Case Digest in COL
Case Digest in COL
FACTS:
Sometime in 1990, Brand Marine Services, Inc., a corporation duly organized and existing under the laws of
the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen,
entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of services in
several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11 March
1992, respondent secured a service contract with the Republic of the Philippines on behalf of BMSI for the dredging
of
rivers
affected
by
the
Mt.
Pinatubo
eruption
and
mudflows.
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission, a
suit against BMSI and Rust International, Inc., Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of
commissions, illegal termination and breach of employment contract.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the
Regional Trial Court of Bauang, La Union. The Complaint named as defendants herein petitioner Raytheon
International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor case.
Petitioner also referred to the NLRC decision which disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as Special Sales Representative Agreement, the rights and
obligations of the parties shall be governed by the laws of the State of Connecticut. Petitioner sought the dismissal of
the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages by
way of compulsory counterclaim.
Petitioner asserts that the written contract between respondent and BMSI included a valid choice of law clause,
that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of
foreign elements in the dispute namely, the parties and witnesses involved are American corporations and citizens
and the evidence to be presented is located outside the Philippines that renders our local courts inconvenient
forums.
ISSUE:
WHETHER OR NOT THE COMPLAINT BE DISMISSED ON THE GROUND OF FORUM NON CONVENIENS?
RULING:
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and
where the court has jurisdiction over the subject matter, the parties and theres, it may or can proceed to try the case
even if the rules of conflict-of-laws or the convenience of the parties point to a foreign forum. This is an exercise of
sovereign
prerogative
of
the
country
where
the
case
is
filed.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party
plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party
defendant) was acquired by its voluntary appearance in court.
That the subject contract included a stipulation that the same shall be governed by the lawsof the State of
Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded
from hearing the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it
is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both parties.The choice of law stipulation will
become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits
proceeds
before
the
trial
court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its
jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking
remedies elsewhere. Petitioners averments of the foreign elements in the instant case are not sufficient to oust the
trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual
determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the trial
court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the courts desistance.
o
o
o
Choice-of-forum clause
Jurisdiction and Venue
Parties can stipulate as to their choice of venue. But if the stipulation is not
restrictive, it shall be treated as merely permissive and will not bar the other party
from airing the case in a different forum which has jurisdiction over the subject
matter.
FACTS:
Sometime in 1981, Eastern Book Supply PTE, Ltd. (Company), a company incorporated in
Singapore, applied with and was granted by the Singapore Branch of HSBC an overdraft facility.
To secure the overdraft facility, private respondents who were directors of the Company
executed a Joint and Several Guarantee in favour of HSBC, which provides that:
This guarantee and all rights, obligations and liabilities arising hereunder shall be construed
and determined under and may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all
disputes arising under this guarantee.
However, when the Company failed to pay its obligation, HSBC filed this action with the
Philippine courts. In a Motion to Dismiss, the private respondents raised the abovementioned
provision of the Joint and Several Guarantee. The trial court affirmed the plaintiffs but CA
reversed, citing said provision as basis.
ISSUE:
HELD:
The Supreme Court held that the clause in question did not operate to divest the Philippine
courts of jurisdiction.
While it is true that the transaction took place in Singaporean setting and that the Joint and
Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates
that the stipulation that [t]his guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in accordance with
the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have
jurisdiction over all disputes arising under this guarantee be liberally construed. One basic
principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction
in the absence of some reasonable basis for exercising it, whether the proceedings are in rem,
quasi in rem, or in personam. To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions of fair play and substantial justice.
Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd
situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign
tribunal, with more reason as a defendant. However, in this case, private respondents are
Philippine residents (a fact which was not disputed by them) who would rather face a complaint
against them before a foreign court and in the process incur considerable expenses, not to
mention inconvenience, than to have a Philippine court try and resolve the case. Private
respondents' stance is hardly comprehensible, unless their ultimate intent is to evade, or at least
delay, the payment of a just obligation.
The defense of private respondents that the complaint should have been filed in Singapore is
based merely on technicality. They did not even claim, much less prove, that the filing of the
action here will cause them any unnecessary trouble, damage, or expense. On the other hand,
there is no showing that petitioner BANK filed the action here just to harass private respondents.
The parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the
rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of
jurisdiction. In International Law, jurisdiction is often defined as the light of a State to exercise
authority over persons and things within its boundaries subject to certain exceptions. Thus, a
State does not assume jurisdiction over travelling sovereigns, ambassadors and diplomatic
representatives of other States, and foreign military units stationed in or marching through State
territory with the permission of the latter's authorities. This authority, which finds its source in the
concept of sovereignty, is exclusive within and throughout the domain of the State. A State is
competent to take hold of any judicial matter it sees fit by making its courts and agencies
assume jurisdiction over all kinds of cases brought before them.
3.Polytrade vs. Blanco
Blanco was sued by Polytrade for damages as he failed to pay a delivery of rawhide (to be converted to
leather and leather products). For failing to answer the suit, he was declared in default and among those
awarded in favor of Polytrade Corporation is attorneys fee of P51,961.63 which is equivalent to 25% of
the principal indebtedness of Blanco to Polytrade. Blanco now claims that said judgment against him is
exorbitant and unconscionable.
ISSUE: Whether or not Blanco is correct.
HELD: No. This case would have never reached the courts had Blanco been current with his obligation to
Polytrade. He never raised any defense as he did not file an answer. Bottom line is, the case could have
been easily avoided without Polytrade having to go to trial.
The attorneys fees awarded in favor of Polytrade and not his counsel. Such an arrangement is not illegal.
It is the litigant, not counsel, who is the judgment creditor entitled to enforce the judgment by execution.
Further, Polytrade may have spent much for its counsel considering its counsels high standing.
when they returned to their hotels so they agreed to have breakfast together at the room of
Thamer. Shortly after Allah left the room, Thamer attempted to rape Morada. Fortunately, a roomboy
and several security personnel heard her cries for help and rescued her. Indonesian police arrested
to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
June 27, 1993: SAUDIA's Manila manager, Aslam Saleemi, assured Morada that the investigation was
routinary and that it posed no danger to her so she reported to Miniewy in Jeddah for further
January 19, 1994: SAUDIA filed an Omnibus Motion To Dismiss on following grounds: (1) that the
Complaint states no cause of action against SAUDIA (2) that defendant Al-Balawi is not a real party in
interest (3) that the claim or demand set forth in the Complaint has been waived, abandoned or
otherwise extinguished and (4) that the trial court has no jurisdiction to try the case.
After opposition to the motion to dismiss by Morada and reply by SAUDIA, Morada filed an Amended
Complaint dropping Al-Balawi. SAUDIA filed its Manifestation, Motion to Dismiss Amended
appeal.
SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining Order:
Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the
RTC Quezon City assuming jurisdiction:
o By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted
herself to the jurisdiction of the court
o SAUDIA has effectively submitted to the trial court's jurisdiction by praying for the dismissal of the Amended
Complaint on grounds other than lack of jurisdiction.
As to the choice of applicable law, it seeks to answer 2 important questions:
o (1) What legal system should control a given situation where some of the significant facts occurred in two or
more states
o (2) to what extent should the chosen legal system regulate the situation
Although ideally, all choice-of-law theories should intrinsically advance both notions of justice and
predictability, they do not always do so. The forum is then faced with the problem of deciding which of
(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or
the place where a power of attorney is to be exercised
(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex fori the law of the
forum is particularly important because, as we have seen earlier, matters of "procedure" not going to the
substance of the claim involved are governed by it; and because the lex fori applies whenever the content of
the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls
under one of the exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its
master or owner as such. It also covers contractual relationships particularly contracts of affreightment
Note that one or more circumstances may be present to serve as the possible test for the
o Morada was made to face trial for very serious charges, including adultery and violation of Islamic laws and
tradition
o SAUDIA may have acted beyond its duties as employer by handing over the person of Morada to Jeddah
officials which contributed to and amplified or even proximately caused additional humiliation, misery and
suffering. It also took advantage of the trust, confidence and faith in the guise of authority as employer.
o Conviction and imprisonment was wrongful but injury or harm was inflicted upon her person and reputation
which must be compensated or redress for the wrong doing
Complaint involving torts
"connecting factor" or "point of contact" - place or places where the tortious conduct or lex loci actus
occurred = Philippines where SAUDIA deceived Morada, a Filipina residing and working here.
"State of the most significant relationship" applied
o taken into account and evaluated according to their relative importance with respect to the particular issue:
(a) the place where the injury occurred
(b) the place where the conduct causing the injury occurred
(c) the domicile, residence, nationality, place of incorporation and place of business of the parties
(d) the place where the relationship, if any, between the parties is centered
v private respondent is a resident Filipina national, working here
v a resident foreign corporation engaged here in the business of international air carriage.
5. Hasegawa vs. Kitamura
538 SCRA 261 Conflict of Laws Private International Law Jurisdiction Lex Loci Celebrationis Lex
Loci Solutionis State of the Most Significant Relationship Forum Non Conveniens
In March 1999, Nippon Engineering Consultants Co., Ltd, a Japanese firm, was contracted by the
Department of Public Works and Highways (DPWH) to supervise the construction of the Southern
Tagalog Access Road. In April 1999, Nippon entered into an independent contractor agreement (ICA) with
Minoru Kitamura for the latter to head the said project. The ICA was entered into in Japan and is effective
for a period of 1 year (so until April 2000). In January 2000, DPWH awarded the Bongabon-Baler Road
project to Nippon. Nippon subsequently assigned Kitamura to head the road project. But in February
2000, Kazuhiro Hasegawa, the general manager of Nippon informed Kitamura that they are preterminating his contract. Kitamura sought Nippon to reconsider but Nippon refused to negotiate. Kitamura
then filed a complaint for specific performance and damages against Nippon in the RTC of Lipa.
Hasegawa filed a motion to dismiss on the ground that the contract was entered in Japan hence, applying
the principle of lex loci celebracionis, cases arising from the contract should be cognizable only by
Japanese courts. The trial court denied the motion. Eventually, Nippon filed a petition for certiorari with
the Supreme Court.
Hasegawa, on appeal significantly changed its theory, this time invoking forum non conveniens; that the
RTC is an inconvenient forum because the parties are Japanese nationals who entered into a contract in
Japan. Kitamura on the other hand invokes the trial courts ruling which states that matters connected
with the performance of contracts are regulated by the law prevailing at the place of performance, so
since the obligations in the ICA are executed in the Philippines, courts here have jurisdiction.
ISSUE: Whether or not the complaint against Nippon should be dismissed.
HELD: No. The trial court did the proper thing in taking cognizance of it.
In the first place, the case filed by Kitamura is a complaint for specific performance and damages. Such
case is incapable of pecuniary estimation; such cases are within the jurisdiction of the regional trial court.
Hasegawa filed his motion to dismiss on the ground of forum non conveniens. However, such ground is
not one of those provided for by the Rules as a ground for dismissing a civil case.
The Supreme Court also emphasized that the contention that Japanese laws should apply is premature.
In conflicts cases, there are three phases and each next phase commences when one is settled, to wit:
1.
Jurisdiction Where should litigation be initiated? Court must have jurisdiction over the subject
matter, the parties, the issues, the property, the res. Also considers, whether it is fair to cause a defendant
to travel to this state; choice of law asks the further question whether the application of a substantive law
which will determine the merits of the case is fair to both parties.
2.
Choice of Law Which law will the court apply? Once a local court takes cognizance, it does not
mean that the local laws must automatically apply. The court must determine which substantive law when
applied to the merits will be fair to both parties.
3.
Recognition and Enforcement of Judgment Where can the resulting judgment be enforced?
This case is not yet in the second phase because upon the RTCs taking cognizance of the case,
Hasegawa immediately filed a motion to dismiss, which was denied. He filed a motion for reconsideration,
which was also denied. Then he bypassed the proper procedure by immediately filing a petition for
certiorari. The question of which law should be applied should have been settled in the trial court had
Hasegawa not improperly appealed the interlocutory order denying his MFR.
FACTS: Petitioner KOGIES and respondent PGSMC executed a Contract whereby KOGIES would set up an
LPG Cylinder Manufacturing Plant for respondent. Respondent unilaterally cancelled the contract on the ground
that petitioner had altered the quantity and lowered the quality of the machineries and equipment it delivered.
Petitioner opposed informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle
and transfer the machineries and equipment on mere imagined violations by petitioner. Petitioner then filed a
Complaint for Specific Performance against respondent before the RTC. Respondent filed its Answer with
Compulsory Counterclaim asserting that it had the full right to dismantle and transfer the machineries and
equipment because it had paid for them in full as stipulated in the contract. KOGIES filed a motion to dismiss
respondents counterclaims arguing that when PGSMC filed the counterclaims, it should have paid docket fees
and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect. The RTC dismissed
the petitioners motion to dismiss respondents counterclaims as these counterclaims fell within the requisites of
compulsory counterclaims.
ISSUE: WON payment of docket fees and certificate of non-forum shopping were required in the respondents
Answer with counterclaim?
HELD: NO. The counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim in
accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the
time the Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, A
compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be
contained therein. As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an
initiatory pleading which requires a certification against forum shopping under Sec. 524 of Rule 7, 1997
Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible
error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims. At the time PGSMC filed its
Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing fees for said
counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7,
Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory
counterclaim or cross-claims.
7. United Airlines vs. CA
FIRST DIVISION
KAPUNAN, J.:
On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United
Airlines, through the Philippine Travel Bureau in Manila, three (3) Visit the U.S.A. tickets for
himself, his wife and his minor son Mychal for the following routes:
The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely
uttered, Its not my fault. Its the fault of the company. Just sit down and wait.[9]When Mr.
Fontanilla reminded Linda of the inconvenience being caused to them, she bluntly retorted, Who
do you think you are? You lousy Flips are good for nothing beggars. You always ask for
American aid. After which she remarked Dont worry about your baggage. Anyway there is
nothing in there. What are you doing here anyway? I will report you to immigration. You
Filipinos should go home.[10] Such rude statements were made in front of other people in the
airport causing the Fontanillas to suffer shame, humiliation and embarrassment. The chastening
situation even caused the younger Fontanilla to break into tears.[11]
After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She
simply said Take it or leave it. This, the Fontanillas declined.[12]
The Fontanillas then proceeded to the United Airlines customer service counter to plead
their case. The male employee at the counter reacted by shouting that he was ready for it and left
without saying anything.[13]
The Fontanillas were not booked on the next flight, which departed for San Francisco at
11:00 a.m. It was only at 12:00 noon that they were able to leave Los Angeles on United Airlines
Flight No. 803.
Petitioner United Airlines has a different version of what occurred at the Los Angeles
Airport on May 5, 1989.
According to United Airlines, the Fontanillas did not initially go to the check-in counter to
get their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding
the aircraft without first securing their seat assignments as required in their ticket and boarding
passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go
to the check-in counter. When the Fontanillas proceeded to the check-in counter, Linda Allen, the
United Airlines Customer Representative at the counter informed them that the flight was
overbooked. She booked them on the next available flight and offered them denied boarding
compensation. Allen vehemently denies uttering the derogatory and racist words attributed to her
by the Fontanillas.[14]
The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the
Regional Trial Court of Makati. After trial on the merits, the trial court rendered a decision, the
dispositive portion of which reads as follows:
damages. The dispositive portion of the decision of the respondent Court of Appeals dated 29
September 1995, states as follows:
On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when
Rule 9, Section 1 of the Rules of Court,[18] there was an implied admission in petitioner's answer
in the allegations in the complaint that private respondent and his son observed the check-in
requirement at the Los Angeles Airport. Thus:
A perusal of the above pleadings filed before the trial court disclosed that there exists a
blatant admission on the part of the defendant-appellee that the plaintiffs-appellants indeed
observed the check-in requirement at the Los Angeles Airport on May 5, 1989. In view of
defendant-appellees admission of plaintiffs-appellants material averment in the complaint, We
find no reason why the trial court should rule against such admission.[19]
We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph
7 of private respondents' complaint states:
7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendants
designated counter at the airport in Los Angeles for their scheduled flight to San
Francisco on defendants Flight No. 1108.[20]
Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:
4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that
plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or information at
this point in time as to the truth thereof. [21]
The rule authorizing an answer that the defendant has no knowledge or information
sufficient to form a belief as to the truth of an averment and giving such answer the effect of a
denial, does not apply where the fact as to which want of knowledge is asserted is so plainly and
necessarily within the defendant's knowledge that his averment of ignorance must be palpably
untrue.[22] Whether or not private respondents checked in at petitioner's designated counter at the
airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner's knowledge.
While there was no specific denial as to the fact of compliance with the check-in
requirement by private respondents, petitioner presented evidence to support its contention that
there indeed was no compliance.
Private respondents then are said to have waived the rule on admission. It not only presented
evidence to support its contention that there was compliance with the check-in requirement, it
even allowed petitioner to present rebuttal evidence. In the case of Yu Chuck vs. "Kong Li Po,"
we ruled that:
The object of the rule is to relieve a party of the trouble and expense in proving in the
first instance an alleged fact, the existence or non-existence of which is necessarily
within the knowledge of the adverse party, and of the necessity (to his opponents case)
of establishing which such adverse party is notified by his opponents pleadings.
The plaintiff may, of course, waive the rule and that is what must be considered to
have done (sic) by introducing evidence as to the execution of the document and
failing to object to the defendants evidence in refutation; all this evidence is now
competent and the case must be decided thereupon. [23]
The determination of the other issues raised is dependent on whether or not there was a
breach of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to
board United Airlines Flight 1108.
It must be remembered that the general rule in civil cases is that the party having the burden
of proof of an essential fact must produce a preponderance of evidence thereon. [24] Although the
evidence adduced by the plaintiff is stronger than that presented by the defendant, a judgment
cannot be entered in favor of the former, if his evidence is not sufficient to sustain his cause of
action. The plaintiff must rely on the strength of his own evidence and not upon the weakness of
the defendants.[25]Proceeding from this, and considering the contradictory findings of facts by the
Regional Trial Court and the Court of Appeals, the question before this Court is whether or not
private respondents were able to prove with adequate evidence his allegations of breach of
contract in bad faith.
We rule in the negative.
Time and again, the Court has pronounced that appellate courts should not, unless for strong
and cogent reasons, reverse the findings of facts of trial courts. This is so because trial judges are
in a better position to examine real evidence and at a vantage point to observe the actuation and
the demeanor of the witnesses.[26] While not the sole indicator of the credibility of a witness, it is
of such weight that it has been said to be the touchstone of credibility.[27]
Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he immediately
proceeded to the check-in counter, and that Linda Allen punched in something into the computer
is specious and not supported by the evidence on record. In support of their allegations, private
respondents submitted a copy of the boarding pass.Explicitly printed on the boarding pass are the
words Check-In Required. Curiously, the said pass did not indicate any seat number. If indeed the
Fontanillas checked in at the designated time as they claimed, why then were they not assigned
seat numbers? Absent any showing that Linda was so motivated, we do not buy into private
respondents' claim that Linda intentionally deceived him, and made him the laughing stock
among the passengers.[28] Hence, as correctly observed by the trial court:
Plaintiffs fail to realize that their failure to check in, as expressly required in their
boarding passes, is the very reason why they were not given their respective seat
numbers, which resulted in their being denied boarding. [29]
Neither do we agree with the conclusion reached by the appellate court that private
respondents' failure to comply with the check-in requirement will not defeat his claim as the
denied boarding rules were not complied with. Notably, the appellate court relied on the Code of
Federal Regulation Part on Oversales, which states:
xxx plaintiffs claim to have been discriminated against and insulted in the presence of
several people. Unfortunately, plaintiffs limited their evidence to the testimony [of]
Aniceto Fontanilla, without any corroboration by the people who saw or heard the
discriminatory remarks and insults; while such limited testimony could possibly be
true, it does not enable the Court to reach the conclusion that plaintiffs have, by a
preponderance of evidence, proven that they are entitled to P1,650,000.00 damages
from defendant.[31]
As to the award of moral and exemplary damages, we find error in the award of such by the
Court of Appeals. For the plaintiff to be entitled to an award of moral damages arising from a
breach of contract of carriage, the carrier must have acted with fraud or bad faith. The appellate
court predicated its award on our pronouncement in the case of Zalamea vs. Court of
Appeals, supra, where we stated:
Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier
with respect to its operation of flights or portions of flights originating from or
terminating at, or serving a point within the territory of the Republic of the Philippines
insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or
outside the Philippines, for which he holds confirmed reserved space. Furthermore,
this Regulation is designed to cover only honest mistakes on the part of the carriers
and excludes deliberate and willful acts of non-accommodation. Provided, however,
that overbooking not exceeding 10% of the seating capacity of the aircraft shall
not be considered as a deliberate and willful act of non-accommodation.
What this Court considers as bad faith is the willful and deliberate overbooking on the part
of the airline carrier. The above-mentioned law clearly states that when the overbooking does not
exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to bad
faith. While there may have been overbooking in this case, private respondents were not able to
prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.
As earlier stated, the Court is of the opinion that the private respondents were not able to
prove that they were subjected to coarse and harsh treatment by the ground crew of United
Airlines. Neither were they able to show that there was bad faith on part of the carrier airline.
Hence, the award of moral and exemplary damages by the Court of Appeals is
improper. Corollarily, the award of attorney's fees is, likewise, denied for lack of any legal and
factual basis.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CAG.R. CV No. 37044 is hereby REVERSED and SET ASIDE. The decision of the Regional Trial
Court of Makati City in Civil Case No. 89-4268 dated April 8, 1991 is hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Puno, and Ynares-Santiago, JJ., concur.
Pardo, J., on sick leave.
[1]
Records, p. 35.
[2]
Ibid.
[3]
Id.
[4]
[5]
Id., at 36.
[6]
Ibid.
[7]
Id.
[8]
Id.
[9]
Id.
[10]
Records, p. 37.
[11]
Ibid.
[12]
Id.
[13]
Id., at 39.
[14]
Id., at 119-204.
[15]
[16]
Rollo, p. 25
[17]
Id., at 37.
[18]
Section 1. Allegations not specifically denied deemed admitted. Material Averment in the complaint, other than
those as to the amount of damage, shall be deemed admitted when not specifically admitted when not specifically
denied. Allegations of usury are deemed not denied specifically when not denied specifically under oath.
[19]
Rollo, p. 75.
[20]
CA Rollo, p. 2.
[21]
Id., at 14.
[22]
Warner Barnes and Co. Ltd. vs. Reyes, 103 Phil 662 (1958); PNB vs. Utility Assurance and Surety Co., Inc.,
177 SCRA 210 (1989).
[23]
[24]
Ricardo J. Francisco, THE REVISED RULES OF COURT IN THE PHILIPPINES, EVIDENCE, Volume VII,
Part II, 1997, citing I Moore on Facts 54.
[25]
[26]
Matuguina Integrated Wood Products, Inc. vs. CA, 263 SCRA 490 (1996) citing Bael vs. IAC, 169 SCRA 617
(1989).
[27]
[28]
Records, p. 39.
[29]
CA Rollo, p. 40.
[30]
[31]
CA Rollo, p. 41.
Commercial Law Corporation Law License Requirement Foreign Corporation Being an assignee
does not automatically mean doing business
Marcopper Mining Corporation was unable to pay its loans from the Asian Development Bank (ADB).
Later, ADB transferred all its rights to collect from Marcopper to MR Holdings, Ltd. In order to pay MR
Holdings, Marcopper assigned all its assets to MR Holdings and executed therefor a Deed of Assignment
in MR Holdings favor.
Meanwhile, another creditor of Marcopper, Solidbank Corporation, won a case against Marcopper. The
court then issued a writ of execution directing Sheriff Carlos Bajar to levy Marcoppers assets.
MR Holdings then filed an opposition asserting that it is now the owner of Marcoppers assets hence,
Bajar cannot levy them. The lower court denied MR Holdings on the ground that the Deed of Assignment
was made in bad faith and that MR Holdings was a foreign corporation doing business without a license in
the Philippines (by virtue of the Deed of Assignment) and as such cannot sue in the Philippines.
ISSUE: Whether or not MR Holdings may sue on this particular transaction.
HELD: Yes. The Supreme Court emphasized the following rules when it comes to foreign corporations
doing business here in the Philippines:
1.
2.
3.
if a foreign corporation does business in the Philippines with the required license, it can
sue before Philippine courts on any transaction.
Being a mere assignee does not constitute doing business in the Philippines. MR Holdings, a foreign
corporation, cannot be said to be doing business simply because it became an assignee of Marcopper.
MR Holdings was not doing anything else other than being a mere assignee. The only time that MR
Holdings is considered to be doing business here is that if it continues the business of Marcopper which
it did not.
Therefore, since it is not doing business here, pursuant to the rules above, it can sue without any license
before Philippine courts on an isolated transaction or on a cause of action entirely independent of any
business transaction.
Anent the issue of bad faith, the same was not proven. It appears that the deed of assignment was an
earlier agreement incidental to the loan agreement between ADB and Marcopper which precedes the
action brought by Solidbank against Marcopper.
THIRD DIVISION
The Case
Before us is a Petition[1] under Rule 45 of the Rules of Court assailing the December
3, 1997 Decision[2]of the Court of Appeals (CA) in CA-GR SP No. 45501. The decretal
portion of the CA Decision reads as follows:
(ii) Tenant or any of its Subsidiaries shall commit a material breach or violation of any
of the conditions, covenants or agreements herein made by Tenant or such Subsidiary
(other than those described in Sections 22.2 [a] [l] and such violation or failure shall
continue for thirty (30) days after notice from the Landlord, or, at Landlords sole
discretion, sixty (60) days if such violations or failure is reasonably susceptible of
cure during such 60 day period and Tenant or such Subsidiary begins and diligently
pursues to completion such cure within thirty (30) days of the initial notice from
Landlord;
xxxxxxxxx
(b) If an event of default shall have occurred and be continuing, Landlord may, in its
sole discretion;
(i) Terminate this Lease thirty (30) days after the expiration of any period granted
hereunder to cure any Event of Default and retain all rent and other amounts
previously paid by tenant and its Subsidiaries. Thereafter, Landlord may immediately
reenter, renovate or relet all or part of the Property to others, and cancel all rights and
privileges granted to Tenant and its Subsidiaries without any restriction on recovery
by Landlord for rents, fees and damages owned by Tenant and its Subsidiaries.
On 4 February 1997, Petitioner SBMA sent a letter to private respondent UIG calling
its attention to its alleged several contractual violations in view of private respondent
UIGs failure to deliver its various contractual obligations, primarily its failure to
complete the rehabilitation of the Golf Course in time for the APEC Leaders Summit,
and to pay accumulated lease rentals and utilities, and to post the required
performance bond. Respondent UIG, in its letter of 7 February 1997, interposed as an
excuse the alleged default of its main contractor FF Cruz, resulting in their filing of
suit against the latter, and committed itself to comply with its obligations within a few
days. Private respondent UIG, however, failed to comply with its undertakings. On 7
March 1997, petitioner SBMA sent a letter to private respondent UIG declaring the
latter in default of its contractual obligations to SBMA under Section 22.1 of the
Lease and Development Agreement and required it to show cause why petitioner
SBMA should not pre-terminate the agreement. Private respondents paid the rental
arrearages but the other obligations remained unsatisfied.
On 8 September 1997, a letter of pre-termination was served by petitioner SBMA
requiring private respondent UIG to vacate the premises. On 12 September 1997,
petitioner served the formal notice of closure of Subic Bay Golf Course and took over
possession of the subject premises. On even date, private respondent filed a complaint
against petitioner SBMA for Injunction and Damages with prayer for a writ of
temporary restraining order and writ of preliminary injunction. On 3 October 1997,
respondent court issued the two assailed orders subject of the petition.
Ruling of the Court of Appeals
The Court of Appeals upheld the capacity to sue of Respondent Universal
International Group of Taiwan (UIG) because petitioners, having entered into a Lease
Development Agreement (LDA) with it, were estopped from questioning its standing. It
also held that Respondents UIG International Development Corporation (UIGDC) and
Subic Bay Golf and Country Club, Inc., (SBGCCI) were real parties in interest because
they had made substantial investments in the venture and had been in possession of
the property when Subic Bay Metropolitan Authority (SBMA) rescinded the LDA.
Likewise, it debunked petitioners submission that Section 21 of RA 7227 [9] was a
blanket proscription against the issuance of any and all injunctive relief[s] against
SBMA. It said that those actions which are removed from the stated objectives of the
corporate entity x x x cannot be placed beyond the pale of prohibitory writs. [10]
While it conceded that the law allowed extrajudicial rescission of a contract, it ruled
that no rationalization was possible for the extrajudicial taking of possession. It
reasoned that no one may take the law into his own hands. To hold otherwise would be
productive of nothing but mischief and chaos.
It also rejected petitioners reliance on Consing v. Jamandre,[11] in which the Supreme
Court allowed a contractual stipulation giving the lessor the right to take possession of the leased property
without need of court order. It explained that Consing was a judicial aberration, not common but not
unknown in the body of our jurisprudence, which lays down a ruling contrary to the teaching of the greater
mass of cases.[12]
Furthermore, it held that the issuance of the Writ of Preliminary Injunction did not
dispose of the main issue. Concluding, it observed that we cannot and should not send
the message to foreigners who do business here that we are a group of jingoists who
cannot look beyond our narrow interests and must look at every stranger with a wary
eye and treat them with uneven hands.
Disagreeing with the above judgment, petitioners elevated the matter to this Court.
[13]
The Issues
In its Memorandum, Petitioner SBMA submits the following issues for our
consideration:[14]
I.
Whether or not the respondent court committed a reversible error in ruling that
petitioners action of extra-judicially recovering the possession of the subject
premises is supposedly illegal [as it] runs counter to the established law and [the]
applicable decisions of the Supreme Court on the matter.
II.
Whether or not the respondent court committed a reversible error in ruling that:
(a) The trial court ha[d] jurisdiction over the nature and subject matter of the case
despite the fact that the suit filed by private respondents is essentially
an ejectment case, and
(b) The trial court ha[d] authority to issue the questioned injunctive relief despite the
express prohibition under Section 21 of R.A. 7227
III.
Whether or not respondent court committed a reversible error in ruling that private
respondents ha[d] the capacity to sue and possess material interest to institute an
action against petitioners.
IV.
Under the second issue, the Court shall determine these questions: (1) whether the
Writ of Injunction against SBMA issued by the trial court contravenes Section 21 of RA
7227; (2) whether respondents have established their entitlement to the Writ; and (3)
whether SBMAs rescission of the LDA and takeover of the property are allowed by law.
The Courts Ruling
The Petition is partly meritorious. The CA correctly affirmed the denial of the Motion
to Dismiss, but erred in sustaining the Writ of Preliminary Mandatory and Prohibitory
Injunction.
First Issue:
Denial of the Motion to Dismiss
In its amended Motion to Dismiss filed before the RTC, petitioners contended that
UIG had no capacity to sue, and that UIGDC and SBGCCI had no material interest in
the present case. Both the appellate and the trial courts rejected these
contentions. Reiterating the arguments before us, petitioners add that the RTC had no
jurisdiction over the nature of the case.
(a) Respondents Capacity to Sue
Petitioners contend that UIG does not have the capacity to sue because it is a
foreign non-resident corporation not licensed by the Securities and Exchange
Commission to do business in the Philippines. They contend that the capacity to sue is
conferred by law and not by the parties.
As a general rule, unlicensed foreign non-resident corporations cannot file suits in
the Philippines. Section 133 of the Corporation Code specifically provides:
personality to file suits in the Philippines. In order to subject a foreign corporation doing
business in the country to the jurisdiction of our courts, it must acquire a license from
the SEC and appoint an agent for service of process. [15] Without such license, it cannot
institute a suit in the Philippines.
It should be stressed, however, that the licensing requirement was never intended
to favor domestic corporations who enter into solitary transactions with unwary foreign
firms and then repudiate their obligations simply because the latter are not licensed to
do business in this country.[16] After contracting with a foreign corporation, a domestic
firm is estopped from denying the formers capacity to sue. Hence, in Merril Lynch
Futures v. CA,[17] the Court ruled:
The rule is that a party is estopped to challenge the personality of a corporation after
having acknowledged the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to foreign as well as to domestic
corporations; one who has dealt with a corporation of foreign origin as a corporate
entity is estopped to deny its existence and capacity. The principle will be applied to
prevent a person contracting with a foreign corporation from later taking advantage of
its noncompliance with the statutes, chiefly in cases where such person has received
the benefits of the contract x x x.
This doctrine was initiated as early as 1924 in Asia Banking Corporation v.
Standard
Products[18] and
reiterated
in Georg
Grotjahn
GMBH
v.
[19]
[20]
Isnani and Communication Materials and Design v. CA. In Antam Consolidated v.
CA,[21] the Court also rejected a similar argument and noted that it is a common ploy of
defaulting local companies which are sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke lack of capacity to sue.
In this case, SBMA is estopped from questioning the capacity to sue of UIG. In
entering into the LDA with UIG, SBMA effectively recognized its personality and capacity
to institute the suit before the trial court.
(b) Material Interest of
SBGCCI and UIGDC
Section 2, Rule 3 of the 1997 Rules of Court, defines a real party in interest in this
manner:
Sec. 2. Parties in Interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of
the suit.Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest. [22]
SBMA contends that UIGDC is not a real party in interest because it was not privy to
the LDA between UIG and SBMA. It further alleges that it did not approve the
assignment to UIGDC of UIGs rights thereunder. In like manner, SBGCCI had no
interest in the LDA because it only derived its rights from the Development Agreement it
had entered into with UIGDC.
We are not persuaded. The CA made a factual finding that UIGDC and SBGCCI
were in possession of the property when SBMA took over. Moreover, it also found that
they had already made substantial investments in the project. We find no reason at this
time to justify a different conclusion. In view of these circumstances, we agree with the
CA that UIGDC and SBGCCI stand to be benefitted or injured by the present suit and
should be deemed real parties in interest.[23]
SBMAs contention -- that it had not approved UIGs assignment of rights to UIGDC
-- is not necessarily bereft of merit, however. SBMA should raise this issue, not now but
in appropriate proceedings before the trial court.
(c) Jurisdiction Over the Subject Matter
Petitioners also argue that the RTC had no jurisdiction over the case, which was
allegedly an ejectment suit cognizable by municipal trial courts. They add that the
Complaint demanded that respondents be restored to the possession of the subject
leased premises.
We disagree. A close scrutiny of the amended Complaint reveals that it sought to
enjoin petitioners from rescinding the contract and taking over the property. While
possession was a necessary consequence of the suit, it was merely incidental. The
main issue was whether SBMA could rescind the Agreement. Because it was a dispute
that was incapable of pecuniary estimation, it was within the jurisdiction of the RTC. [24]
Second Issue:
Issuance of the Writ of Injunction
(a) Present Writ of Injunction Not Barred by RA 7227
Petitioners contend that the RTC was barred from issuing a writ of injunction in this
case, pursuant to Section 21 of RA 7227 which provides as follows:
Sec. 21. Injunction and Restraining Order. -- The implementation of the projects for
the conversion into alternative productive uses of the military reservations is urgent
and necessary and shall not be restrained or enjoined except by an order issued by the
Supreme Court of the Philippines.[25]
We are not persuaded. We agree with the CA that the present provision is not a
blanket prohibition of the issuance of an injunctive relief against any SBMA
action. Section 21 of RA 7227 prohibits only such court orders which restrain the
implementation of the projects for the conversion into alternative productive uses of the
military reservations.
The Writ issued in this case did not restrain or enjoin the implementation of any of
SBMAs conversion projects. In fact, it allowed UIG to proceed with the development of
the golf course pursuant to the LDA. It merely restrained SBMA from taking over the golf
course. Clearly, the assailed RTC Order did not seek to delay or hamper the conversion
of the former naval base into civilian uses.
Moreover, the assailed Writ of Preliminary Injunction was issued in connection with
a dispute pertaining to the correct interpretation of the LDA. To divest the trial court of
that authority is to give SBMA unhampered discretion to disregard its contractual
obligations under the guise of implementing its projects.Indeed, Section 21 of RA 7227
should not bar judicial scrutiny of irregularities allegedly committed by SBMA. [26]
(b) Right of Respondents to Injunctive Relief
A writ of mandatory injunction requires the performance of a particular act [27] and is
granted only upon a showing of the following requisites:
The records, however, do not show that herein respondents were indubitably
entitled to a mandatory writ. Under the LDA, we find no proof of a clear and
unmistakable right on their part to continue the operation and the development of the
golf course. Indeed, the RTC based its assailed Order mainly on the ground that
SBMAs takeover was not legally justifiable. Thus, it ruled in this wise:[30]
From all the foregoing, the Court is of the considered view that the forcible take over
[by] the [petitioners] of the golf course and its appurtenances is not legally
justifiable.Based on the evidence adduced during the hearing, the [respondents] have
established a clear right to continue the operation and management of the golf course,
and x x x continued withholding of the premises by the [petitioners] will result to
irreparable damages to [respondents].
Furthermore, the CA did not make any categorical ruling that respondents
established a clear and unmistakable right to the Writ. Like the RTC, it emphasized that
there was no rationalization for SBMAs extrajudicial takeover of the disputed
property. In other words, both the CA and the trial court effectively ruled that
respondents are entitled to the Writ of Mandatory Injunction because SBMAs action was
not in accordance with law.
On this point, we disagree with the trial and the appellate courts. As we will now
show, there is legal basis for petitioners rescission of the contract and takeover of the
property without any court order.
(c) Legality of SBMAs Rescission of the LDA and Takeover of the Property
Because of UIGs failure to comply with several of its contractual undertakings,
SBMA rescinded the LDA and took over the possession, the operation and the
management of the property without any judicial imprimatur. In doing so, it relied on the
provisions of the LDA, which we quoted earlier.
The Court of Appeals held that the extrajudicial rescission of the LDA was lawful,
but that the extrajudicial takeover of the property was not. It relied onNera v. Vacante,
[31]
in which the Supreme Court held:
x x x. A stipulation entitling one party to take possession of the land and building if
the other party violates the contract does not ex proprio vigore confer upon the former
the right to take possession thereof if objected to without judicial intervention and
determination.
It also cited Zulueta v. Mariano,[32] which reiterated the above-quoted ruling. That
case was purportedly applicable because it involved a similar contractual stipulation,
which reads as follows:
12. That upon failure of the BUYER to fulfill any of the conditions herein stipulated,
BUYER automatically and irrevocably authorizes OWNER to recover extrajudicially, physical possession of the land, building and other improvements which are
subject of this contract, and to take possession also extra-judicially whatever personal
properties may be found within the aforesaid premises from the date of said failure to
answer for whatever unfulfilled monetary obligations BUYER may have
with OWNER; and this contract shall be considered as without force and effect also
from said date; x x x.
Because Zulueta was a subsequent Decision, it supposedly overturned the
diametrically opposed earlier ruling in Consing v. Jamandre,[33] in which the Supreme
Court upheld a contractual stipulation authorizing the sub-lessor to take possession of
the leased premises in case of contractual breach. As earlier noted, the CA also
ruled that Consing was a judicial aberration.
We disagree. At the outset, it should be underscored that these cases are not
diametrically opposed to each other. In fact, they coexist. It should be noted also that
the CA erred in holding that Zulueta, being a later case, overturned Consing. The CA
logic is flawed, because after the promulgation ofZulueta, Consing was reiterated in
1991 in Viray v. IAC.[34]
Moreover, Zulueta and Nera recognized the validity and the effectivity of a
contractual provision authorizing the extrajudicial rescission of a contract and the
concomitant recovery of possession. Like Nera, Zulueta merely added the qualification
that the stipulation has legal effect x x x where the other party does not oppose
it. Where it is objected to, a judicial determination of the issues is still necessary.
Significantly, they did not categorically rule that such stipulation was void.
In fact, the stipulation is lawful. In Consing, the Court held that this kind
of contractual stipulation is not illegal, there being nothing in the law proscribing such
kind of agreement.[35] Affirming this ruling, the Court in Viray v. IAC[36] reiterated that the
stipulation was in the nature of a resolutory condition, for upon the exercise by the sublessor of his right to take possession of the leased property, the contract is deemed
terminated.
UP v. De los Angeles[37] is instructive on this point. Pursuant to a stipulation similar to that in the
present case, the University of the Philippines (UP) rescinded its Logging Agreement with ALUMCO and
subsequently appointed another concessionaire to take over the logging operation. Hence, the issue was
whether [P]etitioner UP can treat its contract with ALUMCO rescinded, and may disregard the same
before any judicial pronouncement to that effect. Ruling in favor of UP, the Court held that a party could
enforce such stipulation:
[T]he party who deems the contract violated may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds at its
own risk. For it is only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in
law. But the law definitely does not require that the contracting party who believes
itself injured must first file suit and wait for a judgment before taking extrajudicial
steps to protect its interest.Otherwise, the party injured by the others breach will have
to passively sit and watch its damages accumulate during the pendency of the suit
until the final judgment of rescission is rendered when the law itself requires that he
should exercise due diligence to minimize its own damages. (Emphasis supplied.)
The Court also noted that the rescission was provisional and subject to scrutiny and
review by the proper court. It further noted that if the other party denies that rescission is
justified, it is free to resort to judicial action in its own behalf, and bring the matter to
court. It observed that the practical effect of the stipulation [was] to transfer to the
defaulter the initiative of instituting suit, instead of the rescinder.
In the present case, it is clear that the subject stipulation is allowed by
law. Moreover, a party is free to enforce it by rescinding the contract and recovering
possession of the property even without court intervention. Where it is objected to,
however, a judicial determination of the issue is still necessary. [38] Force or bloodshed
cannot be justified in the enforcement of the stipulation. Where the lessees offer
physical resistance, the lessors may apply for a writ of preliminary mandatory injunction,
to which they have a clear and unmistakable right. Indeed, courts are the final arbiters.
Thus, contrary to the ruling of the CA and the RTC, there is a rationalization and a
legal justification for the stipulation authorizing SBMA to rescind the contract and to take
over the property.
No Valid Objection on the Part of Respondents
As earlier observed, there were several violations[39] of the LDA, which were duly
reported by SBMA to UIG. Respondents, however, did not deny or controvert
them. Effectively, therefore, they offered no valid or sufficient objection to SBMAs
exercise of its stipulated right to extrajudicially rescind the LDA and take over the
property in case of material breach.
First, the Amended Complaint merely argued that the takeover was grounded upon
a void provision of the agreement. [40] It did not controvert the grounds for SBMAs
exercise of its rights under the subject stipulation. Indeed, glaring was respondents
failure to deny the alleged violations of the LDA.
Second, Respondent UIG was given several opportunities by SBMA to explain the
alleged violations. Instead of controverting them, UIG instead indicated its willingness to
comply with all its undertakings. Hence, in its February 4, 1997 letter,[41] SBMA called its
attention to several instances showing contractual breach. In response, UIGs counsel
did not deny the violations and instead apologized for the delay.[42]
Finding the response and the explanation unsatisfactory, SBMA, in a letter dated
March 7, 1997, declared UIG in default and required it to explain why the LDA should
not be terminated. UIG did not submit any written explanation. Instead, its counsel
called the SBMA chief operating officer [43] to inform him of its commitment to undertake
anew the remedial measures regarding the matter.[44]
In its letter dated September 8, 1997, SBMA directed UIG to vacate the premises
and to settle its outstanding accounts. Finally, on September 12, 1997, SBMA served
UIG a Notice of Closure.[45] It should be underscored that during all these exchanges,
UIG did not controvert its alleged noncompliance with the LDA.
Third, in the hearing for the application for a writ of mandatory injunction,
respondents presented two witnesses: Orlando de la Masa, operations manager of
SBGCCI; and Danilo Alabado, comptroller of UIGDC. De la Masa testified on the
alleged forcible takeover by SBMA, while Alabado testified that respondents had
invested $12 million in the rehabilitation of the golf course. Respondents, however, did
not deny the violations of their undertaking, which were explained by Atty. Raymond P.
Ventura.[46]
Most significant, neither the CA nor the RTC made any finding that there was no
breach on the part of UIG. Likewise, they did not even make any observation that
respondents had controverted SBMAs claim.
Clearly, respondents stand was not a valid or sufficient objection to SBMAs exercise
of its right. Indeed, sustaining their claim would unduly diminish the force of such lawful
stipulation and allow parties to disregard it at will without any valid reason. In this case,
respondents miserably failed to give any semblance of objection to the merits of SBMAs
allegations. Moreover, we find no adequate showing of resistance to SBMAs
implementation of the subject stipulation.
Under the circumstances, SBMA showed that it had a right not only to rescind the
contract, but also to take over the property. On the other hand, respondents have not
shown any clear and unmistakable right to restrain SBMA from enforcing the contractual
stipulation. Indeed, they have offered no objection to SBMAs allegations of contractual
breach. Without prejudging their right to offer controverting evidence during the trial on
the merits, the Court holds that they failed to do so in their application for a writ of
preliminary injunction.
Epilogue
The Court of Appeals expressed its apprehension that a ruling against UIG would
send a message to foreign investors that we are a group of jingoists. We do not share
that view. Jingoism is not an issue here. Far from it. In partially reversing the CA, this
Court is merely performing its mandate to do justice and to apply the law to the facts of
the case. It is merely affirming the message that in this country, the rule of law prevails;
and contracts freely entered into, whether by foreign or by local investors, must be
complied with. Indeed, rule of law and faithfulness in the performance of contracts are
cherished values everywhere.
WHEREFORE, the Petition is partially GRANTED, and the assailed Decision of the
Court of Appeals REVERSED and SET ASIDE insofar as it affirmed the Writ of
Preliminary Injunction issued by the trial court. The said Writ is hereby LIFTED and the
case REMANDED to the RTC for trial on the merits. In the meantime, respondents
shall, upon finality of this Decision, yield the possession, the operation and the
management of the subject property to SBMA. No costs.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
[1]
Although the Petition was captioned Petition for Certiorari, petitioners averred that it was a Petition for
Review on Certiorari under Rule 45 of the 1997 revised Rules of Court.(Petition, p. 2; rollo, p. 4.)
[2]
Rollo, pp. 420-434. It was penned by Justice Romeo A. Brawner, with the concurrence of
Justices Ricardo P. Galvez (Division chairman) and Marina L. Buzon (member).
[3]
[4]
Rollo, p. 356.
[5]
[6]
[7]
Rollo, p. 276.
[8]
[9]
Entitled An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses,
Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor
and for Other Purposes.
[10]
[11]
Infra.
[12]
[13]
The case was deemed submitted for resolution on September 23, 1999, upon receipt by this Court of
Petitioner SBMAs Memorandum signed by Atty. Rizal V. Katalbas Jr.Respondents Memorandum, which
was signed by Atty. Reynaldo A. Ruiz of Yulo Torres Velasco and Bello Law Offices, had been filed earlier
on March 29, 1999. While the SBMAs Memorandum appears to have been filed on behalf of SBMA only
and not of the other SBMA officials, it may be noted that the Petition signed by Atty. Manuel M. Quijano
was filed not only for SBMA but also for the SBMA officials who had been impleaded as defendants in
their official capacities before the trial court. Hence, the Memorandum is deemed to benefit said SBMA
officials.
[14]
[15]
Communication Materials and Design v. CA, 260 SCRA 673, August 22, 1996.
[16]
[17]
211 SCRA 824, 837, July 24, 1992, per Narvasa, J. (Subsequently CJ)
[18]
[19]
[20]
Supra.
[21]
[22]
See also Tankiko v. Cezar, 302 SCRA 559, February 2, 1999; Smith, Bell & Co. v. CA, 267 SCRA 530,
February 6, 1997; Arcelona v. CA, 280 SCRA 20, October 2, 1997.
[23]
[24]
[25]
Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary
injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an
infrastructure project, or a mining, fishery, forest, or other natural resource development project of the
government, or any public utility operated by the government, including among others public utilities for
the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or
persons, entity or government officials from proceeding with, or continuing the execution or
implementation of any such project, or the operation of such public utility, or pursuing any lawful activity
necessary for such execution, implementation or operation.
[26]
See Malaga v. Penachos, 213 SCRA 516, September 3, 1992, in relation to PD 1818.
[27]
Section 1, Rule 58 of the Rules of Court, provides: A preliminary injunction is an order granted at any
stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency
or a person to refrain from a particular act or acts. It may also require the performance of a particular act
or acts, in which case it shall be known as a preliminary injunction.
[28]
Pelejo v. CA, 117 SCRA 665, October 18, 1982, per Relova, J.
[29]
Prosperity Credit Resources v. CA, 301 SCRA 52, January 15, 1999.
[30]
[31]
[32]
[33]
[34]
198 SCRA 786, 792, July 4, 1991, per Narvasa, J. (Subsequently CJ). See also Campo Assets
Corporation v. Club X.O. Company, GR No. 134986, March 17, 2000.
[35]
Citing Froilan v. Pan Oriental Shipping, 12 SCRA 276, October 31, 1964.
[36]
198 SCRA 786, 792, July 4, 1991, per Narvasa, J. (Subsequently CJ)
[37]
[38]
See Vitug, Compendium of Civil Law and Jurisprudence, 1993 revised ed., pp. 483-484.
[39]
The trial court summarized the alleged violations as follows: (1) failure to rehabilitate the existing
eighteen (18) holes of the Binictican Golf Course in time for the 1996 APEC leaders summit meeting, and
x x x after the recent completion of the rehabilitation work, after a delay of almost a year, noted were
discrepancies showing failure to upgrade the golf course according to world/first class USGA standards;
(2) failure to accomplish construction of a new clubhouse; (3) failure to design and construct [a] one
hundred (100) [-room] condominium building before the APEC summit meeting in November 1996; (4)
inability to undertake the construction and development of Phase II Development which includes: (a)
further renovation and improvement of the golf course; (b) construction of additional nine (9) holes to the
golf course; (c) provision of floodlighting to the aforementioned nine holes for nighttime golf; and (d)
constructing an additional twenty (20) villas/bungalows; all within a period of six (6) months after the
APEC meeting or until May 1997. (First assailed Order dated October 3, 1997, pp. 4-5; rollo, pp. 265266.)
[40]
[41]
[42]
[43]
[44]
[45]
Rollo, p. 138.
[46]
SECOND DIVISION
UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29
August 1995 Decision of the Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7
August 1992 order issued by the trial court in Civil Case No. Q-92-12410 [1] granting petitioner's
motion to dismiss based on prescription of cause of action.The issues sought to be resolved are
whether the notice of appeal to the appellate court was timely filed, and whether Art. 29 of the
Warsaw Convention[2] should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight
No. 819 for the San Francisco - Manila route, checked in together with his luggage one piece of
which was found to be overweight at the airline counter. To his utter humiliation, an employee of
petitioner rebuked him saying that he should have known the maximum weight allowance to be
70 kgs. per bag and that he should have packed his things accordingly. Then, in a loud voice in
front of the milling crowd, she told respondent to repack his things and transfer some of them
from the overweight luggage to the lighter ones. Not wishing to create further scene, respondent
acceded only to find his luggage still overweight. The airline then billed him overweight charges
which he offered to pay with a miscellaneous charge order (MCO) or an airline pre-paid
credit. However, the airlines employee, and later its airport supervisor, adamantly refused to
honor the MCO pointing out that there were conflicting figures listed on it. Despite the
explanation from respondent that the last figure written on the MCO represented his balance,
petitioners employees did not accommodate him. Faced with the prospect of leaving without his
luggage, respondent paid the overweight charges with his American Express credit card.
Respondents troubles did not end there. Upon arrival in Manila, he discovered that one of
his bags had been slashed and its contents stolen. He particularized his losses to be around US
$5,310.00. In a letter dated 16 October 1989 respondent bewailed the insult, embarrassment and
humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner
of his loss and requested reimbursement thereof. Petitioner United Airlines, through Central
Baggage Specialist Joan Kroll, did not refute any of respondents allegations and mailed a check
representing the payment of his loss based on the maximum liability of US $9.70 per
pound. Respondent, thinking the amount to be grossly inadequate to compensate him for his
losses, as well as for the indignities he was subjected to, sent two (2) more letters to petitioner
airline, one dated 4 January 1990 through a certain Atty. Pesigan, and another dated 28 October
1991 through Atty. Ramon U. Ampil demanding an out-of-court settlement
of P1,000,000.00. Petitioner United Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a complaint for damages against United
Airlines alleging that he was a person of good station, sitting in the board of directors of several
top 500 corporations and holding senior executive positions for such similar firms; [3] that
petitioner airline accorded him ill and shabby treatment to his extreme embarrassment and
humiliation; and, as such he should be paid moral damages of at least P1,000,000.00, exemplary
damages of at least P500,000.00, plus attorney's fees of at least P50,000.00. Similarly, he alleged
that the damage to his luggage and its stolen contents amounted to around $5,310.00, and
requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that respondents cause of
action had prescribed, invoking Art. 29 of the Warsaw Convention which provides -
Art. 29 (1) The right to damages shall be extinguished if an action is not brought
within two (2) years, reckoned from the date of arrival at the destination, or from the
date on which the aircraft ought to have arrived, or from the date on which the
transportation stopped.
(2) The method of calculating the period of limitation shall be determined by the law
of the court to which the case is submitted.
Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled
with par. (2) thereof which states that "the method of calculating the period of limitation shall be
determined by the law of the court to which the case is submitted." Interpreting thus, respondent
noted that according to Philippine laws the prescription of actions is interrupted "when they are
filed before the court, when there is a written extrajudicial demand by the creditors, and when
there is any written acknowledgment of the debt by the debtor." [4] Since he made several demands
upon United Airlines: first, through his personal letter dated 16 October 1989; second, through a
letter dated 4 January 1990 from Atty. Pesigan; and, finally, through a letter dated 28 October
1991 written for him by Atty. Ampil, the two (2)-year period of limitation had not yet been
exhausted.
On 2 August 1992 the trial court ordered the dismissal of the action holding that the
language of Art. 29 is clear that the action must be brought within two (2) years from the date of
arrival at the destination. It held that although the second paragraph of Art. 29 speaks of
deference to the law of the local court in "calculating the period of limitation," the same does not
refer to the local forums rules in interrupting the prescriptive period but only to the rules of
determining the time in which the action may be deemed commenced, and within our jurisdiction
the action shall be deemed "brought" or commenced by the filing of a complaint. Hence, the trial
court concluded that Art. 29 excludes the application of our interruption rules.
Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992,
or fourteen (14) days later, he moved for the reconsideration of the trial courts order. The trial
court denied the motion and respondent received copy of the denial order on 28 September
1992. Two (2) days later, on 1 October 1992 respondent filed his notice of appeal.
United Airlines once again moved for the dismissal of the case this time pointing out that
respondents fifteen (15)-day period to appeal had already elapsed. Petitioner argued that having
used fourteen (14) days of the reglementary period for appeal, respondent Uy had only one (1)
day remaining to perfect his appeal, and since he filed his notice of appeal two (2) days later, he
failed to meet the deadline.
In its questioned Decision dated 29 August 1995 [5] the appellate court gave due course to the
appeal holding that respondents delay of two (2) days in filing his notice of appeal did not hinder
it from reviewing the appealed order of dismissal since jurisprudence dictates that an appeal may
be entertained despite procedural lapses anchored on equity and justice.
On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw
Convention did not preclude the operation of the Civil Code and other pertinent
laws. Respondents failure to file his complaint within the two (2)-year limitation provided in the
Warsaw Convention did not bar his action since he could still hold petitioner liable for breach of
other provisions of the Civil Code which prescribe a different period or procedure for instituting
an action. Further, under Philippine laws, prescription of actions is interrupted where, among
others, there is a written extrajudicial demand by the creditors, and since respondent Uy sent
several demand letters to petitioner United Airlines, the running of the two (2)-year prescriptive
period was in effect suspended. Hence, the appellate court ruled that respondents cause of action
had not yet prescribed and ordered the records remanded to the Quezon City trial court for
further proceedings.
Petitioner now contends that the appellate court erred in assuming jurisdiction over
respondent's appeal since it is clear that the notice of appeal was filed out of time. It argues that
the courts relax the stringent rule on perfection of appeals only when there are extraordinary
circumstances, e.g., when the Republic stands to lose hundreds of hectares of land already titled
and used for educational purposes; when the counsel of record was already dead; and wherein
appellant was the owner of the trademark for more than thirty (30) years, and the circumstances
of the present case do not compare to the above exceptional cases.[6]
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal
by certiorari, from a judgment of the Court of Appeals, by filing with the Supreme Court a
petition for certiorari, within fifteen (15) days from notice of judgment or of the denial of his
motion for reconsideration filed in due time x x x x" This Rule however should not be interpreted
as "to sacrifice the substantial right of the appellant in the sophisticated altar of technicalities
with impairment of the sacred principles of justice." [7] It should be borne in mind that the real
purpose behind the limitation of the period of appeal is to forestall or avoid an unreasonable
delay in the administration of justice. Thus, we have ruled that delay in the filing of a notice of
appeal does not justify the dismissal of the appeal where the circumstances of the case show that
there is no intent to delay the administration of justice on the part of appellant's counsel, [8] or
when there are no substantial rights affected, [9] or when appellant's counsel committed a mistake
in the computation of the period of appeal, an error not attributable to negligence or bad faith.[10]
In the instant case, respondent filed his notice of appeal two (2) days later than the
prescribed period. Although his counsel failed to give the reason for the delay, we are inclined to
give due course to his appeal due to the unique and peculiar facts of the case and the serious
question of law it poses. In the now almost trite but still good principle, technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy,
deserves scant consideration.[11]
Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of
action has not prescribed since delegates to the Warsaw Convention clearly intended the two (2)year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the
various tolling provisions of the laws of the forum.Petitioner argues that in construing the second
paragraph of Art. 29 private respondent cannot read into it Philippine rules on interruption of
prescriptive periods and state that his extrajudicial demand has interrupted the period of
prescription.[12] American jurisprudence has declared that "Art. 29 (2) was not intended to permit
forums to consider local limitation tolling provisions but only to let local law determine whether
an action had been commenced within the two-year period, since the method of commencing a
suit varies from country to country."[13]
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored,
depending on the peculiar facts presented by each case. [14] Thus, we have ruled that the
Convention's provisions do not regulate or exclude liability for other breaches of contract by the
carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage.[15] Neither may the Convention be invoked to justify the disregard of some extraordinary
sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by
said Convention.[16] Likewise, we have held that the Convention does not preclude the operation
of the Civil Code and other pertinent laws.[17] It does not regulate, much less exempt, the carrier
from liability for damages for violating the rights of its passengers under the contract of carriage,
especially if willful misconduct on the part of the carrier's employees is found or established.[18]
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby
and humiliating treatment he received from petitioner's employees at the San Francisco Airport
which caused him extreme embarrassment and social humiliation; and, (b) the slashing of his
luggage and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from theft or damage to
property or goods - is well within the bounds of the Warsaw Convention, his first cause of action
-an action for damages arising from the misconduct of the airline employees and the violation of
respondent's rights as passenger - clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's failure to file his
complaint within the two (2)-year limitation of the Warsaw Convention does not bar his action
since petitioner airline may still be held liable for breach of other provisions of the Civil Code
which prescribe a different period or procedure for instituting the action, specifically, Art. 1146
thereof which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw
Convention reveal that the delegates thereto intended the two (2)-year limitation incorporated in
Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of
the laws of the forum. This therefore forecloses the application of our own rules on interruption
of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether
an action had been commenced within the two (2)-year period, and within our jurisdiction an
action shall be deemed commenced upon the filing of a complaint. Since it is indisputable that
respondent filed the present action beyond the two (2)-year time frame his second cause of action
must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately
convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his
claims, and that the filing of the action itself was delayed because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of Appeals [19] is instructive. In this case
of PAL, private respondent filed an action for damages against petitioner airline for the breakage
of the front glass of the microwave oven which she shipped under PAL Air Waybill No. 0-791013008-3. Petitioner averred that, the action having been filed seven (7) months after her arrival
at her port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill
which expressly provided that the person entitled to delivery must make a complaint to the
carrier in writing in case of visible damage to the goods, immediately after discovery of the
damage and at the latest within 14 days from receipt of the goods. Despite non-compliance
therewith the Court held that by private respondent's immediate submission of a formal claim to
petitioner, which however was not immediately entertained as it was referred from one employee
to another, she was deemed to have substantially complied with the requirement. The Court
noted that with private respondent's own zealous efforts in pursuing her claim it was clearly not
her fault that the letter of demand for damages could only be filed, after months of exasperating
follow-up of the claim, on 13 August 1990, and that if there was any failure at all to file the
formal claim within the prescriptive period contemplated in the Air Waybill, this was largely
because of the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances brought before us. Verily, respondent
filed his complaint more than two (2) years later, beyond the period of limitation prescribed by
the Warsaw Convention for filing a claim for damages. However, it is obvious that respondent
was forestalled from immediately filing an action because petitioner airline gave him the
runaround, answering his letters but not giving in to his demands. True, respondent should have
already filed an action at the first instance when his claims were denied by petitioner but the
same could only be due to his desire to make an out-of-court settlement for which he cannot be
faulted. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action
for damages should be filed within two (2) years from the arrival at the place of destination, such
rule shall not be applied in the instant case because of the delaying tactics employed by petitioner
airline itself. Thus, private respondent's second cause of action cannot be considered as timebarred under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside
the appealed order of the trial court granting the motion to dismiss the complaint, as well as its
Resolution denying reconsideration, is AFFIRMED. Let the records of the case be remanded to
the court of origin for further proceedings taking its bearings from this disquisition.
SO ORDERED.
Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
[1]
[2]
Convention for the Unification of Certain Rules Relating to International Transportation by Air. Philippine
adherence embodied in Presidential Proclamation No. 201 signed on 23 September 1965 by President Ramon
Magsaysay.
[3]
Willie J. Uy is a graduate of Master of Business Administration of the Ateneo Graduate School of Business, and
Bachelor of Science and Marketing Management from De La Salle University as well as of Xavier School and
Council High School of Idaho, USA. He is presently the Vice President for Operations of Phinma Property Holdings
Corporation; Senior Vice-President/Chief Operating Officer of Phinma-Dee Construction Venture Corporation; VicePresident and General Manager of Trans-Oceanic Insurance Agencies, Inc; Treasurer of Phinma Fisheries, Inc.;
Treasurer/Director of Uni-Products Company, Inc.; Asst. Vice-Pres./Asst. Treasurer of Phinma Consultants, Inc;
Asst. Treasurer of Filmag (PHILS), Inc.; Vice-President of Fil-House of Consumer Products, Inc.; Vice-Pres. of
Mariposa Properties, Inc.; Director of SANAEA International Corp.; and, Director of Southeast Asia Tour & Travel
Corp.; Asst. Corporate Secretary/Director of Harrison Industrial Corporation.
[4]
[5]
With Justice Ruben T. Reyes as ponente and Justices Antonio M. Martinez and Consuelo Ynares-Santiago,
concurring.
[6]
Rollo, p. 18.
[7]
Pan American World Airways, Inc. v. Espiritu, No. L-35401, 20 January 1976, 69 SCRA 36.
[8]
De las Alas v. Court of Appeals, No. L-38006, 16 May 1978, 83 SCRA 200; American Home Assurance
Company v. Court of Appeals, No. L-45026, 12 November 1981, 109 SCRA 180.
[9]
Margate v. Court of Appeals, No. L-42366, 15 December 1982, 119 SCRA 259.
[10]
Ibid.
[11]
See Note 7.
[12]
Ibid.
[13]
Split End Ltd. v. Dimerco Express (Phils.), 19 Avi. 18363, as cited in Petition; Rollo, p. 12.
[14]
Alitalia v. Intermediate Appellate Court, G.R. No. 71929, 4 December 1990, 192 SCRA 9.
[15]
Ibid.
[16]
Ibid.
[17]
Cathay Pacific Airways Ltd. v. Court of Appeals, G.R. No. 60501, 5 March 1993, 219 SCRA 520; Luna v.
Northwestern Airways, G.R. Nos. 100374-75, 27 November 1992, 216 SCRA 107.
[18]
Ibid.
[19]