ON ACCOUNT OF THE
execute a written extension of the VAASA for a period of five years PENDENCY OF CIVIL CASE NO. 3110-2001-C.
as earlier assured and promised; to comply with the extended
VAASA; and to pay actual, moral, exemplary damages and III.
attorneys fees.[9]
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
On June 1, 2001, summons and a copy of the complaint were IN ANNULLING AND SETTING ASIDE THE TRIAL COURTS
served on Atty. Ramon Quisumbing, who returned these ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
processes on the claim that he was not the registered agent of DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE
Agilent. Later, he entered a special appearance to assail the courts GROUND OF FORUM SHOPPING, ON ACCOUNT OF THE
jurisdiction over the person of Agilent. PENDENCY OF CIVIL CASE NO. 3110-2001-C.

On July 2, 2001, Agilent filed a separate complaint against IV.


Integrated Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony
Choo, Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and
Rolando T. Nacilla,[10] for Specific Performance, Recovery of THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
Possession, and Sum of Money with Replevin, Preliminary IN ORDERING THE DISMISSAL OF CIVIL CASE NO. 323-2001-C
Mandatory Injunction, and Damages, before the Regional Trial BELOW INSTEAD OF ORDERING IT CONSOLIDATED WITH
Court, Calamba, Laguna, Branch 92, docketed as Civil Case No. CIVIL CASE NO. 3110-2001-C.[19]
3123-2001-C. Agilent prayed that a writ of replevin or, in the
alternative, a writ of preliminary mandatory injunction, be issued The two primary issues raised in this petition: (1) whether or not
ordering defendants to immediately return and deliver to plaintiff its the Court of Appeals committed reversible error in giving due
equipment, machineries and the materials to be used for fiber-optic course to respondents petition, notwithstanding the failure to file a
components which were left in the plant of Integrated Silicon. It Motion for Reconsideration of the September 4, 2001 Order; and
further prayed that defendants be ordered to pay actual and (2) whether or not the Court of Appeals committed reversible error
exemplary damages and attorneys fees.[11] in dismissing Civil Case No. 3123-2001-C.

Respondents filed a Motion to Dismiss in Civil Case No. 3123- We find merit in the petition.
2001-C,[12] on the grounds of lack of Agilents legal capacity to
sue;[13] litis pendentia;[14] forum shopping;[15] and failure to state
The Court of Appeals, citing the case of Malayang Manggagawa
a cause of action.[16]
sa ESSO v. ESSO Standard Eastern, Inc.,[20] held that the lower
court had no jurisdiction over Civil Case No. 3123-2001-C because
On September 4, 2001, the trial court denied the Motion to Dismiss of the pendency of Civil Case No. 3110-2001-C and, therefore, a
and granted petitioner Agilents application for a writ of replevin.[17] motion for reconsideration was not necessary before resort to a
petition for certiorari. This was error.
Without filing a motion for reconsideration, respondents filed a
petition for certiorari with the Court of Appeals.[18] Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests
jurisdiction over the subject matter of Civil Case No. 3123-2001-C
in the RTC.[21]
Page 74 of 84
The Court of Appeals ruling that the assailed Order issued by the (a) identity of parties or at least such as represent the same
RTC of Calamba, Branch 92, was a nullity for lack of jurisdiction interest in both actions;
due to litis pendentia and forum shopping, has no legal basis. The
pendency of another action does not strip a court of the jurisdiction
(b) identity of rights asserted and reliefs prayed for, the
granted by law. reliefs being founded on the same facts; and

The Court of Appeals further ruled that a Motion for (c) the identity in the two cases should be such that the
Reconsideration was not necessary in view of the urgent necessity
judgment that may be rendered in one would, regardless of which
in this case. We are not convinced. In the case of Bache and Co. party is successful, amount to res judicata in the other.[28]
(Phils.), Inc. v. Ruiz,[22] relied on by the Court of Appeals, it was
held that time is of the essence in view of the tax assessments
sought to be enforced by respondent officers of the Bureau of The Court of Appeals correctly appreciated the identity of parties in
Internal Revenue against petitioner corporation, on account of Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the
which immediate and more direct action becomes necessary. Tax rule that lis pendens requires only substantial, and not absolute,
assessments in that case were based on documents seized by identity of parties.[29] There is substantial identity of parties when
virtue of an illegal search, and the deprivation of the right to due there is a community of interest between a party in the first case
process tainted the entire proceedings with illegality. Hence, the and a party in the second case, even if the latter was not
urgent necessity of preventing the enforcement of the tax impleaded in the first case.[30] The parties in these cases are
assessments was patent. Respondents, on the other hand, cite the vying over the interests of the two opposing corporations; the
case of Geronimo v. Commission on Elections,[23] where the individuals are only incidentally impleaded, being the natural
urgent necessity of resolving a disqualification case for a position persons purportedly accused of violating these corporations rights.
in local government warranted the expeditious resort to certiorari.
In the case at bar, there is no analogously urgent circumstance Likewise, the fact that the positions of the parties are reversed, i.e.,
which would necessitate the relaxation of the rule on a Motion for the plaintiffs in the first case are the defendants in the second case
Reconsideration. or vice versa, does not negate the identity of parties for purposes
of determining whether the case is dismissible on the ground of litis
Indeed, none of the exceptions for dispensing with a Motion for pendentia.[31]
Reconsideration is present here. None of the following cases cited
by respondents serves as adequate basis for their procedural The identity of parties notwithstanding, litis pendentia does not
lapse. obtain in this case because of the absence of the second and third
requisites. The rights asserted in each of the cases involved are
In Vigan Electric Light Co., Inc. v. Public Service Commission,[24] separate and distinct; there are two subjects of controversy
the questioned order was null and void for failure of respondent presented for adjudication; and two causes of action are clearly
tribunal to comply with due process requirements; in Matanguihan involved. The fact that respondents instituted a prior action for
v. Tengco,[25] the questioned order was a patent nullity for failure Specific Performance and Damages is not a ground for defeating
to acquire jurisdiction over the defendants, which fact the records the petitioners action for Specific Performance, Recovery of
plainly disclosed; and in National Electrification Administration v. Possession, and Sum of Money with Replevin, Preliminary
Court of Appeals,[26] the questioned orders were void for Mandatory Injunction, and Damages.
vagueness. No such patent nullity is evident in the Order issued by
the trial court in this case. Finally, while urgency may be a ground In Civil Case No. 3110-2001-C filed by respondents, the issue is
for dispensing with a Motion for Reconsideration, in the case of whether or not there was a breach of an oral promise to renew of
Vivo v. Cloribel,[27] cited by respondents, the slow progress of the the VAASA. The issue in Civil Case No. 3123-2001-C, filed by
case would have rendered the issues moot had a motion for petitioner, is whether petitioner has the right to take possession of
reconsideration been availed of. We find no such urgent the subject properties. Petitioners right of possession is founded
circumstance in the case at bar. on the ownership of the subject goods, which ownership is not
disputed and is not contingent on the extension or non-extension
Respondents, therefore, availed of a premature remedy when they of the VAASA. Hence, the replevin suit can validly be tried even
immediately raised the matter to the Court of Appeals on certiorari; while the prior suit is being litigated in the Regional Trial Court.
and the appellate court committed reversible error when it took
cognizance of respondents petition instead of dismissing the same Possession of the subject properties is not an issue in Civil Case
outright. No. 3110-2001-C. The reliefs sought by respondent Integrated
Silicon therein are as follows: (1) execution of a written extension
We come now to the substantive issues of the petition. or renewal of the VAASA; (2) compliance with the extended
VAASA; and (3) payment of overdue accounts, damages, and
attorneys fees. The reliefs sought by petitioner Agilent in Civil Case
Litis pendentia is a Latin term which literally means a pending suit. No. 3123-2001-C, on the other hand, are as follows: (1) issuance
It is variously referred to in some decisions as lis pendens and of a Writ of Replevin or Writ of Preliminary Mandatory Injunction;
auter action pendant. While it is normally connected with the (2) recovery of possession of the subject properties; (3) damages
control which the court has on a property involved in a suit during and attorneys fees.
the continuance proceedings, it is more interposed as a ground for
the dismissal of a civil action pending in court.
Concededly, some items or pieces of evidence may be admissible
in both actions. It cannot be said, however, that exactly the same
Litis pendentia as a ground for the dismissal of a civil action refers evidence will support the decisions in both, since the legally
to that situation wherein another action is pending between the
significant and controlling facts in each case are entirely different.
same parties for the same cause of action, such that the second Although the VAASA figures prominently in both suits, Civil Case
action becomes unnecessary and vexatious. For litis pendentia to
No. 3110-2001-C is premised on a purported breach of an oral
be invoked, the concurrence of the following requisites is obligation to extend the VAASA, and damages arising out of
necessary:
Agilents alleged failure to comply with such purported extension.

Page 75 of 84
Civil Case No. 3123-2001-C, on the other hand, is premised on a supervision and control of Integrated Silicon,[39] including
breach of the VAASA itself, and damages arising to Agilent out of instructing Integrated Silicon to hire more employees to meet
that purported breach. Agilents increasing production needs,[40] regularly performing
quality audit, evaluation and supervision of Integrated Silicons
It necessarily follows that the third requisite for litis pendentia is employees,[41] regularly performing inventory audit of raw
also absent. The following are the elements of res judicata: materials to be used by Integrated Silicon, which was also required
to provide weekly inventory updates to Agilent,[42] and providing
and dictating Integrated Silicon on the daily production schedule,
(a) The former judgment must be final; volume and models of the products to manufacture and ship for
Agilent.[43]
(b) The court which rendered judgment must have
jurisdiction over the parties and the subject matter; A foreign corporation without a license is not ipso facto
incapacitated from bringing an action in Philippine courts. A license
(c) It must be a judgment on the merits; and is necessary only if a foreign corporation is transacting or doing
business in the country. The Corporation Code provides:
(d) There must be between the first and second actions
identity of parties, subject matter, and cause of action.[32] Sec. 133.Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene
In this case, any judgment rendered in one of the actions will not in any action, suit or proceeding in any court or administrative
amount to res judicata in the other action. There being different agency of the Philippines; but such corporation may be sued or
causes of action, the decision in one case will not constitute res proceeded against before Philippine courts or administrative
judicata as to the other. tribunals on any valid cause of action recognized under Philippine
laws.
Of course, a decision in one case may, to a certain extent, affect
the other case. This, however, is not the test to determine the The aforementioned provision prevents an unlicensed foreign
identity of the causes of action. Whatever difficulties or corporation doing business in the Philippines from accessing our
inconvenience may be entailed if both causes of action are courts.
pursued on separate remedies, the proper solution is not the
dismissal order of the Court of Appeals. The possible consolidation
of said cases, as well as stipulations and appropriate modes of In a number of cases, however, we have held that an unlicensed
discovery, may well be considered by the court below to subserve foreign corporation doing business in the Philippines may bring suit
not only procedural expedience but, more important, the ends of in Philippine courts against a Philippine citizen or entity who had
justice.[33] contracted with and benefited from said corporation.[44] Such a
suit is premised on the doctrine of estoppel. A party is estopped
from challenging the personality of a corporation after having
We now proceed to the issue of forum shopping. acknowledged the same by entering into a contract with it. This
doctrine of estoppel to deny corporate existence and capacity
The test for determining whether a party violated the rule against applies to foreign as well as domestic corporations.[45] The
forum-shopping was laid down in the case of Buan v. Lopez.[34] application of this principle prevents a person contracting with a
Forum shopping exists where the elements of litis pendentia are foreign corporation from later taking advantage of its
present, or where a final judgment in one case will amount to res noncompliance with the statutes chiefly in cases where such
judicata in the final other. There being no litis pendentia in this person has received the benefits of the contract.[46]
case, a judgment in the said case will not amount to res judicata in
Civil Case No. 3110-2001-C, and respondents contention on forum The principles regarding the right of a foreign corporation to bring
shopping must likewise fail. suit in Philippine courts may thus be condensed in four statements:
(1) if a foreign corporation does business in the Philippines without
We are not unmindful of the afflictive consequences that may be a license, it cannot sue before the Philippine courts;[47] (2) if a
suffered by both petitioner and respondents if replevin is granted foreign corporation is not doing business in the Philippines, it
by the trial court in Civil Case No. 3123-2001-C. If respondent needs no license to sue before Philippine courts on an isolated
Integrated Silicon eventually wins Civil Case No. 3110-2001-C, transaction or on a cause of action entirely independent of any
and the VAASAs terms are extended, petitioner corporation will business transaction[48]; (3) if a foreign corporation does business
have to comply with its obligations thereunder, which would include in the Philippines without a license, a Philippine citizen or entity
the consignment of properties similar to those it may recover by which has contracted with said corporation may be estopped from
way of replevin in Civil Case No. 3123-2001-C. However, petitioner challenging the foreign corporations corporate personality in a suit
will also suffer an injustice if denied the remedy of replevin, resort brought before Philippine courts;[49] and (4) if a foreign
to which is not only allowed but encouraged by law. corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.
Respondents argue that since Agilent is an unlicensed foreign
corporation doing business in the Philippines, it lacks the legal The challenge to Agilents legal capacity to file suit hinges on
capacity to file suit.[35] The assailed acts of petitioner Agilent, whether or not it is doing business in the Philippines. However,
purportedly in the nature of doing business in the Philippines, are there is no definitive rule on what constitutes doing, engaging in, or
the following: (1) mere entering into the VAASA, which is a service transacting business in the Philippines, as this Court observed in
contract;[36] (2) appointment of a full-time representative in the case of Mentholatum v. Mangaliman.[50] The Corporation
Integrated Silicon, to oversee and supervise the production of Code itself is silent as to what acts constitute doing or transacting
Agilents products;[37] (3) the appointment by Agilent of six full-time business in the Philippines.
staff members, who were permanently stationed at Integrated
Silicons facilities in order to inspect the finished goods for Jurisprudence has it, however, that the term implies a continuity of
Agilent;[38] and (4) Agilents participation in the management, commercial dealings and arrangements, and contemplates, to that
Page 76 of 84
extent, the performance of acts or works or the exercise of some of Sec. 3, par. (d). The phrase doing business shall include soliciting
the functions normally incident to or in progressive prosecution of orders, service contracts, opening offices, whether called liaison
the purpose and subject of its organization.[51] offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the
In Mentholatum,[52] this Court discoursed on the two general tests country for a period or periods totaling one hundred eighty (180)
to determine whether or not a foreign corporation can be days or more; participating in the management, supervision or
considered as doing business in the Philippines. The first of these control of any domestic business, firm, entity, or corporation in the
is the substance test, thus:[53] Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that
extent the performance of acts or works, or the exercise of some of
The true test [for doing business], however, seems to be whether the functions normally incident to, and in the progressive
the foreign corporation is continuing the body of the business or prosecution of, commercial gain or of the purpose and object of the
enterprise for which it was organized or whether it has substantially business organization.
retired from it and turned it over to another.
An analysis of the relevant case law, in conjunction with Section 1
The second test is the continuity test, expressed thus:[54] of the Implementing Rules and Regulations of the FIA (as
amended by Republic Act No. 8179), would demonstrate that the
The term [doing business] implies a continuity of commercial acts enumerated in the VAASA do not constitute doing business in
dealings and arrangements, and contemplates, to that extent, the the Philippines.
performance of acts or works or the exercise of some of the
functions normally incident to, and in the progressive prosecution Section 1 of the Implementing Rules and Regulations of the FIA
of, the purpose and object of its organization. (as amended by Republic Act No. 8179) provides that the following
shall not be deemed doing business:
Although each case must be judged in light of its attendant
circumstances, jurisprudence has evolved several guiding (1) Mere investment as a shareholder by a foreign entity in
principles for the application of these tests. For instance, domestic corporations duly registered to do business, and/or the
considering that it transacted with its Philippine counterpart for exercise of rights as such investor;
seven years, engaging in futures contracts, this Court concluded
that the foreign corporation in Merrill Lynch Futures, Inc. v. Court of
Appeals and Spouses Lara,[55] was doing business in the (2) Having a nominee director or officer to represent its
Philippines. In Commissioner of Internal Revenue v. Japan Airlines interest in such corporation;
(JAL),[56] the Court held that JAL was doing business in the
Philippines, i.e., its commercial dealings in the country were (3) Appointing a representative or distributor domiciled in the
continuous despite the fact that no JAL aircraft landed in the Philippines which transacts business in the representatives or
country as it sold tickets in the Philippines through a general sales distributors own name and account;
agent, and opened a promotions office here as well.
(4) The publication of a general advertisement through any
In General Corp. of the Phils. v. Union Insurance Society of Canton print or broadcast media;
and Firemans Fund Insurance,[57] a foreign insurance corporation
was held to be doing business in the Philippines, as it appointed a
(5) Maintaining a stock of goods in the Philippines solely for
settling agent here, and issued 12 marine insurance policies. We the purpose of having the same processed by another entity in the
held that these transactions were not isolated or casual, but
Philippines;
manifested the continuity of the foreign corporations conduct and
its intent to establish a continuous business in the country. In Eriks
PTE Ltd. v. Court of Appeals and Enriquez,[58] the foreign (6) Consignment by a foreign entity of equipment with a local
corporation sold its products to a Filipino buyer who ordered the company to be used in the processing of products for export;
goods 16 times within an eight-month period. Accordingly, this
Court ruled that the corporation was doing business in the (7) Collecting information in the Philippines; and
Philippines, as there was a clear intention on its part to continue
the body of its business here, despite the relatively short span of
time involved. Communication Materials and Design, Inc., et al. v. (8) Performing services auxiliary to an existing isolated
Court of Appeals, ITEC, et al.[59] and Top-Weld Manufacturing v. contract of sale which are not on a continuing basis, such as
ECED, IRTI, et al.[60] both involved the License and Technical installing in the Philippines machinery it has manufactured or
Agreement and Distributor Agreement of foreign corporations with exported to the Philippines, servicing the same, training domestic
their respective local counterparts that were the primary bases for workers to operate it, and similar incidental services.
the Courts ruling that the foreign corporations were doing business
in the Philippines.[61] In particular, the Court cited the highly By and large, to constitute doing business, the activity to be
restrictive nature of certain provisions in the agreements involved, undertaken in the Philippines is one that is for profit-making.[63]
such that, as stated in Communication Materials, the Philippine
entity is reduced to a mere extension or instrument of the foreign
corporation. For example, in Communication Materials, the Court By the clear terms of the VAASA, Agilents activities in the
deemed the No Competing Product provision of the Philippines were confined to (1) maintaining a stock of goods in the
Representative Agreement therein restrictive.[62] Philippines solely for the purpose of having the same processed by
Integrated Silicon; and (2) consignment of equipment with
Integrated Silicon to be used in the processing of products for
The case law definition has evolved into a statutory definition, export. As such, we hold that, based on the evidence presented
having been adopted with some qualifications in various pieces of thus far, Agilent cannot be deemed to be doing business in the
legislation. The Foreign Investments Act of 1991 (the FIA; Republic Philippines. Respondents contention that Agilent lacks the legal
Act No. 7042, as amended), defines doing business as follows: capacity to file suit is therefore devoid of merit. As a foreign

Page 77 of 84
corporation not doing business in the Philippines, it needed no Before Todaro filed his complaint, there were several meetings and
license before it can sue before our courts. exchanges of letters between Todaro and the officers of Pioneer
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK,
PPHI, and PIL. According to Todaro, PIL contacted him in May
Finally, as to Agilents purported failure to state a cause of action
against the individual respondents, we likewise rule in favor of 1996 and asked if he could join it in establishing a pre-mixed
petitioner. A Motion to Dismiss hypothetically admits all the concrete plant and in overseeing its operations in the Philippines.
allegations in the Complaint, which plainly alleges that these Todaro confirmed his availability and expressed interest in joining
individual respondents had committed or permitted the commission PIL. Todaro met with several of PIL’s representatives and even
of acts prejudicial to Agilent. Whether or not these individuals had gave PIL the names of three of his subordinates in Betonval whom
divested themselves of their interests in Integrated Silicon, or are he would like to join him in PIL.
no longer members of Integrated Silicons Board of Directors, is a
matter of defense best threshed out during trial. Todaro attached nine letters, marked as Annexes "A" to "I," to his
complaint. Annex "A" shows that on 15 July 1996, Todaro, under
WHEREFORE, PREMISES CONSIDERED, the petition is the letterhead of Ital Tech Distributors, Inc., sent a letter to Max
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited.
No. 66574 dated August 12, 2002, which dismissed Civil Case No. Todaro wrote that "[m]y aim is to run again a ready-mix concrete
company in the Philippines and not to be a part-time consultant.
3123-2001-C, is REVERSED and SET ASIDE. The Order dated
September 4, 2001 issued by the Regional Trial Court of Calamba, Otherwise, I could have charged your company with a much higher
fee."
Laguna, Branch 92, in Civil Case No. 3123-2001-C, is
REINSTATED. Agilents application for a Writ of Replevin is
GRANTED. Annex "B" shows that on 4 September 1996, Lindsay, under the
letterhead of Pioneer Concrete (Hong Kong) Limited, responded by
fax to Todaro’s faxed letter to McDonald and proposed that Todaro
No pronouncement as to costs.
"join Pioneer on a retainer basis for 2 to 3 months on the
understanding that [Todaro] would become a permanent employee
SO ORDERED. if as we expect, our entry proceeds." The faxed letter to McDonald
referred to by Lindsay is not found in the rollo and was not
attached to Todaro’s complaint.
PIONEER INTERNATIONAL, LTD. vs. HON. TEOFILO GUADIZ,
JR., in his capacity as Presiding Judge of Regional Trial
Court, Branch 147, Makati City, and ANTONIO D. TODARO; Annex "C" shows that on the same date as that of Annex "B,"
G.R. No. 156848; October 11, 2007; CARPIO, J.: Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
another letter to Lindsay of Pioneer Concrete (Hong Kong) Limited.
Todaro asked for a formal letter addressed to him about the
The Case proposed retainer. Todaro requested that the letter contain a
statement on his remuneration package and on his permanent
This is a petition for review on certiorari of the Decision dated 27 employment "with PIONEER once it has established itself on a
September 2001 and of the Resolution dated 14 January 2003 of permanent basis in the Philippines."
the Court of Appeals (appellate court) in CA-G.R. SP No. 54062.
The Decision affirmed the Orders dated 4 January 1999 and 3 Annex "D" shows that Todaro, under the letterhead of Ital Tech
June 1999 of Branch 147 of the Regional Trial Court of Makati City Distributors, Inc., sent a letter to McDonald of PIL. Todaro
(trial court) in Civil Case No. 98-124. The trial court denied the confirmed the following to McDonald:
motion to dismiss filed by Pioneer International, Ltd. (PIL) in its
special appearance.
1. That I am accepting the proposal of PIONEER INT’L.
as a consultant for three (3) months, starting October 1,
The Facts 1996, with a retainer fee of U.S. $15,000.00 per month;

On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint 2. That after three (3) months consultancy, I should be
for sum of money and damages with preliminary attachment employed by PIONEER INT’L., on a permanent basis, as
against PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer its Managing Director or CEO in the Philippines.
Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald), Remuneration package will be mutually agreed upon by
and Philip J. Klepzig (Klepzig). PIL and its co-defendants were PIONEER and the undersigned;
served copies of the summons and of the complaint at PPHI and
PCPI’s office in Alabang, Muntinlupa, through Cecille L. De Leon
(De Leon), who was Klepzig’s Executive Assistant. 3. That Gino Martinel and the Sales Manager – Jun Ong,
will be hired as well, on a permanent basis, by PIONEER
as soon as the company is established. Salary, likewise,
Todaro alleged that PIL is a corporation duly organized under will be accepted by both PIONEER and the respective
Australian laws, while PCPI and PPHI are corporations duly parties.
organized under Philippine laws. PIL is engaged in the ready-mix
and concrete aggregates business and has established a presence
worldwide. PIL established PPHI as the holding company of the Annex "E" is a faxed letter dated 18 November 1996 of McDonald,
stocks of its operating company in the Philippines, PCPI. under the letterhead of Pioneer Concrete Group HK, to Todaro of
McDonald is the Chief Executive Officer of PIL’s Hong Kong office Ital Tech Distributors, Inc. The first three paragraphs of
while Klepzig is the President and Managing Director of PPHI and McDonald’s letter read:
PCPI. For his part, Todaro further alleged that he was the
managing director of Betonval Readyconcrete, Inc. (Betonval) from Further to our recent meeting in Hong Kong, I am now
June 1975 up to his resignation in February 1996. able to confirm my offer to engage you as a consultant to
Pioneer International Ltd. Should Pioneer proceed with
an investment in the Philippines, then Pioneer would
Page 78 of 84
offer you a position to manage the premixed concrete Clearly your consultancy services to Pioneer Hong Kong
operations. are well documented and have been appropriately
rewarded. However, in regard to your request and
expectation to be given permanent employment with
Pioneer will probably be in a position to make a decision
on proceeding with an investment by mid January ‘97. Pioneer Philippines Holdings, Inc. I am informed that
negotiations to reach agreement on appropriate terms
and conditions have not been successful.
The basis for your consultancy would be:
The employment conditions you specified in your letter to
 Monthly fee USD 15,000 per month John McDonald dated 11th September are well beyond
billed on monthly basis and payable our expectations.
15 days from billing date.
 Additional pre-approved expenses to Mr. Todaro, I regret that we do not wish to pursue our
be reimbursed. association with you any further. Mr. Klepzig was
 Driver and secretarial support-basis authorized to terminate this association and the letter he
for reimbursement of this to be sent to you dated 18th September has my support.
agreed.
 Arrangement to commence from 1st Thank you for your involvement with Pioneer. I wish you
November ‘96, reflecting your all the best for the future. (Emphasis added)
contributions so far and to continue
until Pioneer makes a decision.
PIL filed, by special appearance, a motion to dismiss Todaro’s
complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
Annex "F" shows Todaro’s faxed reply, under the letterhead of Ital separate motion to dismiss. PIL asserted that the trial court has no
Tech Distributors, Inc., to McDonald of Pioneer Concrete Group jurisdiction over PIL because PIL is a foreign corporation not doing
HK dated 19 November 1996. Todaro confirmed McDonald’s business in the Philippines. PIL also questioned the service of
package concerning the consultancy and reiterated his desire to be summons on it. Assuming arguendo that Klepzig is PIL’s agent in
the manager of Pioneer’s Philippine business venture. the Philippines, it was not Klepzig but De Leon who received the
summons for PIL. PIL further stated that the National Labor
Annex "G" shows Todaro’s faxed reply, under the letterhead of Ital Relations Commission (NLRC), and not the trial court, has
Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997. jurisdiction over the subject matter of the action. It claimed that
Todaro informed McDonald that he was willing to extend assuming that the trial court has jurisdiction over the subject matter
assistance to the Pioneer representative from Queensland. The of the action, the complaint should be dismissed on the ground of
tenor of the letter revealed that Todaro had not yet occupied his forum non-conveniens. Finally, PIL maintained that the complaint
expected position. does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial
court against PIL because PIL is a foreign corporation not doing
Annex "H" shows Klepzig’s letter, under the letterhead of PPHI, to business in the Philippines and there was improper service of
Todaro dated 18 September 1997. Klepzig’s message reads: summons on PIL.

It has not proven possible for this company to meet with Todaro filed a Consolidated Opposition dated 26 August 1998 to
your expectations regarding the conditions of your refute PIL’s assertions. PIL filed, still by special appearance, a
providing Pioneer with consultancy services. This, and Reply on 2 October 1998.
your refusal to consider my terms of offer of permanent
employment, leave me no alternative but to withdraw
these offers of employment with this company. The Ruling of the Trial Court

As you provided services under your previous agreement On 4 January 1999, the trial court issued an order which ruled in
with our Pioneer Hong Kong office during the month of favor of Todaro. The trial court denied the motions to dismiss filed
August, I will see that they pay you at the previous rates by PIL, PCPI, PPHI, and Klepzig.
until the end of August. They have authorized me on
behalf of Pioneer International Ltd. to formally advise you The trial court stated that the merits of a motion to dismiss a
that the agreement will cease from August 31st as per our complaint for lack of cause of action are tested on the strength of
previous discussions. the allegation of facts in the complaint. The trial court found that
the allegations in the complaint sufficiently establish a cause of
Annex "I" shows the letter dated 20 October 1997 of K.M. Folwell action. The trial court declared that Todaro’s cause of action is
(Folwell), PIL’s Executive General Manager of Australia and Asia, based on an alleged breach of a contractual obligation and an
to Todaro. Folwell confirmed the contents of Klepzig’s 18 alleged violation of Articles 19 and 21 of the Civil Code. Therefore,
September 1997 letter. Folwell’s message reads: the cause of action does not lie within the jurisdiction of the NLRC
but with the trial court.
Thank you for your letter to Dr. Schubert dated 29th
September 1997 regarding the alleged breach of contract The trial court also asserted its jurisdiction over PIL, holding that
with you. Dr. Schubert has asked me to investigate this PIL did business in the Philippines when it entered into a contract
matter. with Todaro. Although PIL questions the service of summons on
Klepzig, whom PIL claims is not its agent, the trial court ruled that
PIL failed to adduce evidence to prove its contention. Finally, on
I have discussed and examined the material regarding the issue of forum non-conveniens, the trial court found that it is
your association with Pioneer over the period from mid more convenient to hear and decide the case in the Philippines
1996 through to September 1997.
Page 79 of 84
because Todaro resides in the Philippines and the contract C. [The trial court] did not and cannot acquire jurisdiction
allegedly breached involves employment in the Philippines. over the subject matter of the complaint since the
allegations contained therein indubitably show that
[Todaro] bases his claims on an alleged breach of an
PIL filed an urgent omnibus motion for the reconsideration of the
trial court’s 4 January 1999 order and for the deferment of filing its employment contract. Thus, exclusive jurisdiction is
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus vested with the [NLRC].
motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
PPHI, and Klepzig filed a joint reply. The trial court issued an order D. Pursuant to the principle of forum non-conveniens,
on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and [the trial court] committed grave abuse of discretion when
Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days it took cognizance of the case.
within which to file their respective answers.
The Ruling of the Court
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
The Ruling of the Appellate Court service of summons, the rulings of the trial and appellate courts on
the issues raised by PIL are correct.
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate court’s Cause of Action
decision reads:
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a
WHEREFORE, premises considered, the present petition cause of action is the act or omission by which a party violates a
for certiorari is hereby DENIED DUE COURSE and right of another.
accordingly DISMISSED. The assailed Orders dated
January 4, 1999 and June 3, 1999 of the Regional Trial The general rule is that the allegations in a complaint are
Court of Makati City, Branch 147, in Civil Case No, 98-
sufficient to constitute a cause of action against the
124 are hereby AFFIRMED in toto. defendants if, admitting the facts alleged, the court can
render a valid judgment upon the same in accordance
SO ORDERED.20 with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in
On 14 January 2003, the appellate court dismissed21 PIL’s motion favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on
for reconsideration for lack of merit. The appellate court stated that
PIL’s motion raised no new substantial or weighty arguments that the part of the named defendant to respect or not to
could impel the appellate court from departing or overturning its violate such right; and (3) an act or omission on the part
previous decision. PIL then filed a petition for review on certiorari of such defendant violative of the right of the plaintiff or
before this Court. constituting a breach of the obligation of the defendant to
the plaintiff for which the latter may maintain an action for
recovery of damages.23
The Issues
In the present case, the summary of Todaro’s allegations states
PIL raised the following issues before this Court: that PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
A. [The trial court] did not and cannot acquire jurisdiction PIL’s Philippine office. Todaro’s allegations are thus sufficient to
over the person of [PIL] considering that: establish a cause of action. We quote with approval the trial court’s
ruling on this matter:
A.1. [PIL] is a foreign corporation "not doing
business" in the Philippines. On the issue of lack of cause of action – It is well-settled
that the merits of a motion to dismiss a complaint for lack
of cause of action is tested on the strength of the
A.2. Moreover, the complaint does not contain allegations of fact contained in the complaint and no
appropriate allegations of ultimate facts other (De Jesus, et al. vs. Belarmino, et al., 95 Phil. 366
showing that [PIL] is doing or transacting [1954]). This Court finds that the allegations of the
business in the Philippines. complaint, specifically paragraphs 13-33 thereof,
paragraphs 30-33 alleging as follows:
A.3. Assuming arguendo that jurisdiction may
be acquired over the person of [PIL], [the trial "30. All of the acts set forth in the foregoing
court] still failed to acquire jurisdiction since have been done with the knowledge, consent
summons was improperly served on [PIL]. and/or approval of the defendants who acted in
concert and/or in conspiracy with one another.
B. [Todaro] does not have a cause of action and the
complaint fails to state a cause of action. Jurisprudence 31. Under the circumstances, there is a valid
is settled in that in resolving a motion to dismiss, a court contract entered into between [Todaro] and the
can consider all the pleadings filed in the case, including Pioneer Group, whereby, among others, the
annexes, motions and all evidence on record. Pioneer Group would employ [Todaro], on a
permanent basis, to manage and operate the
ready-mix concrete operations, if the Pioneer
Group decides to invest in the Philippines.
Page 80 of 84
32. The Pioneer Group has decided to invest in The first level has two sub-issues: PIL’s transaction of business in
the Philippines. The refusal of the defendants to the Philippines and the service of summons on PIL. Section 12,
comply with the Pioneer Group’s undertaking to Rule 14 of the 1997 Rules of Civil Procedure provides the manner
employ [Todaro] to manage their Philippine by which summons may be served upon a foreign juridical entity
ready-mix operations, on a permanent basis, is which has transacted business in the Philippines. Thus:
a direct breach of an obligation under a valid
and perfected contract. Service upon foreign private juridical entity. — When the
defendant is a foreign juridical entity which has
33. Alternatively, assuming without conceding, transacted business in the Philippines, service may be
that there was no contractual obligation on the made on its resident agent designated in accordance
part of the Pioneer Group to employ [Todaro] with law for that purpose, or, if there be no such agent,
on a permanent basis, in their Philippine on the government official designated by law to that
operations, the Pioneer Group and the other effect, or any of its officers or agents within the
defendants did not act with justice, give Philippines.
[Todaro] his due and observe honesty and
good faith and/or they have willfully caused As to the first sub-issue, PIL insists that its sole act of "transacting"
injury to [Todaro] in a manner that is contrary to
or "doing business" in the Philippines consisted of its investment in
morals, good customs, and public policy, as PPHI. Under Philippine law, PIL’s mere investment in PPHI does
mandated under Arts. 19 and 21 of the New
not constitute "doing business." However, we affirm the lower
Civil Code." courts’ ruling and declare that, based on the allegations in
Todaro’s complaint, PIL was doing business in the Philippines
sufficiently establish a cause of action for breach of when it negotiated Todaro’s employment with PPHI. Section 3(d)
contract and/or violation of Articles 19 and 21 of the New of Republic Act No. 7042, Foreign Investments Act of 1991, states:
Civil Code. Whether or not these allegations are true is
immaterial for the court cannot inquire into the truth The phrase "doing business" shall include soliciting
thereof, the test being whether, given the allegations of orders, service contracts, opening offices, whether
fact in the complaint, a valid judgment could be rendered called "liaison" offices or branches; appointing
in accordance with the prayer in the complaint. representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the
It should be emphasized that the presence of a cause of action country for a period or periods totaling one hundred
rests on the sufficiency, and not on the veracity, of the allegations eighty [180] days or more; participating in the
in the complaint. The veracity of the allegations will have to be management, supervision or control of any domestic
examined during the trial on the merits. In resolving a motion to business, firm, entity or corporation in the Philippines;
dismiss based on lack of cause of action, the trial court is limited to and any other act or acts that imply a continuity of
the four corners of the complaint and its annexes. It is not yet commercial dealings or arrangements and
necessary for the trial court to examine the truthfulness of the contemplate to that extent the performance of acts or
allegations in the complaint. Such examination is proper during the works, or the exercise of some of the functions
trial on the merits. normally incident to, and in progressive prosecution
of commercial gain or of the purpose and object of
Forum Non-Conveniens the business organization: Provided, however, That the
phrase "doing business" shall not be deemed to include
mere investment as a shareholder by a foreign entity in
The doctrine of forum non-conveniens requires an examination of domestic corporations duly registered to do business,
the truthfulness of the allegations in the complaint. Section 1, Rule and/or the exercise of rights as such investor; nor having
16 of the 1997 Rules of Civil Procedure does not mention forum a nominee director or officer to represent its interests in
non-conveniens as a ground for filing a motion to dismiss. The such corporation; nor appointing a representative or
propriety of dismissing a case based on forum non-conveniens distributor domiciled in the Philippines which transacts
requires a factual determination; hence, it is more properly business in its own name and for its own account;
considered a matter of defense. While it is within the discretion of (Emphases added)
the trial court to abstain from assuming jurisdiction on this ground,
the trial court should do so only after vital facts are established to
PIL’s alleged acts in actively negotiating to employ Todaro to run
determine whether special circumstances require the court’s
desistance. its pre-mixed concrete operations in the Philippines, which acts are
hypothetically admitted in PIL’s motion to dismiss, are not mere
acts of a passive investor in a domestic corporation. Such are
Jurisdiction over PIL managerial and operational acts in directing and establishing
commercial operations in the Philippines. The annexes that Todaro
PIL questions the trial court’s exercise of jurisdiction over it on two attached to his complaint give us an idea on the extent of PIL’s
levels. First, that PIL is a foreign corporation not doing business in involvement in the negotiations regarding Todaro’s employment. In
the Philippines and because of this, the service of summons on Annex "E," McDonald of Pioneer Concrete Group HK confirmed his
PIL did not follow the mandated procedure. Second, that Todaro’s offer to engage Todaro as a consultant of PIL. In Annex "F,"
claims are based on an alleged breach of an employment contract Todaro accepted the consultancy. In Annex "H," Klepzig of PPHI
so Todaro should have filed his complaint before the NLRC and stated that PIL authorized him to tell Todaro about the cessation of
not before the trial court. his consultancy. Finally, in Annex "I," Folwell of PIL wrote to
Todaro to confirm that "Pioneer" no longer wishes to be associated
with Todaro and that Klepzig is authorized to terminate this
Transacting Business in the Philippines and association. Folwell further referred to a Dr. Schubert and to
Service of Summons Pioneer Hong Kong. These confirmations and references tell us
that, in this instance, the various officers and companies under the
Pioneer brand name do not work independently of each other. It
Page 81 of 84
cannot be denied that PIL had knowledge of and even authorized corporation does not have a resident agent, and (3) service on any
the non-implementation of Todaro’s alleged permanent of the corporation’s officers or agents within the Philippines. 30
employment. In fact, in the letters to Todaro, the word "Pioneer"
was used to refer not just to PIL alone but also to all corporations
In the present case, service of summons on PIL failed to follow any
negotiating with Todaro under the Pioneer name. of the prescribed processes. PIL had no resident agent in the
Philippines. Summons was not served on the Securities and
As further proof of the interconnection of the various Pioneer Exchange Commission (SEC), the designated government
corporations with regard to their negotiations with Todaro, agency,31 since PIL is not registered with the SEC. Summons for
McDonald of Pioneer Concrete Group HK confirmed Todaro’s PIL was served on De Leon, Klepzig’s Executive Assistant. Klepzig
engagement as consultant of PIL (Annex "E") while Folwell of PIL is PIL’s "agent within the Philippines" because PIL authorized
stated that Todaro rendered consultancy services to Pioneer HK Klepzig to notify Todaro of the cessation of his consultancy
(Annex "I"). In this sense, the various Pioneer corporations were (Annexes "H" and "I").32 The authority given by PIL to Klepzig to
not acting as separate corporations. The behavior of the various notify Todaro implies that Klepzig was likewise authorized to
Pioneer corporations shoots down their defense that the receive Todaro’s response to PIL’s notice. Todaro responded to
corporations have separate and distinct personalities, PIL’s notice by filing a complaint before the trial court.
managements, and operations. The various Pioneer corporations
were all working in concert to negotiate an employment contract
However, summons was not served personally on Klepzig as
between Todaro and PPHI, a domestic corporation. agent of PIL. Instead, summons was served on De Leon, Klepzig’s
Executive Assistant. In this instance, De Leon was not PIL’s agent
Finally, the phrase "doing business in the Philippines" in the former but a mere employee of Klepzig. In effect, the sheriff 33 resorted to
version of Section 12, Rule 14 now reads "has transacted business substituted service. For symmetry, we apply the rule on substituted
in the Philippines." The scope is thus broader in that it is enough service of summons on a natural person and we find that no
for the application of the Rule that the foreign private juridical entity reason was given to justify the service of PIL’s summons on De
"has transacted business in the Philippines." 26 Leon.

As to the second sub-issue, the purpose of summons is not only to Thus, we rule that PIL transacted business in the Philippines and
acquire jurisdiction over the person of the defendant, but also to Klepzig was its agent within the Philippines. However, there was
give notice to the defendant that an action has been commenced improper service of summons on PIL since summons was not
against it and to afford it an opportunity to be heard on the claim served personally on Klepzig.
made against it. The requirements of the rule on summons must
be strictly followed; otherwise, the trial court will not acquire NLRC Jurisdiction
jurisdiction over the defendant.

As to the second level, Todaro prays for payment of damages due


When summons is to be served on a natural person, service of him because of PIL’s non-implementation of Todaro’s alleged
summons should be made in person on the defendant.27 employment agreement with PPHI. The appellate court stated its
Substituted service is resorted to only upon the concurrence of two ruling on this matter, thus:
requisites: (1) when the defendant cannot be served personally
within a reasonable time and (2) when there is impossibility of
prompt service as shown by the statement in the proof of service in It could not be denied that there was no existing contract
the efforts made to find the defendant personally and that such yet to speak of between PIONEER INTL. and [Todaro].
efforts failed.28 Since there was an absence of an employment contract
between the two parties, this Court is of the opinion and
so holds that no employer-employee relationship actually
The statutory requirements of substituted service must be followed exists. Record reveals that all that was agreed upon by
strictly, faithfully, and fully, and any substituted service other than
[Todaro] and the Pioneer Concrete, acting in behalf of
by the statute is considered ineffective. Substituted service is in PIONEER INTL., was the confirmation of the offer to
derogation of the usual method of service. It is a method
engage the services of the former as consultant of
extraordinary in character and may be used only as prescribed and PIONEER INTL. (Rollo, p. 132). The failure on the part of
in the circumstances authorized by the statute. 29 The need for strict
PIONEER INTL. to abide by the said agreement, which
compliance with the requirements of the rule on summons is also was duly confirmed by PIONEER INTL., brought about a
exemplified in the exclusive enumeration of the agents of a breach of an obligation on a valid and perfected
domestic private juridical entity who are authorized to receive agreement. There being no employer-employee
summons. relationship established between [PIL] and [Todaro], it
could be said that the instant case falls within the
At present, Section 11 of Rule 14 provides that when the jurisdiction of the regular courts of justice as the money
defendant is a domestic private juridical entity, service may be claim of [Todaro] did not arise out of or in connection with
made on the "president, managing partner, general manager, [an] employer-employee relationship.
corporate secretary, treasurer, or in-house counsel." The previous
version of Section 11 allowed for the service of summons on the Todaro’s employment in the Philippines would not be with PIL but
"president, manager, secretary, cashier, agent, or any of its
with PPHI as stated in the 20 October 1997 letter of Folwell.
directors." The present Section 11 qualified "manager" to "general Assuming the existence of the employment agreement, the
manager" and "secretary" to "corporate secretary." The present
employer-employee relationship would be between PPHI and
Section 11 also removed "cashier, agent, or any of its directors" Todaro, not between PIL and Todaro. PIL’s liability for the non-
from the exclusive enumeration. implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes
When summons is served on a foreign juridical entity, there are of action as stated in his complaint are, in addition to breach of
three prescribed ways: (1) service on its resident agent designated contract, based on "violation of Articles 19 and 21 of the New Civil
in accordance with law for that purpose, (2) service on the Code" for the "clear and evident bad faith and malice" on the part
government official designated by law to receive summons if the
Page 82 of 84
of defendants. The NLRC’s jurisdiction is limited to those binding in the Philippines the Court of Turin Decision and ordered
enumerated under Article 217 of the Labor Code. the DFA to cancel or restrict Ocampo's Philippine passport and not
to allow its renewal until she has served her sentence. 12
WHEREFORE, the petition is PARTIALLY GRANTED. The
Decision dated 27 September 2001 and the Resolution dated 14 On February 11, 2010, Ocampo's mother, Laureana Macahia,
January 2003 of the appellate court are AFFIRMED with the received a copy of the RTC Decision and forwarded it to
MODIFICATION that there was improper service of summons on Ocampo.13 Not having been represented by counsel a quo, the
Pioneer International, Ltd. The case is remanded to the trial court period of appeal lapsed. Ocampo was later able to engage the
for proper service of summons and trial. No costs. SO ORDERED. services of counsel who filed a petition for certiorari under Rule 65
with the CA on April 12, 2010.14Ocampo principally argued that the
RTC acted in grave abuse of discretion in recognizing and ordering
September 6, 2017; G.R. No. 202505 the enforcement of the Court of Turin Decision.15

EXPRESS PADALA (ITALIA) S.P.A., now BDO REMITTANCE In its now assailed Decision,16 the CA set aside the RTC Decision
(ITALIA) S.P.A., Petitioner vs. HELEN M. OCAMPO, and revoked the order to cancel or restrict Ocampo's Philippine
Respondent; JARDELEZA, J.: passport (CA Decision). The CA first settled the issue of
procedural due process, particularly whether Ocampo was properly
This is a petition for review on certiorari1 challenging the served with summons. It held that since Ocampo's whereabouts
Decision2 dated January 5, 2012 and Resolution3 dated June 27, were unknown, summons should have been served in accordance
2012 of the Court of Appeals (CA) in CA-G.R. SP No. 113475. The with Section 14, Rule 14 of the Rules of Civil Procedure. The
CA granted the petition for certiorarifiled by respondent Helen M. sheriff however, erroneously effected the substituted service of
Ocampo (Ocampo) and set aside the Decision4 dated September summons under Section 7 of Rule 14. Thus, the CA concluded that
14, 2009 of the Regional Trial Court (RTC) in Civil Case No. the RTC did not acquire jurisdiction over Ocampo, and the RTC
MC08-3775 which granted BDO Remittance (Italia) S.P.A. 's (BDO Decision against her is null and void. It also found that the RTC
Remittance) petition for recognition of foreign judgment. acted in grave abuse of discretion when it recognized a foreign
judgment of a criminal case and ordered the DFA to restrict or
cancel Ocampo's passport.17
The core issue being raised is whether service of summons was
validly effected upon respondent, who lives in Italy, through
substituted service. After the CA denied its motion for reconsideration, BDO
Remittance filed the present petition for review under Rule 45
arguing that: (1) Ocampo availed of the wrong remedy; and (2) the
BDO Remittance, a corporation with principal office in Italy, hired RTC did not gravely abuse its discretion in granting the petition for
respondent Ocampo as a remittance processor in September recognition of foreign judgment and ordering the DFA to restrict or
2002. She was dismissed in February 2004 for misappropriating cancel Ocampo's passport.18
the sum of €24,035.60 by falsifying invoices of money payments
relating to customers' money transfer orders from February to
December 2003.5 In her comment,19 Ocampo explained that BDO Remittance's
insistence on the enforcement of Court of Turin Decision is
misleading because, by availing of the benefit of suspension of the
Accordingly, BDO Remittance filed a criminal complaint against enforcement, the penalty of confinement will not be enforced upon
Ocampo for the same acts before the Court of Turin, Italy. Ocampo her. She also presented a decree20 from the High Court of Turin
pleaded guilty to the offense charged. On April 13, 2005, the dated June 29, 2010 which stated that her criminal liability has
Honorable Court of Turin convicted and sentenced her to suffer been extinguished.
imprisonment of six months and a penalty of €300.00, but granted
her the benefit of suspension of the enforcement of sentence on
account of her guilty plea (the Court of Turin Decision). 6 We deny the petition.

On September 22, 2008, BDO Remittance filed a petition for The general rule in this jurisdiction is that summons must be
recognition of foreign judgment7 with the RTC of Mandaluyong served personally on the defendant. Section 6, Rule 14 of the
City. BDO Remittance prayed for the recognition of the Court of Rules of Court provides:
Turin Decision and the cancellation or restriction of Ocampo' s
Philippine passport by the Department of Foreign Affairs (DFA).8 Sec. 6. Service in person on defendant. - Whenever practicable,
the summons shall be served by handing a copy thereof to the
On November 21, 2008, the sheriff attempted to personally serve defendant in person, or, if he refuses to receive and sign for it, by
the summons on Ocampo in her local address alleged in the tendering it to him.
petition located in San Bernardo Village, Darasa, Tanauan,
Batangas. However, since the address was incomplete, the sheriff For justifiable reasons, however, other modes of serving summons
sought the help of barangay officials, who pointed him to the house may be resorted to. When the defendant cannot be served
belonging to Ocampo's father, Nicasio Ocampo, Victor P. Macahia personally within a reasonable time after efforts to locate him have
(Macahia), uncle of Ocampo and present occupant, informed the failed, the rules allow summons to be served by substituted
sheriff that Ocampo and her family were already in Italy, and that service. Substituted service is effected by leaving copies of the
he was only a caretaker of the house. The sheriff then proceeded summons at the defendant's residence with some person of
to serve the summons upon Macahia.9 After Ocampo failed to file suitable age and discretion then residing therein, or by leaving the
an answer, BDO Remittance filed a motion to declare Ocampo in copies at defendant's office or regular place of business with some
default. The RTC granted the motion and allowed BDO Remittance competent person in charge thereof. 21
to present evidence ex parte.10
When the defendant's whereabouts are unknown, the rules allow
On September 14, 2009, the RTC rendered a Decision11 in favor of service of summons by publication.22 As an exception to the
BDO Remittance (RTC Decision). It recognized as valid and preferred mode of service, service of summons by publication may
Page 83 of 84
only be resorted to when the whereabouts of the defendant are not strictly followed in order that the court may acquire jurisdiction over
only unknown, but cannot be ascertained by diligent inquiry. The the person of the defendant. The purpose of this is to afford the
diligence requirement means that there must be prior resort to defendant an opportunity to be heard on the claim against
personal service under Section 7 and substituted service under him.32 BDO Remittance is not totally without recourse, as the rules
Section 8, and proof that these modes were ineffective before allow summons by publication and extraterritorial service.33 Unlike
summons by publication may be allowed.23 This mode also substituted service, however, these are extraordinary modes which
requires the plaintiff to file a written motion for leave of court to require leave of court.
effect service of summons by publication, supported by affidavit of
the plaintiff or some person on his behalf, setting forth the grounds The service of summons is a vital and indispensable ingredient of
for the application.24 a defendant's constitutional right to due process. As a rule, if a
defendant has not been validly summoned, the court acquires no
In the present case, the sheriff resorted to substituted service upon jurisdiction over his person, and a judgment rendered against him
Ocampo through her uncle, who was the caretaker of Ocampo's is void.34 Since the RTC never acquired jurisdiction over the
old family residence in Tanauan, Batangas. The CA held that person of Ocampo, the judgment rendered by the court could not
substituted service was improperly resorted to. It found that since be considered binding upon her.
Ocampo' s "whereabouts are unknown and cannot be ascertained
by diligent inquiry x x x service may be effected only by publication
Consequently, it is no longer necessary to delve into the other
in a newspaper of general circulation."25 issues raised in the petition. These issues can be resolved by the
trial court upon acquiring jurisdiction over Ocampo and giving her
We agree with the CA that substituted service is improper under an opportunity to be heard. It is in a better position to receive and
the facts of this case. Substituted service presupposes that the assess the evidence that may be presented by Ocampo, including
place where the summons is being served is the the decree dated June 29, 2010 issued by the High Court of Turin,
defendant's current residence or office/regular place of to the effect that her liability has been extinguished. While such
business. Thus, where the defendant neither resides nor holds claim would tend to render the case moot, we refuse to consider
office in the address stated in the summons, substituted service the argument at the first instance on two grounds: first, we are not
cannot be resorted to. As we explained in Keister v. Navarro: 26 a trier of facts; and second, the document submitted has not been
authenticated in accordance with the rules on evidence.
Under the Rules, substituted service may be effect[ed] (a) by
leaving copies of the summons at the defendant's dwelling house WHEREFORE, the petition is DENIED. The Decision dated
or residence with some person of suitable age and discretion then January 5, 2012 and Resolution dated June 27, 2012 of the Court
residing therein, or (b) by leaving the copies at of Appeals in CA-G.R. SP No. 113475 are AFFIRMED insofar as
defendant's office or regular place of business with there was no valid service of summons. The Decision dated
some competent person in charge thereof. The terms "dwelling September 14, 2009 of the Regional Trial Court, Branch 212,
house" or "residence" are generally held to refer to the time of Mandaluyong City in Civil Case No. MCOS-3775 is declared VOID.
service, hence it is not sufficient "to leave the copy at defendant's
former dwelling house, residence, or place of abode, as the case
SO ORDERED.
may be, after his removal therefrom." They refer to the place
where the person named in the summons is living at the time when
the service is made, even though he may be temporarily out of the
country at the time. Similarly, the terms "office" or "regular place of
business" refer to the office or place of business of defendant at
the time of service. Note that the rule designates the persons to
whom copies of the process may be left. The rule presupposes
that such a relation of confidence exists between the person with
whom the copy is left and the defendant and, therefore, assumes
that such person will deliver the process to defendant or in some
way give him notice thereof.27 (Italics in the original, citations
omitted.)

Based on the sheriffs report, it is clear that Ocampo no longer


resides in San Bernardo Village, Darasa, Tanauan, Batangas. The
report categorically stated that "defendant Helen M. Ocampo and
her family were already in Italy,"28without, however, identifying any
specific address. Even BDO Remittance itself admitted in its
petition for recognition that Ocampo' s "whereabouts in Italy are no
longer certain."29 This, we note, is the reason why in alleging the
two addresses of Ocampo, one in Italy and one in the Philippines,
BDO Remittance used the phrase "last known [address ]" 30 instead
of the usual "resident of." Not being a resident of the address
where the summons was served, the substituted service of
summons is ineffective. Accordingly, the RTC did not acquire
jurisdiction over the person of Ocampo.

BDO Remittance's reliance on Palma v. Galvez31 is misplaced for


the simple reason that the case involved service of summons to a
person who is temporarily out of the country. In this case, however,
Ocampo's sojourn in Italy cannot be classified as temporary
considering that she already resides there, albeit her precise
address was not known. Modes of service of summons must be
Page 84 of 84